Reference no: EM133525036

Case Study: Wave Goodbye The final round of negotiations for the new energy field of wave turbines off the coast of Goodland was nearing. The Government of Goodland had a target of using renewable energy for 15% of its total energy consumption by 2025, and this field (called locally Winton4) would enable them to reach that target. Winton4 would comprise 200 state of the art wave turbines and generate enough electricity to power 3 of Goodland's large cities. There would also be room for expansion in the future to Winton5 and Winton6 areas, with a potential to take Goodland up to 25% renewable energy levels. This ranked high on the Governments policy list. Also, key is making sure that the field works, nothing is more embarrassing for a government than to spend tax payers money and for delays and breakdowns to occur. It is not a vote winner. Final round negotiations would be held with 2 firms who had both bid competitively for the contract. One was a local firm, GoodWave Plc, who bid $38m with some new technology. It was a relatively new firm, and although local, was the slightly less favoured of the two. The technology was not tested and concerns had been raised over the reliability of the technology and of the financial sustainability of this new firm, should things go wrong. The most favoured bid was from Turbine King Plc, an international firm, whose reputation in the market was great for product, but not so great with after sales service. The Turbines themselves were very good and reliable, and their bid for the project was just over $41m. The government felt that if they could secure a good warranty and service agreement for 6 years, with full cover, they would be happy to do the deal. Anything less than 4 years with spares and repairs only was not of interest and they would look elsewhere. The Government's budget for the project was $40m, with no possibility of going above that. They did, however, have discretion of preferred bidder status for the next 2 phases of the turbine field. Some kind of performance guarantees would be expected, with an ideal level of 5% of costs for each shutdown of 6 hours of more. Also, if generation levels fall below agreed levels per month (turbines working below guaranteed levels), a further levy of $100,000 per month. There was room to negotiate here though, so long as the other issues were in the governments favour. The Government has a timescale of installation within 8 months, though could stretch this to 12 months.

Questions:

1. What are the Interests and related negotiation Issues for the Government for this case?

2. Why are priorities important for the negotiator, and how should each side rank their Issues in this case?

3. Show how important setting your negotiation Range can be for the Government in this negotiation.

4. Explain why having a BATNA can help when preparing for a negotiation?

5. From the limited information in the case, how would you advise the Government to behave in the debate phase of this negotiation?