Harbor Co Simulation - Negotiation Law Resource

PROGRAM ON NEGOTIATION AT HARVARD LAW SCHOOL AN INTER-UNIVERSITY CONSORTIUM TO IMPROVE THE THEORY AND PRACTICE OF CONFLICT RESOLUTION

HARBORCO

TEACHER’S PACKAGE


These teaching notes were written by Lawrence Susskind and Eileen Babbitt, based on a case was written by Denise Madigan and Thomas Weeks under the supervision of Professor Lawrence Susskind (M.I.T.), Assistant Professor David Lax and the Negotiation Roundtable. Copies are available online at www.pon.org, Telephone: 800-258-4406, Fax: 617-495-7818. This case may not be reproduced, revised or translated in whole or in part by any means without the written permission of the Director of Curriculum Development, Program on Negotiation, Harvard Law School, 518 Pound Hall, Cambridge, MA 02138. Please help to preserve the usefulness of this case by keeping it confidential. Copyright © 1984, 1988, 1989, 1994, 1995, 1996, 2007 by the President and Fellows of Harvard College. All rights reserved. (Rev. 3/07)

HARBORCO Teaching Notes This is a six-party, multi-issue, scorable negotiation game involving a dispute over the building of a deep-water port. It introduces and explores the uses of principled negotiation and coalitions. Scenario Harborco is a consortium of development, industrial, and shipping concerns interested in building and operating a deep-water port. The consortium has already selected a site for the port, but cannot proceed without a license from the Federal Licensing Agency (FLA). The FLA is willing to grant Harborco a license but only if it secures the support of at least four other parties from among the environmental coalition, the federation of labor unions, a consortium of other ports in the region, the Federal Department of Coastal Resources (DCR), and the governor of the host state. The parties must deal with several issues: (1) Industry mix - what kinds of industries will be permitted to locate near the port? (2) Environmental impact - to what extent will potential environmental damage be mitigated? (3) Employment rules - will organized labor be given preference in hiring for construction and operation of the port? (4) Federal loan assistance - will the DCR provide a federal loan to Harborco? (5) Compensation to other ports - should other ports in the region receive compensation for potential economic losses?

Background Readings

Fisher, Roger and William Ury, Getting to Yes (New York, NY: Penguin Books, 1983), pp. 17-99.

Bacow, Lawrence, and Michael Wheeler, Environmental Dispute Resolution, (New York, NY: Plenum Press, 1984), pp. 21-41, 56-75.

Raiffa, Howard, The Art and Science of Negotiation (Cambridge, MA: Harvard University Press, 1982), pp. 251-274.

HARBORCO: Teaching Notes

Copyright © 1984, 1988, 1989, 1994, 1995, 1996, 2007 by the President and Fellows of Harvard College. All rights reserved. (Rev. 7/07)

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Logistics This game can be played with either 12 players (two per role) or six players (one per role). A game manager is needed to conduct periodic votes and to answer questions. Game instructions require at least 30 minutes to read; more preparation time is helpful. Negotiations require a minimum of 1½ hours. If possible, distribute the General Instructions at some point prior to the time of the game to give each player an opportunity to think about the scenario and consider the interests of the other negotiating parties. Hand out Confidential Instructions ahead of time, too, if you can be reasonably sure that all the participants will be present for the play of the game. Otherwise, Confidential Instructions can be distributed just before the game begins, to ensure that all the roles are filled in each group.

Before starting the game, make sure that everyone understands the General Instructions and the mechanics of the negotiation. In particular, the following points are important to stress:

- Harborco must be a party to any agreement; indeed, it must be the proposer of any package.

- Only four additional parties (in addition to Harborco) are needed for agreement; DCR must

be among the supporters of a proposed agreement if any federal subsidy is included.

- Three formal votes will be taken during the course of the negotiation; if no alternative proposal is on the table at the time of a vote, the vote will be taken on the original Harborco proposal or the previous proposal.

- In order for a party to vote "yes" on any package, the proposal must meet or exceed the minimum number of points assigned to that party in his or her Confidential Instructions. (This does not include bonus points). When handing out the role-specific Confidential Instructions, explain to players that there is a confidential one-page score sheet attached to the back of their instructions. You may want to have players in each role caucus with others in similar roles to discuss strategy before the actual negotiations begin. After these initial discussions, the negotiating group(s) of six or 12 should convene (ideally, in separate rooms). If there is more than one group, the game manager should meet with each group separately to welcome them and start the meeting. Explain your role as FLA scorekeeper in the context of the story. (You are there to observe the progress of negotiations on behalf of your superiors at the FLA.) Explain the voting procedures. You will call for a formal vote after the first 15 minutes, and every 40 to 45 minutes (or so) thereafter. These votes are required by FLA rules to help monitor the progress of negotiations. Additional informal votes may be carried out by the groups, but you must conduct the formal votes. No vote is final until you have conducted it.

Explain that the FLA will accept no proposal unless at least five of the six parties are on board. In addition, remind the players that two parties have certain veto power; Harborco can veto any



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proposal (because it is the developer), and the Federal DCR can veto any proposal requiring FEDERAL funding. Remind the groups to calculate their score for each proposed package very carefully before voting. You are not there to facilitate or participate in the meeting in any way. Players are free to run the meeting as they wish. (This means that you are a SILENT, PASSIVE observer, except for those times when a formal vote is being taken.)

BEGIN THE NEGOTIATIONS. (You may suggest, before moving on to the next group, that players begin by introducing themselves in their roles and by making brief statements.) FORMAL VOTE #1: Ask Harborco if it has a proposal it would like to submit for a vote. If a new proposal is submitted, write the proposal on the flip chart and ask for a simultaneous show of hands:

If no new proposal is submitted, call for a vote on Harborco's initial proposal. Write the original proposal on the flip chart and ask for a simultaneous show of hands:

FORMAL VOTE #2 - after 30 to 40 minutes. FORMAL VOTE #3 - after 30 to 40 minutes.

IF A FIVE-WAY AGREEMENT IS REACHED in any round, ask the parties to try to come up with a six-party agreement. NEGOTIATION ENDS IF NO AGREEMENT IS REACHED: Write down the last proposal and the votes for and against. Compute two sets of points: a) the points each party would have earned with the last proposal; and b) the final scores - if the proposal failed, each person receives his or her walk-away, or minimum, score.

IND ECOL EMP LOAN COMP 1 1 2 2 5

IND ECOL EMP LOAN COMP 1 1 4 2 1



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Notes to Instructor It is important to stress that the purpose of the game is to get the highest possible individual score. This is what makes the game similar to real life. You might want to create an incentive for students to maximize their scores. We don't advise you to base their grades on those scores, but you should remind them that the scores are in some way an evaluation of their personal performances. Settling for a score you're not happy with, just to reach a six-way agreement, is not the best outcome.

Be sure to check the final scores, as reported by the groups, to be sure there are no miscalculations. Adding mistakes can lead to a group thinking it has an agreement when it really doesn't. Be insistent about taking the formal votes during negotiations. Even if the group doesn't want to vote, push them to put a proposal on the table, or to vote on Harborco's original package. The reason for doing this is for them to get an idea of how positions are changing. Commonly Asked Questions

Q: Are the parties allowed to take votes in between the formal voting?

A: Yes - but these are informal votes and not recorded by the game manager.

Q: Can we show our score sheets to each other at the end?

A: Preferably not. Simply comparing the numbers makes it seem too much like a mechanical process. It is better to believe the arguments made by the other parties, based on the numbers; this is closer to a real-life situation. Debriefing There are 55 possible agreements; only nine are six-way agreements. These are all listed in the attached Solution Set. The score sheet lists each of these possible agreements, by number of the option in each issue category. It then lists the points that each party will receive for that particular package. The highest score possible for each party is circled. The debriefing should begin with a posting of scores from each group. Typically, 10 percent are 6-way, 70 percent are 5-way, and 20 percent reach no agreement. To begin the debriefing, ask the following: 1. What happened in the groups that reached agreement, versus the groups that did not reach agreement? 2. Identify the people who got the highest score for each role. What were their strategies?



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3. Identify the person who got the lowest score for each role. What happened?

4. What did the participants learn from the game?

Commonly Asked Questions

1. What happened in the negotiations in the groups that reached "no agreement"? Usually Harborco, as instructed, had preempted discussion by proposing a package designed to ensure the greatest return on its investment. The other negotiators protested, and a series of caucuses began. Harborco, offering various concessions, tried to forge a winning coalition with at least four other players. Groups opposed to the port caucused simultaneously, seeking to block any pro-Harborco agreements. Few coalitions were stable. Each player was in something of a bind -- not wanting to be left out of any settlement that might emerge, but also working to block packages that offered too few points. Sometimes agreement eluded the players even when the proposed package permitted five of the parties to vote “yes” (i.e., they were holding out for more than their minimum scores). They also may have been attempting to deprive others of what they presumed would be unduly large gains. Often, the exchanges in the groups that fail to reach agreement become quite heated.

2. What was the negotiation process in the groups reaching five-way agreement? Typically, there was very little caucusing. Everyone stayed at the table. Harborco began by asking each group to express its concerns. It sought to build a package incrementally, attempting to pyramid proposals responsive to each group's concerns. Some players, usually the other ports, unions, and the environmental coalition, held out for no project at all since their Best Alternatives To a Negotiated Agreement (BATNA) were high, thus forming a blocking coalition. Blocking coalitions dissolved, however, in the face of increasingly attractive offers from Harborco, aimed at meeting the demands of both the union and the environmentalists. The representative of other ports continued to vote no. The following is an example of a five-way agreement that leaves out the Environmental League:

• Industry mix: primarily dirty • Ecological impact: maintain or repair • Employment rules: unlimited union preference • Federal loan: $1 billion over 20 years • Compensation to other ports: $150 million

This package yields the following scores:

The Environmental League has little room to maneuver in the negotiation, because it scores points on only two of the five issues. Often it is left out of an agreement after failing to construct

Harborco Environ Unions Ports DCR Governor 56 25 75 40 72 76



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a blocking coalition with the other ports.

3. What strategies could have led the "no-agreement" groups to agreement? The first step would have been to realize that this was not a zero-sum negotiating situation. Joint gains were possible because each player attached different importance to the various issues being negotiated. Such gains could have been realized if they had listened to each other more carefully.

