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PMP Practice: Assess priorities for all parties in the negotiation

Question 2 of 4 in Negotiate Project Agreements

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Sky Okonkwo is managing a hybrid project at Photon Drift Inc to develop a customer analytics platform. The project uses two-week sprints for the software components and a predictive approach for hardware integration. The vendor providing cloud infrastructure has proposed a contract amendment requiring a 15% cost increase and a two-month extension to delivery timelines due to supply chain constraints. The sponsor, Kenji Matsuda, has made it clear that budget overruns are unacceptable given current market pressures. Meanwhile, the technical lead insists the vendor's infrastructure is critical and cannot be substituted without significant rework. Sky has confirmed that the vendor's competitors could provide similar services within the original budget and timeline, though onboarding would require three weeks. What should Sky do to negotiate effectively?
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Correct answer: Present the vendor with competitive alternatives and their pricing, then explore options for meeting original terms while understanding their constraints

Explanation

Effective negotiation requires understanding both parties' interests and constraints while having alternatives available. By presenting competitive options, Sky demonstrates she has leverage and alternatives (BATNA - Best Alternative to a Negotiated Agreement) while still engaging collaboratively to understand the vendor's actual constraints. This approach may reveal flexibility the vendor hasn't disclosed or create pressure to find creative solutions that meet both parties' needs. The scenario indicates viable alternatives exist and the sponsor's budget position is firm, making this informed, principled negotiation approach most appropriate. Sky should explore whether the vendor can meet original terms through alternative solutions before either accepting unfavorable terms or switching vendors.

**Why not A:** Escalating to the sponsor immediately when the PM has not yet exhausted negotiation options is premature. The sponsor has already communicated that budget overruns are unacceptable, and the PM's role is to negotiate effectively before escalating. Escalation should be reserved for situations where the PM cannot resolve the issue independently.

**Why not C:** Accepting the vendor's 15% cost increase and extended timeline contradicts the sponsor's explicit directive that budget overruns are unacceptable. Accepting unfavorable terms and then seeking additional budget shifts the problem rather than solving it and demonstrates weak negotiation.

**Why not D:** Directing the technical lead to begin evaluating alternatives while still negotiating creates a parallel track that may be premature. The first step should be presenting competitive information to the current vendor to explore whether they can meet original terms, not immediately investing resources in vendor transition planning.

Key Concept

This question covers Assess priorities for all parties in the negotiation under Negotiate Project Agreements (People).

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