Lessons can also be learned from six-way agreements. Consensus agreements are reached only when the parties dedicate themselves to building consensus, working hard to respond to each other's concerns. Usually, one player functions as a process manager even though he or she is an interested party. While forbidden from revealing his or her confidential point allocations, each party must find a way to communicate his or her true interests in a manner that is believable to the others. In effect, the parties create joint gains by trading across issues they value differently, while developing packages that allocate these joint gains.

4. What are the highest possible scores for each role?

Harborco: 77 Environmental League: 100 Unions: 90 Other Ports: 64 Federal DCR: 100 Governor: 77. All of these scores are only possible with five-way agreements (one group is always left out).

5. Could we have invented other options? No. The scoring system is set up to handle only the options described in the game.

6. Is it better to caucus or not? For this game, it's better to work together at the table. But if it looks as if you may not get your BATNA, you may want to caucus with someone to form a blocking coalition.

7. What if a party or parties aren't truthful (i.e., agree to vote a certain way, and then don't)? Aren’t they required to live up to their agreements? There is no such requirement, which is a problem with coalitions. It is difficult, if not impossible, to find the means to hold someone to such an agreement.

8. To get a six-way agreement, does someone have to play a mediating role? Not necessarily a mediating role, but someone does have to perform a facilitative function, which will be discussed more in a later game. Explain that negotiation becomes more complicated as more parties and more issues are added. A BATNA may not be as easy to assess. Integrative bargaining may be more difficult to establish, as parties may be more protective of their interests in the presence of many would-be adversaries. The significant issues to discuss after playing this multi-party, multi-issue game are the elements of principled negotiation and the importance of coalitions.



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Elements of Principled Negotiation In Getting to Yes, Fisher, Ury, and Patton expand the idea of integrative bargaining to include a checklist of principles. These principles are designed to move any negotiation away from distributive bargaining to one in which all parties are made better off. The main elements are the following: 1. Know your BATNA. This principle was explained in the Teaching Notes to the Redstone game. Knowing one’s BATNA gives each player more power at the negotiating table. He or she can evaluate options more critically and be clearer with other parties about what he or she needs to be part of any agreement. In a scorable game, the BATNA is given to each player. These scores are based on estimates of preference and on expected value of various outcomes. 2. Distinguish interests from positions.– Fisher, et al. distinguish between "interests," which are the underlying concerns of each party, and "positions," which are the stands taken by each party on the issues being negotiated. They argue that by focusing on interests rather than positions, parties can engage in integrative bargaining and find creative ways to make all parties to the negotiation better off.

Positional bargaining occurs when parties do not focus on interests. In positional bargaining, each party typically identifies bottom line, opening, and fallback positions before negotiation begins. After the opening position is offered, each party makes small concessions, based on his or her fallback strategy. Concessions are made grudgingly, until a compromise position is found or until the parties reach an impasse. This type of bargaining builds little trust between the parties, as there is no opportunity to develop a relationship, and no incentive to explore each other's interests. The result is a process that moves backward from an opening position, rather than upward toward a creative outcome. Most distributive bargaining follows this positional approach.

Focusing on interests, by contrast, compels the parties to listen carefully to each other to discover what each feels is really important. Interests define the problem in a way that allows for collaboration and creativity in fashioning a solution. The endeavor becomes one of joint problem solving, rather than adversarial positioning. As discussed in integrative bargaining, the parties using this approach can explore possibilities for trade offs and joint gains, resulting in a positive-sum, rather than constant, agreement. 3. Invent options without committing. In order to explore the interests of parties at the table, the negotiating process should include the opportunity to brainstorm possible approaches to problems. This encourages the creativity and joint problem solving so essential to integrative bargaining. Parties are more likely to engage in this process if it doesn't tie their hands and lock them into agreements before they are ready. Thus the understanding should be that parties will not be held to options they propose during the inventing period.

4. Insist on objective criteria: Criteria to evaluate proposed options should be objective, so each party feels his or her interests are being protected. Sometimes such criteria are principles that the parties can agree should govern the outcome, such as fairness or efficiency. Sometimes



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objectivity is insured by outside expertise, such as when technical models are used. The objective criteria themselves can be the subject of much negotiation, and this process can highlight the underlying aspirations of each party. An agreement on such criteria can free up the parties to invent options more creatively, knowing that the final evaluation will winnow out those that don't meet the agreed-upon criteria. 5. Separate the people from the problem: By focusing on the problem rather than on the individuals and personalities at the table, parties can more easily collaborate on joint problem solving. Parties can work to identify common interests related to the problem, rather than getting stuck on differences in style and tactics. This approach can also keep the emotions of the negotiation from getting out of control; it's usually easier to deal with attacks on ideas than to handle personal confrontations. The Fisher, et al. work has its limitations, and there are several good articles that critique the "principled negotiation" approach. A very stimulating class discussion can focus on these critiques and the pros and cons of principled negotiation in a variety of real and hypothetical cases. Additional Articles:

White, James, "The Pros and Cons of Getting to Yes," Journal of Legal Education, Vol. 34, No. 1 (March 1984).

McCarthy, William, "The Role of Power and Principle in Getting to Yes," Negotiation Journal, Vol. 1, No. 1, (January 1985).

Fisher, Roger, "Beyond Yes," Negotiation Journal, Vol. 1, No. 1 (January 1985). Importance of Coalitions In a multi-party negotiation, the analysis of coalitions becomes crucial in developing strategies both before and during the negotiation itself. Who are the most likely parties to share your interests? If such a coalition were to form, would it be strong enough to block agreements that aren't in accord with its interests? How stable is such a coalition likely to be? Are there other potential coalitions whose interests are in opposition?

The stability of a coalition is always quite fragile. There's the possibility that an outside party may be able to lure a coalition member away by offering a bit more than the coalition can provide. Raiffa (Art & Science, p. 252) illustrates this dynamic with a coalition game, in which shifting allegiances dominate the play. The key, therefore, to effective coalition building is to find a way to bind the parties together so that shifting is less likely to occur. To do this, one must really understand the interests of each party and be creative about appealing to those interests. Or one can step back from the negotiation a bit and ask what an impartial arbitrator might award to each coalition member. Sometimes this appeal to principles of fairness can persuade reluctant coalition members to structure their agreement along mutually beneficial lines.



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Summary of Lessons 1. Inventing options before committing to them is critical to achieving mutually beneficial outcomes. Unfettered brainstorming often yields creative and surprising solutions. 2. It almost always pays to be honest about the "interests" behind your positions. That way, other parties will have an easier time constructing proposals that satisfy your most important interests. Try to suggest "yes-able" propositions. 3. The legitimacy of arguments (and ultimately agreements) is enhanced if supported by objective and respected sources of data. 4. It almost always pays to maintain cordial working relations with adversaries, even in the face of substantial disagreement. Focus your energy on solving the problems, not on beating the other side. 5. Players are exposed to elementary utility analysis in the point-scoring scheme. The importance of pre-negotiation analysis in evaluating options is illustrated. The players can then explore how and why different negotiating strategies led to different outcomes. 6. Multi-issue, multi-party negotiations tend to involve the formation of coalitions, especially blocking coalitions. This game provides an instructive context for exploring coalition strategies. 7. Parties who reveal their true interests do not necessarily do better than those who remain silent or bluff. The advantages and disadvantages of revealing all of one's concerns are worth pursuing carefully. Exam Questions 1. What are the key elements in "principled negotiation"? How does each element move a negotiation away from distributive, and toward integrative, bargaining? 2. What are some of the limitations of Fisher and Ury's approach? What additional principles would you add to the original list to address these limitations? 3. How can coalitions help and hinder potential agreement in a multi-party negotiation?

Review Copy Do Not Reproduce


This case was written by Denise Madigan and Thomas Weeks under the supervision of Professor Lawrence Susskind (M.I.T.), Assistant Professor David Lax and the Negotiation Roundtable. Copies are available at reasonable cost from the Clearinghouse for the Program on Negotiation at Harvard Law School (Web site: www.pon.org; telephone: 800-258-4406 or 617-495-1684). This case may not be reproduced, revised, or translated in whole or in part by any means without the written permission of the Director of Curriculum Development, Program on Negotiation, 513 Pound Hall, Harvard Law School, Cambridge MA 02138. Please help to preserve the usefulness of this case by keeping it confidential. Copyright © 1984, 1988, 1989, 1994, 1995, 1996, 2002, 2007 by the President and Fellows of Harvard College. All rights reserved. (Rev. 3/07)

HARBORCO GAME REVIEW

FINAL PROPOSAL

FINAL VOTES/SCORES

GROUP

Industry Mix

Eco Impac

t

Employee Rules

Federal Money

Money to Other Ports

Harborco

(55)

Environment

(50)

Union (50)

Other Ports

(31)

Federal

(65)

Government

(30)



This case was written by Denise Madigan and Thomas Weeks under the supervision of Professor Lawrence Susskind (M.I.T.), Assistant Professor David Lax and the Negotiation Roundtable. Copies are available at reasonable cost from the Clearinghouse for the Program on Negotiation at Harvard Law School (Web site: www.pon.org; telephone: 800-258-4406 or 617-495-1684). This case may not be reproduced, revised, or translated in whole or in part by any means without the written permission of the Director of Curriculum Development, Program on Negotiation, 513 Pound Hall, Harvard Law School, Cambridge MA 02138. Please help to preserve the usefulness of this case by keeping it confidential. Copyright © 1984, 1988, 1989, 1994, 1995, 1996, 2002, 2007 by the President and Fellows of Harvard College. All rights reserved. (Rev. 3/07)

HARBORCO GAME VOTING SHEET

INDUSTRY

MIX

ECOLOGICAL

IMPACT

EMPLOYMENT

RULES

FEDERAL

LOAN

COMPENSATION

TO PORTS VOTE 1

VOTE 2

VOTE 3


[55] [50] [50] [31] [65] [30] [55] [50] [50] [31] [65] [30]# IND EC EMP FL COM Har Env Uni Por DCR Gov TOT # IND EC EMP FL COM Har Env Uni Por DCR Gov TOT1 1 2 1 3 4 56 [25] 75 40 72 76 344 32 2 2 4 1 3 77* [47] 56 34 65 60 339

2 1 2 2 3 3 56 [25] 66 51 77 67 342 33-U 2 3 2 2 4 67 77* 83 35 76 63 401 max points

3 1 2 2 3 4 61 [25] 68 36 74 70 334 34 2 3 2 3 5 56 77 65 [25] 78 59 360

4 1 2 3 2 3 70 [25] 66 44 65 68 338 35-U 2 3 3 1 3 73 77 81 40 65 64 4005 1 2 3 3 2 56 [25] 54 64* 72 59 330 36-U 2 3 3 2 3 67 77 71 48 81 54 3986 1 2 3 3 3 61 [25] 56 49 79 61 331 37-U 2 3 3 2 4 72 77 73 33 78 57 3907 1 2 3 3 4 66 [25] 58 34 76 64 323 38 2 3 3 2 5 70 77 65 [18] 66 60 356

8 1 3 1 3 5 57 55 67 [25] 65 71 340 39 2 3 3 3 5 61 77 55 [23] 80 53 349

9-U 1 3 2 2 3 68 55 76 46 68 66 379 40-U 2 3 4 1 3 80* 77 56 34 70 52 36910-U 1 3 2 2 4 73 55 78 31 65 69 371 41 2 3 4 1 4 75 77 58 [19] 67 55 351

11 1 3 2 3 5 62 55 60 [21] 67 65 330 42 2 3 4 2 2 59 77 [44] 57 79 40 356

12-U 1 3 3 2 3 73 55 66 44 70 60 368 43 2 3 4 2 3 64 77 [46] 42 86 42 357

13 1 3 3 2 4 68 55 68 [29] 67 63 350 44 2 3 4 3 3 55 77 [36] 47 100* 35 350

14-U 1 3 3 3 4 69 55 58 34 81 56 353 45 2 3 4 3 4 60 77 [38] 32 97 38 342

15 1 3 3 3 5 67 55 50 [19] 69 59 319 46-U 3 2 2 2 4 66 70 63 41 65 63 36816 1 3 4 2 2 65 55 [39] 53 68 46 326 47 3 2 2 3 5 55 70 [45] 31 67 59 327

17 1 3 4 2 3 70 55 [41] 38 75 48 327 48-U 3 2 3 2 3 66 70 51 54 70 54 36518 1 3 4 3 2 56 55 [29] 58 82 39 319 49-U 3 2 3 2 4 71 70 53 39 67 57 35719 1 3 4 3 3 61 55 [31] 43 89 41 320 50 3 2 4 2 2 58 70 [24] 63 68 40 323

20 2 1 2 3 4 59 [22] 73 40 65 68 327 51 3 2 4 2 3 63 70 [26] 48 75 42 324

21 2 1 3 3 3 59 [22] 61 53 70 59 324 52 3 2 4 2 4 68 70 [28] 33 72 45 316

22 2 1 3 3 4 64 [22] 63 38 67 62 316 53 3 2 4 3 4 59 70 [18] 38 86 38 309

23 2 2 1 2 4 59 [47] 90* 39 69 77* 381 54 3 3 4 2 3 56 100* [26] 48 80 34 344

24 2 2 2 2 3 59 [47] 81 50 74 68 379 55 3 3 4 2 4 61 100* [28] 33 77 37 336

25 2 2 2 2 4 64 [47] 83 35 71 71 371

26 2 2 2 3 4 55 [47] 73 40 85 64 364 * Note: While all 55 agreements technically are possible, the 35 5-way agreements in which a party other than

27 2 2 3 2 2 59 [47] 69 63 69 60 367 Other Ports withholds agreement are strategically foolish from Other Ports' perspective. In those cases (i.e.,

28 2 2 3 2 3 64 [47] 71 48 76 62 368 1-7, 16-32, 42-45, 47, and 50-55), even though Other Ports receives more than its 31-point minimum, Other

29 2 2 3 2 4 69 [47] 73 33 73 65 360 Ports would have received even more points (150) by withholding its consent along with the other

30 2 2 3 3 3 55 [47] 61 53 90 55 361 nonconsenting party, and thus scuttling the entire deal. So, assuming Other Ports plays its role strategically

31 2 2 3 3 4 60 [47] 63 38 87 58 353 and never consents to a 5-way deal, there are only 8 possible 5-way agreements (8, 11, 13, 15, 34, 38, 39 &

41), with Other Ports as the lone holdout in each.

ISSUES (outcomes)

HARBORCO SOLUTION SET: 55 Possible Agreements*• 12 6-way agreements (marked with U) • Max points for each party are asterisked (*) • Points below party minimum are in brackets [25]

ISSUES (outcomes)PARTIES (min required points in bold brackets) PARTIES (min required points in bold brackets)



These case was written by Denise Madigan and Thomas Weeks under the supervision of Professor Lawrence Susskind (M.I.T.), Assistant Professor David Lax, and the Negotiation Roundtable. Copies are available online at www.pon.org, Telephone: 800-258-4406, Fax: 617-495-7818. This case may not be reproduced, revised, or translated in whole or in part by any means without the written permission of the Director of Curriculum Development, Program on Negotiation, Harvard Law School, 518 Pound Hall, Cambridge, MA 02138. Please help to preserve the usefulness of this case by keeping it confidential. Copyright © 1984, 1988, 1989, 1994, 1995, 1996, 2007 by the President and Fellows of Harvard College. All rights reserved. (Rev. 3/07)

HARBORCO General Instructions Harborco, a newly formed national consortium, is interested in building and operating a deep-water port off the coast of Seaborne. The consortium's members are drawn from a variety of enterprises, most of which are diversified among a number of commercial activities. Harborco is prepared to participate in the financing, construction, and operation of the port. It has already engaged in some preliminary planning and design work, but it cannot proceed without a license issued by the Federal Licensing Agency (FLA). The Project The deep-water port proposed by Harborco would be the first of its kind on the East Coast. It would be located in Seaborne at the estuary of the Banksedge River. Like the European seaport Rotterdam, it would accommodate a new generation of large cargo ships and supertankers -- ships believed to be especially cost-effective in transporting raw materials and goods. The deep-water port would be based on an artificial island of roughly nine square miles, created with fill from the dredging of the access channel. The island would be connected to the shore by a network of highways, railroads, and pipelines. Onshore, an Air-Sea-Cargo Center (ASCC) would be developed, along with major connections to existing highways, railroads, and pipeline networks. Substantial infrastructure would be needed to accommodate an intermodal freight terminal of this sort. Most of the industrial plant and ancillary facilities would be located on the island. While components of the port could be operational as early as five years after construction begins, the port's full development might not be completed until 20 years later. The projected cost of the port is roughly $4 billion (in current dollars). The Parties Harborco is excited about the prospect of a deep-water port on the East Coast. It believes such a port could generate substantial profits within ten years after operations begin. (Harborco bases its projections on an independent study by Transport Associates, Inc., which concluded that such a port could be economically viable under several possible scenarios.) In addition,


HARBORCO: General Instructions

Copyright © 1984, 1988, 1989, 1994, 1995, 1996, 2007 by the President and Fellows of Harvard College. All rights reserved. (Rev. 3/07) 2

Harborco believes the local, regional, and national economies could benefit from a port, which would dramatically reduce the transport costs of imports and exports. Several other parties, however, have an interest in the deep-water port and Harborco's application for a license. The Environmental League: This coalition of environmental interest groups is generally opposed to any development of coastal areas, especially development that threatens the fragile ecosystems, adds to air and water pollution, increases waste disposal problems, and increases health and safety risks. The League is worried that Harborco's proposed port would seriously damage the environment of Seaborne and destroy the basic Banksedge River ecology. Local Federation of Labor Unions (The Unions): The Unions are generally pleased that new development is being considered for Seaborne. They anticipate hundreds of new jobs will be created in both the short and long run. They will argue strongly, however, that these jobs should be reserved for local union members. (This local federation is affiliated with the National Federation of Labor Unions.) Other Ports in the Region: The four other ports in the region are not pleased with Harborco's proposal. They expect to lose a substantial amount of business to the new port, if it is constructed. They are extremely skeptical of Harborco's claim that all regional ports will share in the economic benefits generated by the new port. Federal Department of Coastal Resources (DCR): This Cabinet-level agency created during the Reagan Administration has a dual mandate: (1) to help realize the economic potential of the nation's coastal resources, and (2) to preserve the environmental integrity of the nation's coastal areas. The DCR would like to see a deep-water port established somewhere on the East Coast, and has the resources and authority to subsidize such a port. Governor Sherwood (of Seaborne): Governor Sherwood is in her second gubernatorial term and is eager to promote development in her state. She is sensitive, however, to the needs of organized labor, a powerful political constituency, and is therefore eager to see that unions share in the benefits of the port. The Licensing Process Harborco submitted an application just one month ago for FLA review. While aware of other parties' interest in its proposal, Harborco expected little difficulty in the licensing phase of this project. The FLA, however, has recently been criticized by several members of Congress for failing to consider the "broader public interest" in its previous licensing determinations. Consequently, the FLA is now very sensitive to the level of political support surrounding each application it reviews.




In this case, the FLA will not approve Harborco's application unless it is clear that there is substantial support for the project. Therefore, the FLA has decided that it will approve Harborco's proposal ONLY IF Harborco can muster the support of at least four other parties. (The FLA would prefer to see all five parties support a Harborco application, but it will grant a license even if only four lend their support.) Two parties, however, can exercise some veto power. Harborco can veto any proposal in this negotiation (since no other party is capable of initiating the development). In addition, the Federal DCR can veto any project that requires a federal loan or loan guarantee. The Issues Preliminary discussions have taken place between Harborco and representatives of the five key parties. As a result of these conversations, Harborco has identified five issues that seem to be of concern to all or some of the parties. A general description of the issues is provided below; more detailed information is provided in each party's Confidential Instructions. ISSUE A: Industry Mix The deep-water port itself is only part of the development Harborco has planned. The construction will attract a variety of industries seeking access to the port. These industries will either lease or purchase land on the artificial island and onshore, and they will eventually generate the bulk of the revenues associated with the new port. Harborco has initially requested the freedom to develop any industry mix it chooses. This means that it could choose to develop (or encourage) any type of industry or plant, including oil refineries, steel mills, or a resource recovery plant. The environmentalists, however, have argued that strict limits should be placed on the industry mix allowed in the area; they are asking that only relatively "clean" industries such as high-tech production plants be allowed. As a result of this controversy, three options have surfaced in the discussions between Harborco and the environmentalists. Option A1: Primarily dirty. No industry would be excluded, but the mix would probably be dominated by oil refineries, petrochemical plants, steel productions plants, and a resource recovery plant. Option A2: Clean/Dirty. Would exclude the dirtiest industries, but would allow a limited number of moderately dirty plants (including food-processing plants). Option A3: All clean. — Would be limited to only clean industries such as high-tech production industries; dirty plants would be excluded.




Air pollution, water pollution, and waste disposal would vary with the industry mix selected. Regardless of the industry mix, all industries would conform to existing federal and state pollution regulations. Issue B: Ecological Impact The dredging of the access channel, creation of the island, and general construction activity could seriously disrupt existing ecologically delicate areas both onshore and offshore. The damage would include the alteration of nesting habitats, a reduction in natural tidal flushing, the destruction of wetlands, serious land erosion, adverse impacts on existing fisheries, and substantial subsurface geologic impacts (caused by drilling and dredging). Harborco admits that the new deep-water port would create some damage to the ecological setting, but it also claims that such damage would be within the limits defined by federal and state regulations. Environmentalists, however, counter that the damage would be excessive and that Harborco has no right to disrupt the area. In light of these arguments, three outcomes are possible: Option B1: Some harm to ecology. This would involve unremedied disruption to the ecology. Fish and animal nesting habitats would be altered (or effectively destroyed), valuable wetlands would disappear, water temperatures and currents would change, and certain types of aquatic flora and fauna would be destroyed. All this would take place within federal and state impact mitigation guidelines. Option B2: Maintain or repair ecological balance. This would involve special precautions to divert construction and dredging activity (where possible) from the most ecologically delicate or important areas. But it would also include the relocation or recreation of habitats destroyed by unavoidable dredging and construction. Option B3: Improve the ecological setting. Like the previous option, this would include special efforts to bypass delicate areas during construction and dredging. But it would also include a variety of other efforts to improve the local environment. Environmentalists propose ongoing fishery management and wildlife protection, creating new and larger protected wetland areas, an active anti-erosion program, and constructing and operating a small waste-treatment facility to treat effluents flowing into the estuary from the Banksedge River. Issue C: Employment Rules Construction and operation of the deep-water port is expected to generate hundreds of new jobs in the community in both the short and long run. These jobs can be distributed among potential employees in one of three ways:




Option C1: Unlimited union preference. Jobs would be reserved for local union workers, where appropriate. This would enable local union members to claim as large a share of the new jobs as possible. Option C2: Union quota of 2:1. Limited preference could be given to union members where the ratio of union to nonunion workers would not fall below 2 to 1. Option C3: Union quota of 1:1. The ratio of union to nonunion workers would not be less than 1 to 1. Option C4: No union preference (unrestricted hires). Harborco would be free to hire whomever it chooses. In this scenario, most workers would probably be nonunion, enabling Harborco to maintain its hiring flexibility and to reduce its expected wage costs. In addition, new workers might be drawn from outside Seaborne. Issue D: Federal Loan The newly created Federal Department of Coastal Resources (DCR) has a mandate to promote economic use of coastal areas, while preserving their environmental integrity. It can provide a substantial loan (or guarantee private borrowing) to help cover construction and operating costs of the port over the next 20 years. Harborco estimates that the total cost of developing the port will be roughly $4 billion, and it has requested $3 billion in guaranteed loans. However, the DCR will insist on certain aspects of port design before it will contribute to the port. Four options appear possible: Option D1: A $3 billion loan (at 15% interest) over the next 20 years. Option D2: A $2 billion loan (at 15% interest) over the next 20 years. Option D3: A $1 billion loan (at 15% interest) over the 20-year period. Option D4: No federal loan. Issue E: Compensation to Other Ports in the Region Harborco believes the new port will generate significant economic growth both inside and outside the state. It contends that the entire regional economy will be improved by the port, and that the other four major ports on the Eastern Seaboard will benefit from this growth. The other ports, however, expect to suffer a substantial loss of traffic once the new port begins




operation. They have estimated the present discounted value of their losses to be roughly $600 million, representing losses for 10 years after the new port begins operation. They think Harborco should compensate them for these losses. In light of this conflict, five possible options are up for consideration. Option E1: Harborco pays $600 million (or 100% compensation) in current dollars to the other ports. Option E2: Harborco pays $450 million (or 75% compensation). Option E3: Harborco pays $300 million (or 50% compensation). Option E4: Harborco pays $150 million (or 25% compensation). Option E5: Harborco makes no compensation to the other ports. Though the ports would be free to spend this money as they wished, they could use these funds to make changes that would enable them to serve more effectively as feeder ports for the new deep-water port. The Negotiation Harborco has already submitted a license application to the FLA, which proposes the following:

* A primarily dirty industry mix (Option A1), * Some harm to the ecology (but within federally and state-prescribed limits)

(Option B1), * No special preference for union workers (Option C4), * A $3 billion loan from the DCR (Option D1), and * No compensation payments to other ports (Option E5).

Harborco is free to submit changes to its proposal at any time during the licensing review process, but it is anxious to have its application approved as is. In an attempt to muster support for its current proposal, Harborco has invited all the key parties to a meeting at the Ritz-Carlton Hotel. Its stated objective for the meeting is to seek a negotiated agreement among all parties to ensure unanimous support for its proposal. (Of course, Harborco needs the support of only four other parties in order to secure a license.) Mechanics of the Negotiation All five parties have agreed to attend the meeting, and are seated at the negotiating table. The




FLA representative opens the meeting and explains the procedures that the negotiating session will follow. Each party has seen a copy of Harborco's current FLA application. The discussion may progress in any direction, but Harborco will be searching for a proposal that will win enough votes for FLA approval. Anyone can suggest alternative proposals, but Harborco's concurrence is needed for any proposal to be adopted. Three formal voting rounds are scheduled for the meeting. The first will take place 15 minutes after the meeting begins, the second after 40 minutes of discussion, and the third after 85 minutes of discussion. Additional votes may be taken at any point during the meeting, but at least three voting rounds must take place. (There is of course one exception: if a project receives sufficient votes for FLA approval early in the meeting, the parties may choose to forgo subsequent voting rounds.) The FLA representative will administer the three scheduled voting rounds. If Harborco cannot decide on a revised project to propose at the time of a formally scheduled vote, the participants must vote on the original Harborco proposal. Voting is done by a show of hands. Once a proposal is passed (i.e., receives supporting votes from at least four of the five other parties), the votes are binding and parties cannot renege on their promise of support. The parties are free, however, to explore improvements in the agreement that either benefit the supporting parties or entice the non-supporting party to vote for the agreement. If the parties to the original agreement do not unanimously support proposed improvements, the original agreement stands. Negotiations must stop at the end of the meeting. If no agreement is reached (i.e., if no proposal receives at least four votes in addition to Harborco's), the FLA will reject Harborco's application for a license.


P R O G R A M O N N E G O T I A T I O N A T H A R V A R D L A W S C H O O L AN INTER-UNIVERSITY CONSORTIUM TO IMPROVE THE THEORY AND PRACTICE OF CONFLICT RESOLUTION

This case was written by Denise Madigan and Thomas Weeks under the supervision of Professor Lawrence Susskind (M.I.T.), Assistant Professor David Lax, and the Negotiation Roundtable. Copies are available at reasonable cost from the Clearinghouse for the Program on Negotiation at Harvard Law School (Web site: www.pon.org; telephone: 800-258-4406 or 617-495-1684). This case may not be reproduced, revised, or translated in whole or in part by any means without the written permission of the Director of Curriculum Development, Program on Negotiation, 513 Pound Hall, Harvard Law School, Cambridge MA 02138. Please help to preserve the usefulness of this case by keeping it confidential. Copyright © 1984, 1988, 1989, 1994, 1995, 1996, 2002, 2007 by the President and Fellows of Harvard College. All rights reserved. (Rev. 3/07)

HARBORCO Confidential Instructions for the Federal DCR Negotiator (From the Secretary of Coastal Resources) Harborco's recent application to build and operate a deep-water port in Seaborne is very intriguing. We are certainly interested in seeing a deep-water port finally developed on the East Coast. Unfortunately, some of our lower-level staff appeared over-eager in initial discussions with Harborco and would have gladly committed our entire budget to this venture had my deputy secretary not stepped in! This meeting seems a perfect opportunity to test the strength of Harborco's commitment to the project, and to wrangle some concessions in return for funding. Scoring. In order to help you plan your negotiating strategy, our policy shop has constructed a special 100-point scoring scheme to illustrate which negotiable outcomes are of greatest and least importance to us. Under this scheme, the most-preferred set of outcomes is worth 100 points to us; the least-preferred is worth zero. You can earn up to 100 points depending upon how each of the five issues is resolved. The use of points may seem a bit artificial and awkward. But for the purposes of this negotiation, it enables us to combine our several interests -- developing the coastline, appeasing our Congressional oversight committee, retaining control over important projects, etc. -- into a single "currency." This, in turn, allows us to compare the gains and losses associated with different issues. Your task is to try to earn as many points as possible in this negotiation. This is not being greedy -- it simply means that we want to further our legitimate interests as far as possible. We will support any project worth at least 65 points, but that is the bare minimum we can accept. We certainly hope you will do much better. Federal Loan. This issue is obviously of paramount importance to us. We would prefer to have at least some financial involvement in the project in order to retain some control over its operation. If we support this port and it turns out to be successful, our institutional credibility will improve dramatically. In addition, the current administration would like to claim credit for helping to establish the East Coast's first deep-water port.


HARBORCO:: Confidential Instructions for the Federal DCR Negotiator

Copyright © 1984, 1988, 1989, 1994, 1995, 1996, 2002, 2007 by the President and Fellows of Harvard College. All rights reserved. (Rev. 3/07) 2

We do not, unfortunately, have unlimited funds to bestow on this project, and so we have assigned the following points to this issue:

* $1 billion loan = 40 points



* No loan = 0 points As indicated by the point distribution, we would definitely prefer some financial involvement to none. But our Congressional oversight committee is anxious to see significant private-sector involvement in all projects we underwrite. Consequently, our first choice is to provide just $1 billion. While Harborco will have a somewhat difficult time raising the remaining $3 billion, it will not be impossible for them. (We think they already have almost $2 billion in potential commitments lined up.) In addition, there are several other projects being planned on both the East and West Coasts, many involving improvements to the existing ports. While we acknowledge the tremendous public benefits associated with a deep-water port on the East Coast, we would like to spread our money across as many worthwhile projects as possible. (Congress would also like to see our money spent in as many congressional districts as possible.) Ecological Impact. In light of our dual mandate, we cannot accept a port that promises to do substantial damage to the environment. On the other hand, we do not want to burden Harborco with improving the ecology if such improvement threatens the economic viability of the port. We have assigned the following points to this issue:

* Improve the setting = 25 points

* Maintain and repair the setting = 20 points

* Do some harm to the ecological setting = 0 points As you can see, we are not averse to improvements. We can, after all, win some political credibility if improvements take place. But we are far more concerned that Harborco at least agrees to maintain and repair the setting. Improvements should be considered icing on the cake. Compensation to Other Ports. This is a tricky issue for us because the four other ports in the region are part of our newly created constituency. We would be somewhat reluctant to sign an agreement that specifically excludes these ports from consideration. In addition, we should be very careful not to alienate members of Congress from these areas.




On the other hand, we do not want to jeopardize the economic viability of the port by imposing huge compensation costs on it. The proposed compensation payments are calculated in current dollars and could prove to be a substantial burden for Harborco. Consequently, we prefer the compromise solutions to either of the two extremes. Our analysts suggest that, in fact, the other ports have overestimated their projected losses. We think a fair solution would be compensation of roughly $300 million. While these other ports may lose some business, they will undoubtedly gain other business as feeder ports; estimates of the value of this new business do not appear to have been included in their projected loss estimates. The following points are assigned to the various compensation levels proposed:

* $300 million = 15 points




* No compensation = 0 points Industry Mix. This issue is moderately important because of its impact on the environment. While our mandate requires us to be sensitive to environmental concerns, we need not be overly sensitive. Here we think the environmentalists' demands may be a bit extreme. While we agree that the all-clean industry mix would create the least environmental damage, it would also unduly limit the profit potential of Harborco's port. Harborco should be free to develop a reasonably diverse industry mix. Too narrow a mix would make the port extremely vulnerable to fluctuations in the economy. Moreover, clean/dirty industries are much more likely to benefit from access to the port than all-clean industries. We have assigned the following points to this issue:

* Clean/dirty = 11 points

* All clean = 5 points

* Primarily dirty = 0 points As you can see, we again prefer the compromise position to either of the two extremes. Employment Distribution. Compared to the other issues in this negotiation, this is perhaps a minor issue. Nevertheless, as good Republicans (and former businessmen) we have some




private qualms about tailoring a federally subsidized project to help organized labor. The workers haven't even been hired yet and already the unions are involved. Publicly opposing the unions on ideological grounds is probably very risky. But you should feel free to lend your support on this issue to any allies whose interests coincide with our own. The following points are assigned to this issue:

* No union preference = 9 points

* Union quota of 1:1 = 4 points


* Unlimited union preference = 0 points Keeping the unions out of the port will enable Harborco to keep its wage costs reasonably low. It will also allow Harborco an opportunity to experiment with labor-saving technologies that have historically been blocked by unions at other ports.

* * * * * We have attached a one-page scoring sheet, which summarizes the points assigned to each issue. This information is CONFIDENTIAL!! Do not show your scoring sheet to anyone. You may convey some or all of your scoring information to a mediator, but do not let him or her actually see your scoring sheet. Good luck. I am confident that you will negotiate an extremely valuable agreement for me.




Confidential Score Sheet for the FEDERAL DCR NEGOTIATOR Issue/Option Total Points 1st vote 2nd vote 3rd vote A: Industry Mix (11) 1. primarily dirty 0 2. clean/dirty 11 3. all clean 5 B: Ecological Impact (25) 1. harm 0 2. maintain & repair 20 3. improve 25 C: Employment Rules/

Distribution (9) 1. unlimited union preference 0 2. union quota 2:1 2 3. union quota 1:1 4 4. no union preference 9 D: Federal Loan (40) 1. $3 billion 10 2. $2 billion 26 3. $1 billion 40 4. no federal loan 0 E: Compensation to

Other Ports (15) 1. Harborco pays

$600 million 4 2. Harborco pays




no compensation 0 A through E:

TOTAL (your goal) (100) MINIMUM NEEDED FOR AGREEMENT = 65. This is also your score if no agreement is reached.




Confidential Summary of Points for the FEDERAL DCR NEGOTIATOR Your name: Group #: Did Harborco get an agreement? (circle one) YES NO If "yes" who signed (or voted for) the agreement? Federal DCR Union

Other Ports Governor Environmentalists If your group reached agreement, please describe the agreement and identify the number of points it generated: ISSUE: OUTCOME POINTS A. Which industry mix was agreed to? B. Will Harborco harm, maintain and repair, or improve the ecology? C. Will unions receive preference? How much? Unlimited? 2:1? 1:1? D. How much in loans will DCR guarantee? (amount) E. How much compensation will other ports receive? (amount) TOTAL POINTS GENERATED BY AGREEMENT: (ADD ITEMS A THROUGH E)




APPENDIX A Discussion of the Scoring System (For the FEDERAL DCR NEGOTIATOR) We have several interests in today's negotiation. We'd like to see the deep-water port constructed with our financial assistance, but we'd also like to see our resources saved for other projects around the country. We'd like to preserve the environmental integrity of the coast, but we also want to minimize unnecessary expenditures for Harborco. This is clearly a complex negotiation for us. Several issues are being discussed, and a variety of outcomes are possible. If agreement is reached, we might provide only $1 billion to the project, or we might be forced to offer $3 billion. We might secure environmental reparations, or we might face damage to the ecology. We might even face no agreement at all. Therefore, we have decided to use points in our instructions to indicate how different agreements serve (or harm) our overall interests. Under the 100-point scoring scheme, an agreement worth 100 points would be the best agreement you could negotiate. An agreement worth zero points would be the worst possible agreement. (Note than an agreement worth zero points may have a "non-zero" effect on us, i.e., it may involve net costs or net benefits. It is assigned zero points only because it reflects "zero gains" over the worst possible outcome.) Differences in points can tell you which issues (or specific outcomes) are worth arguing for. For example, in this negotiation we are most concerned about the federal loan issue and have therefore assigned it 40 out of 100 possible points. We would not want to end up with our worst outcome (no federal loan) on this issue. In contrast, we are least concerned about the employment issue and have assigned it only nine points. This means that we would not be too upset if forced to accept the worst possible outcome (unlimited union preference) on this issue. Since we will be evaluating you on the basis of your score in this negotiation, you should examine your score sheet closely when planning your negotiating strategy. Remember, you should not vote for any project worth fewer than 65 points. Supporting such a project would cost us more than we would gain. Also, do not, under any circumstances, show your score sheet to any other player. You may wish to express the strength of your interests to other players, but you should not let them see your actual score sheet. They will have to trust you to give them accurate information about your preferences -- just as they would if this were a real-world negotiation. Finally, resist the temptation to compare your score with the scores of other parties in this negotiation. A score of 75 may mean more (or less) to you than to other parties. While your bottom line is 65 points, theirs may be 45 or 85. Their bottom lines depend on their valuation of the alternatives to agreement -- a psychological factor that makes comparison across parties difficult to interpret.




HARBORCO Confidential Instructions for the Environmental League Negotiator (From the League's Board of Directors)

We are very concerned about Harborco's proposal to construct and operate a deep-water port. This development would result in substantial environmental damage. Although we can try to use this meeting to negotiate an improvement in the environment, we should prepare ourselves for yet another episode of government-sanctioned degradation of the environment. We were initially reluctant to send you to this meeting. After all, we don't want to be seen as lending our support to an environmentally harmful project. On the other hand, your participation in the meeting may help prevent the worst possible scenario: a deep-water port including primarily dirty industries, and causing serious damage to the ecology. Of the five issues to be discussed at this meeting, only two are important to us: the industry mix and the ecological impact. Although it might seem unusual for an environmental group like ours to support a major development project on the coast, we feel it might be worth lending our support, if we can negotiate some extra environmental protection. Scoring. In order to help you plan your negotiating strategy, we have constructed a special 100-point scoring scheme to illustrate which possible outcomes are of the greatest and least importance to us. Our most-preferred set of outcomes is worth 100 points; our least-preferred is worth zero points. Compromising on one or more issues is worth somewhere between zero and 100 points, depending upon how each of the issues is resolved. The use of points may seem artificial and abstract. For the purposes of this negotiation, it enables us to combine our several interests -- minimizing pollution, protecting wildlife and the wetlands, preserving the credibility and efficacy of our organization, etc. -- into a single "currency." This in turn allows us to compare the potential gains and losses associated with different issues. In addition, the points allow us to compare the benefits (or costs) of a negotiated agreement with our alternatives. In this case, we can support the port only if it yields at least 50 points to us. We cannot afford to lend our support to any development project worth fewer than 50 points. Should Harborco fail to muster enough votes for its project, fine. The port is not constructed,


HARBORCO: Confidential Instructions for the Environmental League Negotiator


and we are no worse off today than yesterday. If Harborco succeeds in winning approval for an environmentally disastrous project, we do not want our names attached to it. We can always attempt to delay the project in court. Your task is to try to earn as many points as possible in this negotiation. This is not being greedy -- it simply means that we want to further our legitimate interests as far as possible. We will support any agreement that yields at least 50 points of value, but that is the bare minimum we can accept. We certainly hope you will do much better. Industry Mix. We are extremely concerned that Harborco will succeed in introducing a primarily dirty industry mix into Seaborne. Such a mix would wreak continuous and long-term havoc on the environment. Oil refineries and steel mills typically discharge vile and hazardous effluent -- all perfectly legal! In addition, oil refineries introduce the danger of explosions, fires, and oil spills. Resource recovery plants, in turn, introduce hazardous wastes (including highly toxic dioxins) and threaten worker and community safety. We must strongly object to any proposal that would permit the introduction of primarily dirty industries into Seaborne. Therefore, we have assigned the following points to the industry mix issue:

* All clean = 45 points


* Primarily dirty = 0 points Obviously, our first preference is for the all-clean industry mix. Though virtually any industry will have some waste to dispose of, the all-clean industries are the least objectionable. Note, however, that even if we win this issue we could not sign an agreement without concessions on the ecological impact issue as well. Ecological Impact. Although we are very concerned about industry mix, we are even more concerned about ecological impact. Ecological settings will be disrupted as soon as construction on the port begins, and once the damage is done, it may be very hard to repair. (In contrast, the damage created by the primarily dirty industries will not begin until the plants are in operation. Perhaps by that time we will have stricter regulations in place.) At a minimum, we hope to persuade Harborco to refrain from degrading the ecology. We also want to negotiate major improvements to the area.




We have assigned the following points to this issue:

* Improve the setting = 55 points


* Do some harm to the ecological setting = 0 points This point spread reflects the value of environmental protection and improvement. It also reflects our desire to score an immediate and visible victory. Our constituent environmental groups will be impressed by any agreement that generates immediate and concrete improvements to the environment. This will, in turn, boost morale and (we hope) contributions to the League. Other Issues. We have no strong feelings about the other three issues -- employment, federal loans, and compensation to other ports -- up for discussion. Our primary concern is with the environment. Still, you should probably treat these issues carefully, since we do not want to antagonize potential allies. In addition, we may be able to use these issues strategically, since the other parties may not know that they are unimportant to us.

* * * * * We have attached a one-page scoring sheet that summarizes our analysis of the issues. This information is CONFIDENTIAL! You should not show this sheet to anyone. You may convey some or all of the information verbally to a mediator, but do not show him or her your scoring sheet. Good luck. We're confident that you will negotiate an extremely valuable agreement for us.




Confidential Score Sheet for the

ENVIRONMENTAL LEAGUE NEGOTIATOR Issue/Option Total Points 1st vote 2nd vote 3rd vote A: Industry Mix (45) 1. primarily dirty 0 2. clean/dirty 22 3. all clean 45 B: Ecological Impact (55) 1. harm 0 2. maintain & repair 25 3. improve 55 C: Employment Rules/








TOTAL (100) _______ (your goal) MINIMUM NEEDED FOR AGREEMENT = 50. This is also your score if no agreement is reached.




Confidential Summary of Points for the ENVIRONMENTAL LEAGUE NEGOTIATOR Your name: Group #: Did Harborco get an agreement? (circle one) YES NO If "yes" who signed (or voted for) the agreement? Federal DCR Union

Other Ports Governor Environmentalists If your group reached agreement, please describe the agreement and identify the number of points it generated: ISSUE: OUTCOME POINTS A. Which industry mix was agreed to? B. Will Harborco harm, maintain and repair, or improve the ecology? C. Will unions receive preference? How much? Unlimited? 2:1? 1:1? D. How much in loans will DCR guarantee? (amount) E. How much compensation will other ports receive? (amount) TOTAL POINTS GENERATED BY AGREEMENT: (ADD ITEMS A THROUGH E) ______




APPENDIX A Discussion of the Scoring System (For the ENVIRONMENTAL LEAGUE NEGOTIATOR) We have several interests in today's negotiation. We'd like to see improvements made in the ecological setting, including ongoing fishery management and erosion prevention. We'd like to prevent Harborco from introducing nuclear power in the area. We'd also like to score a major victory in order to improve our organization's credibility with other environmental groups. This is clearly a complex negotiation. Several issues are being discussed, and a variety of outcomes are possible. We may win improvements in the ecological setting, or we may win only maintenance and repairs. We may succeed in limiting Harborco to an all-clean industry mix, or we may have to settle for a clean/dirty mix. We may be excluded entirely from an agreement (and be faced with a project that does maximum damage to the environment). Or, there may be no agreement at all. Therefore, we have decided to use points in our instructions to indicate how different agreements serve (or harm) our overall interests. Under the 100-point scoring scheme described in the instructions, an agreement worth 100 points would be the best agreement you could negotiate. In contrast, an agreement worth zero points would be the worst possible agreement. (Note that an agreement worth zero points may have a "non-zero" effect on us, i.e., it may involve net costs or net benefits. It is assigned zero points in our scoring scheme only because it reflects "zero gains" over the worst possible agreements.) Differences in points can tell you which issues (or specific outcomes) are most worthwhile for us. For example, in this negotiation we are most concerned about the ecological impact issue and have therefore assigned it 55 out of 100 possible points. We would not want to end up with our worst outcome (harm to the ecology) on this issue. In contrast, we are least concerned about the employment, federal loan, and compensation issues and have assigned them zero points. The outcomes possible in each of these areas would not directly affect us. Because we will be evaluating you on the basis of your score in this negotiation, you should examine your score sheet closely when planning your negotiating strategy. Remember, you should not vote for any project worth fewer than 50 points. Supporting such a project would cost us more than we would gain. Do not, under any circumstances, show your score sheet to any other player. You may try to express the strength of your interests to other players, but you should not let them see your actual score sheet. They will have to trust you to give them accurate information about your preferences -- just as they would if this were a real-world negotiation. Finally, resist the temptation to compare your score with the scores of other parties in the negotiation. A score of 75 points may mean more (or less) to you than to other parties. While




your bottom line is 50 points, theirs may be 40 or 80. Their bottom lines depend on their valuation of the alternatives to agreement – a psychological factor that makes comparison across parties difficult to interpret.




HARBORCO Confidential Instructions for the Governor's Negotiator (From Governor Sherwood of Seaborne)

I am very eager to see this deep-water port built in Seaborne. Our state has suffered a serious decline in economic activity over the past five years, and a project the size of Harborco's could provide the stimulus for a dramatic economic recovery. (Obviously, I could also benefit personally from a recovery introduced during my tenure in office.) I have spent some time with Harborco's people discussing the pros and cons of various design options. I generally favor Harborco's proposal. My only serious reservation has to do with its provisions for organized labor. As you know, the unions are a major political power in this state and, if antagonized, could impede my re-election efforts in two years. Therefore, I would like to see Harborco accommodate at least some of the union's demands. I am also concerned that today's negotiations may force Harborco to make concessions on the environment and compensation that could reduce the economic profitability of the port. So you may find yourself in the position of defending most of Harborco's initial proposal, while advocating special consideration for local unions. Scoring. To help you plan your negotiating strategy, my aides and I have constructed a 100-point scoring scheme to illustrate which negotiable outcomes are of greatest and least importance to me. Under this scheme, my most-preferred set of outcomes is worth 100 points; my least-preferred is worth zero. You can score up to 100 points in the negotiation, depending on how each of the five issues is resolved. The use of points may seem a bit artificial and awkward. But for the purposes of this negotiation, it enables me to combine my several interests -- new jobs for my constituents, growth in the tax base, re-election, etc. -- into a single "currency." This, in turn, allows me to compare the potential gains and losses associated with very different issues. In addition, the points allow me to compare the benefits (or costs) of a negotiated agreement to my alternatives. In this case, it is worthwhile for me to support Harborco's proposal only if it


HARBORCO: Confidential Instructions for the Governor’s Negotiator

Copyright © 1984, 1988, 1989, 1994, 1995, 1996, 2002 by the President and Fellows of Harvard College. All rights reserved. (Rev. 4/19/02.)

generates at least 30 points. Any proposal worth fewer than 30 points would cost me political credibility and might deter future development in the state. Your task is to try to earn as many points as possible in this negotiation. This is not being greedy -- it simply means that I want you to further my legitimate interests as far as possible. I will support any project worth at least 30 points, but that is the bare minimum I can accept. I certainly hope you can do much better. Federal Loan. I firmly believe that the project will not survive in the long run without substantial loans guaranteed or provided by DCR. Although I doubt Harborco will attempt to construct the port without federal financing, if it does, I fear Seaborne will be stuck with a partially complete white elephant in five to ten years. The value of these loans includes more than just the savings Harborco can realize with federally guaranteed loans. It also includes the value of a significant federal commitment to the project. The federal government is unlikely to abandon or over-regulate a project to which it has committed billions of dollars. In addition, I would like to be able to demonstrate to my constituents that I can bring federal money into this state. Thus, even $1 billion in loans would generate significant political benefits for me. I have assigned the following points to this issue:

* $3 billion = 40 points



* No loan = 0 points Employment Distribution. This issue is particularly important to me because of the political strength of labor unions in this state. I would be very reluctant to sign an agreement that deliberately snubbed organized labor. Although I would prefer to see the unions get all they have requested, I am very anxious to see that Harborco at least guarantees the union some presence in the work force. Once the unions have a foot in the door, they should have little trouble consolidating and improving their share of the port's work force. In addition, any quota would be a major and visible victory for the unions. I have assigned the following points to this issue:


HARBORCO: Confidential Instructions for the Governor's Negotiator


* Unlimited union preference = 24 points * Union quota of 2:1 = 18 points * Union quota of 1:1 = 12 points * No union preference = 0 points

The points reflect the importance of guaranteeing the unions at least some preference. Industry Mix. I am not anti-environment, but I do think we should avoid placing demands on industry in excess of existing federal and state regulations. The development proposed by Harborco will be a significant boost to our local economy. We should remember that Harborco will have to abide by existing environmental regulations, no matter what industries it chooses to develop. Harborco's analysts are convinced that a diverse industry mix, including primarily dirty industries such as oil refineries, steel mills, and a resource-recovery plant, could provide the greatest economic stability and revenue over the long run. My analysts agree. They suggest that the narrower the industry mix, the more vulnerable it will be to swings in the economy. We want Harborco to be free to pursue as diverse and profitable a mix as possible. I have assigned the following points to this issue:

* Primarily dirty = 14 points


* All clean = 0 points Included in these point assessments is my fear that if we impose too many restrictions on this project, we will deter future development in the state. Ecological Impact. As in the case of industry mix, I think we should avoid imposing unnecessary costs on would-be developers. In no way will the port violate existing state and federal regulations governing the protection of flora and fauna. I have assigned the following points to the issue of ecological impact:

* Do some harm to the ecological setting = 12 points


* Improve the setting = 0 points I am not averse to improvements in the environment, but I do think we should avoid forcing developers to bear the cost of such improvements.




Compensation to Other Ports. This is a very difficult issue for me. I am clearly not anxious to see Harborco's profits diverted to ports in other states. I am also, quite frankly, astounded that the other ports expect to be compensated. The eastern states compete against one another for industrial projects and federal grants on a regular basis; there is never any expectation that the winners should compensate the losers. Nevertheless, I do not want to appear vigorously opposed to such compensation. The governors of these states are my friends and colleagues. As members of the Coalition of East Coast States, we are trying to work together on a number of critical issues. I would rather not antagonize these people, if I can avoid it. Given the personal, professional, and political complications surrounding this issue, I have assigned it the following points, with a request that you treat this issue diplomatically:

* No compensation = 10 points




* $600 million = 0 points While any compensation could cost Harborco as much as the demands being made by the environmentalists, these payments would not cause as much damage to our state. The environmental costs would be viewed by potential developers as a cost imposed by our state. In contrast, the compensation costs would be viewed as costs imposed by other states.

* * * * * I have attached a one-page scoring sheet that summarizes the points assigned to each issue. This information is CONFIDENTIAL! You should not show your scoring sheet to anyone. You may convey some or all of the scoring information to a mediator, but under no circumstances should you let him or her see your scoring sheet. Good luck. I am confident that you will negotiate an extremely valuable agreement for me.




Confidential Score Sheet for THE GOVERNOR’S NEGOTIATOR Issue/Option Total Points 1st vote 2nd vote 3rd vote A: Industry Mix (14) 1. primarily dirty 14 2. clean/dirty 8 3. all clean 0 B: Ecological Impact (12) 1. harm 12 2. maintain & repair 8 3. improve 0 C: Employment Rules/








TOTAL (100) (your goal) MINIMUM NEEDED FOR AGREEMENT = 30. This is also your score if no agreement is reached.




Confidential Summary of Points for THE GOVERNOR’S NEGOTIATOR Your name: Group #: Did Harborco get an agreement? (circle one) YES NO If "yes" who signed (or voted for) the agreement? Federal DCR Union

Other Ports Governor Environmentalists If your group reached agreement, please describe the agreement and identify the number of points it generated: ISSUE: OUTCOME POINTS A. Which industry mix was agreed to? B. Will Harborco harm, maintain and repair, or improve the ecology? C. Will unions receive preference? How much? Unlimited? 2:1? 1:1? D. How much in loans will DCR guarantee? (amount) E. How much compensation will other ports receive? (amount) TOTAL POINTS GENERATED BY AGREEMENT: (ADD ITEMS A THROUGH E)




APPENDIX A discussion of the Scoring Scheme (for the GOVERNOR'S NEGOTIATOR) I have several interests in today's negotiation. I'd like to see the federal government guarantee billions of dollars of investment in our state, and I'd like to claim credit for helping unions win preferential treatment from Harborco. I'd also like to prevent the environmentalists from imposing excessive costs on Harborco (and other developers in the future). This is clearly a complex negotiation. Several issues are being discussed, and a variety of outcomes are possible. We might win the union issue but lose the industry mix issue. We might have to compromise on compensation, ecological impact, or federal loans. There might even be no agreement at all. Therefore, I have used points in your instructions to indicate how different possible agreements might serve (or harm) my overall interests. Under the 100-point scoring scheme, an agreement worth 100 points would be the best agreement you could negotiate. An agreement worth zero points would be the worst. (Note that an agreement worth zero points may have a "non-zero" effect on me, i.e., it may involve net costs or net benefits. It is assigned zero points only because it reflects "zero gains" over the worst possible outcome.) Differences in points can tell you which issues (or specific outcomes) are most worth arguing for. For example, in this negotiation I am most concerned about the federal loan issue and have therefore assigned it 40 out of 100 possible points. I would not want to end up with the worst outcome ($600 million in compensation payments) on the compensation issue. Since I will be evaluating you on the basis of your score in this negotiation, you should examine your score sheet closely when planning your negotiating strategy. Remember, you should not vote for any project worth fewer than 30 points. Supporting such an agreement would cost more than I could gain. Do not, under any circumstances, show your score sheet to any other player. You may try to express the strength of your interests to other players, but you should not let them see your actual score sheet. They will have to trust you to give them accurate information about your preferences -- just as they would if this were a real-world negotiation. Finally, resist the temptation to compare your score with the scores of other players. A score of 75 points may mean more (or less) to you than to other parties. While your bottom line is 30 points, theirs may be 20 or 80. Their bottom lines depend on their valuation of the alternatives to agreement -- a psychological factor that makes comparison across parties difficult to interpret.




HARBORCO Confidential Instructions for the Harborco Negotiator (From the Harborco Board of Directors)

This is obviously a very important project to us. It has tremendous profit potential, particularly if we can obtain approval on our current license application. Yet the project also has the potential to generate significant economic benefits for Seaborne, the region, and the entire nation. In our minds, the public benefits of a deep-water port are so obvious that we are surprised the FLA is hedging on our application. Unfortunately, politics forces us to negotiate with parties who have no business interfering in our business. The application we have recently submitted to the FLA describes the most attractive project possible. We obviously want to protect it by keeping our costs low, and by securing substantial federal assistance. Scoring. In order to help you plan your negotiating strategy, we have constructed a 110-point scoring scheme to illustrate which negotiable issues are of greatest and least importance to us. Under this scheme, you can score up to 110 points during the negotiation, depending upon how each of the five issues is resolved (plus a unanimity bonus). The most preferred set of outcomes is worth 110 points to us; the least preferred is worth zero points. Compromising on one or more issues will earn somewhere between zero and 110 points. The use of points may seem artificial and abstract. For the purposes of this negotiation, it enables us to combine our several interests -- low costs, freedom from unions, federal support, etc. -- into a single "currency." This in turn allows us to compare the gains and losses associated with different issues. In addition, the use of points to summarize our interests allows us to compare the value of negotiated agreements to our other alternatives. For example, we should pursue this particular project only if we can secure an agreement worth at least 55 points to us (excluding any bonus for a unanimous agreement). Any agreement worth fewer than 55 points would not be worth pursuing; we would be better off seeking alternative investment opportunities (such as the new international airport being considered for the Pacific Northwest). Your task is to try to earn as many points as possible in this negotiation. This is not being


HARBORCO: Confidential Instructions for the Harborco Negotiator


greedy -- it simply means that we want to further our legitimate interests as far as possible. We will support any agreement that yields us at least 55 points of value, but that is the bare minimum we can accept. We certainly hope you will do much better. If you have additional questions about the scoring scheme, please see the Appendix. Federal Loan. This is by far the most important issue to us. Up until a few months ago, we thought the DCR would be more than happy to help finance a deep-water port on the East Coast. DCR officials had initially hinted that they would consider underwriting 75 percent of our costs (or $3 billion). Since then, the DCR has downplayed its original enthusiasm and has hinted that it will not provide financial support unless certain conditions are met. Unfortunately, we do not yet know what these conditions are. We have requested a $3 billion loan (at an interest rate of 15 percent) that will secure the investments of our consortium members, increase our ability to attract other investors, and ensure the long-term success of the project. (The federal government is unlikely to abandon a project in which it has invested billions of dollars.) At present, we have firm commitments from private investors that should generate at least $1 billion for the project. If pressed, we could probably muster $2 billion should DCR offer us only $2 billion in loans. But should DCR try to offer us less than $2 billion, we could be in serious trouble. There are not enough private investors currently interested in contributing to our project. If forced to raise $3 billion, we would be faced with the prospect of trying to borrow the money at exorbitant rates, probably equivalent to twice the market rate of interest. We might be able to continue with the project, but only by curtailing certain amenities.

If we received no federal financial assistance, the project would be in very serious jeopardy. In theory, we might still be able to muster the $4 billion to move ahead, but we could not afford to concede on any issues up for discussion today. Consequently, we would probably not have enough political support to win FLA approval. We have assigned the following points to this issue:

* $3 billion guaranteed loan = 35 points



* No loan = 0 points




The distribution of points reflects our belief that the first and second billion dollars are far more important than the third billion. Compensation to Other Ports. We are obviously opposed to paying compensation to other ports. These four other ports have submitted wildly unreasonable estimates of their anticipated losses. They claim they will lose roughly $600 million after our port begins operating, but it is not at all clear to us that they will be hurt by our project. Although some of their traffic may be diverted to our new port, they will attract new traffic as feeder ports. We are also afraid that a dangerous precedent could be set if we agree to compensate our competitors. Will we eventually have to compensate every party who loses some business to us? Given the cost of actual compensation payments and the dangerous precedent potential surrounding such an arrangement, we have assigned points as follows:


* $150 million compensation = 15 points



* $600 million compensation = 0 points Employment Rules (Distribution of Jobs). We had hoped to be free to hire the best people to construct and operate the port. We had also hoped to keep the unions out of the port for at least a few years so that we could install labor-saving technology into the port (technology that the unions are sure to oppose). Apparently the unions want us to guarantee all new jobs to union workers. We have assigned the following points to this issue:

* No union preference = 17 points



* Unlimited union preference = 0 points The point schedule reflects, in part, anticipated increases in wage costs associated with different levels of union preference. In addition, it reflects our fear that any union preference is dangerous, because once unions are allowed on site, they will block our attempts to introduce laborsaving techniques (such as large-scale containerization) into the port.




Industry Mix. This is a difficult issue for us to analyze. We are not arguing for any fixed combination of industries over another; rather, we are arguing for the freedom to develop any combination of industries we choose. Under this scenario, we could develop those industries most likely to generate revenues for the region, those most likely to resist fluctuations in the economy, and those most likely to benefit from access to a deep-water port. The environmentalists, however, would have us limit our industry mix to a narrow base of all-clean industries. This would prevent us from pursuing the most profitable industry mixes and could make the local economy highly susceptible to fluctuations in the business cycle. Although there is tremendous uncertainty in these forecasts, our analysts suggest we could forgo roughly $200 to 375 million in potential profits if forced to limit our mix.

We have assigned the following points to each of the industry mix options up for discussion:

* Primarily dirty = 14 points


* All clean = 0 points We've assigned the middle option -- clean/dirty -- slightly more than half the points possible, because it would enable us to include a highly profitable resource recovery plant. Ecological Impact. Common sense suggests that anytime you build anything, you are probably going to disrupt the ecology. We have tried to be sensitive to environmental concerns by planning construction and dredging so as to avoid unnecessary disruption. We have also been sensitive to existing federal and state standards. We do not propose to break the law. Losing this issue could cost us a significant amount of money, since it could force us to alter our dredging and construction plants in very costly ways. Furthermore, the environmentalists' wish list could cost us up to $280 million, if we do all they ask to improve the ecological setting. In addition to the monetary concerns, we have some ideological feelings about this issue. Environmentalists are asking us to foot the bill for improvements that are properly the responsibility of government, not business.




In light of these concerns, we have assigned the following points to this issue:

* Do some harm to the ecological setting = 11 points


* Improve the setting = 0 points The points reflect the fact that the improvements would be more than twice as costly as maintaining and repairing the ecological setting. Unanimity Bonus. It has been rumored that certain parties might take legal action against the deep-water port if the FLA accepts a proposal that they did not support. This would lead to annoying delays and potentially exorbitant legal fees. The only way to eliminate the possibility of such suits would be to pass an agreement supported by all five other parties. That is, the FLA will agree to a proposal that four of the five parties support, but the proposal would obviously be much more stable if it is supported by all five other parties. With Harborco's interest in a successful port in mind, the following bonus points have been assigned to this issue:

* All five other parties agree to the terms of the port = 10 points

* Four of the five other parties agree = 0 points

* No agreement is reached = 0 points

However, this bonus does not count toward the minimum 55 points Harborco needs to accept the substance of any proposal.

* * * * * We have attached a one-page scoring sheet that summarizes the points we have assigned to each of the five issues. This information is CONFIDENTIAL! You should not show your scoring sheet to anyone! You may convey some or all of the scoring information verbally to a mediator (should one be assigned to your group), but you should not let him or her see your scoring sheet. Good luck. We are confident that you will negotiate an extremely valuable agreement for us.




Confidential Score Sheet for HARBORCO NEGOTIATOR Issue/Option Total Points 1st vote 2nd vote 3rd vote A: Industry Mix (14) 1. primarily dirty 14 2. clean/dirty 8 3. all clean 0 B: Ecological Impact (11) 1. harm 11 2. maintain & repair 7 3. improve 0 C: Employment Rules/








TOTAL (your goal) (100) MINIMUM NEEDED FOR AGREEMENT = 55. This is also your score if no agreement is reached. UNANIMITY BONUS (10) TOTAL POSSIBLE POINTS (110)




Confidential Summary of Points for HARBORCO NEGOTIATOR Your name: Group #: Did Harborco get an agreement? (circle one) YES NO If "yes" who signed (or voted for) the agreement? Federal DCR Union

Other Ports Governor

Environmentalists If your group reached agreement, please describe the agreement and identify the number of points it generated: ISSUE: OUTCOME POINTS A. Which industry mix was agreed to? B. Will Harborco harm, maintain and repair, or improve the ecology? C. Will unions receive preference? How much? Unlimited? 2:1? 1:1? D. How much in loans will DCR guarantee? (amount) E. How much compensation will other ports receive? (amount) SUBTOTAL (ADD ITEMS A THROUGH E): If agreement was unanimous, add 10 points. TOTAL POINTS GENERATED BY AGREEMENT:




APPENDIX A Discussion of the Scoring System (For the HARBORCO NEGOTIATOR) We have several interests in today's negotiation. We'd like to avoid the costs of environmental improvement, and union preference. We'd like to avoid the dangerous precedent of compensating our competitors. We'd also like to be free to pursue the most profitable industry mix. This is clearly a complex negotiation for us. Several issues are being discussed, and a variety of outcomes are possible. We might win the industry mix issue, but lose the employment issue. We might succeed in keeping the unions out, but lose $1 billion in federal loans. We might not even reach agreement at all. Therefore, we have decided to use points in our instructions to indicate how different agreements serve (or harm) our overall interests. Under the 100-point scoring scheme described in the instructions, an agreement worth 100 points would be the best agreement you could negotiate. In contrast, an agreement worth zero points would be the worst possible agreement. (Note that an agreement worth zero points may have a "non-zero" effect on us, i.e., it may involve net costs or net benefits. It is assigned zero points in our scoring scheme only because it reflects "zero gains" over the worse possible agreement.) Differences in points can tell you which issues (and specific outcomes) are most worth arguing for. For example, in this negotiation, we are most concerned about the federal loan issue and have assigned it 35 out of 100 possible points. We would not want to end up with our worst outcome (no federal loan) on this issue. In contrast, we are least concerned about the ecological impact issue and have therefore assigned it only 11 points. This means that we would not be too upset if forced to accept the worst outcome (improve the ecology) on this issue. Because we will be evaluating you on the basis of your score in this negotiation, you should probably examine your score sheets closely when planning your negotiation strategy. Remember, you should not vote for any project worth fewer than 55 points. Such a project would be worse than no project at all. Do not, under any circumstances, show your score sheet to any other player. You may wish to express the strength of our interests to other players, but do not show them your actual score sheet. They will have to trust you to give them accurate information about your preferences – just as they would if this were a real-world negotiation.




HARBORCO Confidential Instructions for the Negotiator for Other Ports (From the Association of Eastern Seaboard Ports) We are very dubious about the benefits Harborco claims we will realize from this new deepwater port. In fact, our analysts suggest that we will suffer substantial losses over the first ten years of the new port's operation. In particular, the largest of our ports will suffer a 25 percent decline in gross revenue while the three smaller ports will each lose about 10 percent of their gross revenue. Our total loss will thus be close to $600 million (in current dollars). We are not, in principle, completely opposed to the idea of a deepwater port on the East Coast. We do not believe any such project should be allowed to undermine existing port operations. We are sending you to this meeting for two reasons. First, we hope that your participation may help derail the negotiations and prevent Harborco from securing enough support for its FLA application. Secondly, if Harborco is able to muster enough support for its own proposal, we hope you can increase the costs facing the new port (thus minimizing its competitive advantage) and win some compensation for us in the process. Scoring. In order to help you plan your negotiating strategy, we have constructed a special scoring scheme to illustrate which negotiable outcomes are of greatest and least importance to us. Under this scheme, our most preferred outcome (no agreement at all) is worth 150 points. If, however, an agreement seems imminent, you still have an opportunity to score up to 100 points by negotiating certain aspects of the port's design. The use of points may seem artificial and awkward to you. For the purposes of this negotiation, it enables us to combine our several interests -- protecting our current business, preserving opportunities for growth, securing federal funds for our own projects -- into a single "currency." This, in turn, allows us to compare the potential gains and losses associated with different issues. In addition, the points allow us to compare the benefits (or costs) of the negotiated agreement to our alternatives. In this case, it would be worthwhile for us to support Harborco's proposal only if it yields at least 31 points to us. Any proposal yielding fewer than 31 points would not be worth our support. (We would rather try to sue for compensation later.)


HARBORCO: Confidential Instructions for the Negotiator for Other Ports

Copyright © 1984, 1988, 1989, 1994, 1995, 1996, 2002, 2007 by the President and Fellows of Harvard College. All rights reserved. (Rev. 3/07)

Your task is to try to earn as many points as possible in this negotiation. This is not being greedy -- it simply means that we want to further our legitimate interests as far as possible. We would like to see Harborco's bid for a license fail, but if an agreement seems unavoidable, we would support any project worth at least 31 points. (Some compensation is better than none.) But 31 points is the bare minimum we can accept. We certainly hope you will do much better. Compensation to Us. This is by far the most important of the negotiable issues. Our largest port will lose roughly 25 percent of its business once the new port begins operation. The smaller ports, which are more specialized, will lose 10 percent. We would need a total of $600 million (in current dollars) to compensate us for our anticipated losses. We have assigned this issue the following points:

* $600 million (100% compensation for our losses) = 60 points

* $450 million (75% compensation) = 45 points



* No compensation = 0 points Of course, you should worry about this issue and those that follow only if agreement seems inevitable. (Note: If an agreement worth more than 31 points does seem inevitable, you should vote in favor to insure that the agreed compensation will be paid.) Federal Loan. We would like to see little or no federal financing in this project. The less money DCR contributes to this project, the less likely it is that the project will succeed. (In fact, Harborco probably cannot afford to go ahead with the port unless there is at least some federal money involved.) In addition, we are currently in the process of applying for federal loans to finance renovations in our own building and operations. (To date, the DCR has contributed very little money to our ports.) The less money DCR spends on this project, the more it will have to spend on other ports like our own. You should therefore argue that DCR would be better off allocating its funds across several projects rather than concentrating its resources on Harborco's one risky venture.




We have assigned the following points to this issue:




* $3 billion = 0 points Employment Rules. We are not big fans of organized labor, but we do think that any new port should face the same labor costs we face. (Our ports are completely unionized.) If Harborco succeeds in keeping organized labor out of its port, it will face significantly lower labor costs than we face. Furthermore, in the absence of unions, the new port may be able to install a wide range of laborsaving technologies (including large-scale containerization). This would allow the new port to realize even lower production costs, making it even harder for us to retain our own business (or compete for new business). We are therefore in the awkward position of favoring union preference on this project. We would rather not publicly champion the cause of organized labor, because our arguments may be turned against us later in our own labor negotiations. We want to prevent Harborco from realizing any unfair competitive advantage. We have assigned the following points to this issue:

* unlimited union preference = 12 points

* union quota of 2:1 = 8 points


* no union preference = 0 points You may note that the difference is greatest between no union preference and the union quota of 1:1. This is because we feel that once the unions are allowed on site, Harborco will have a difficult time introducing large-scale labor-saving technologies. In addition, it will only be a matter of time before the bulk of Harborco's work force is unionized. Industry Mix. This is a difficult issue for us to weigh, because we have to rely on very uncertain projections. We would like to see Harborco's freedom to develop industries constrained as much as possible. The more restricted the industry mix, the less competitive Harborco will be. On the other hand, we should be wary of advocating these kinds of restrictions, because we may




wish to expand our own operations in the future. Given our conflicting interests here, and the fact that compensation is a more important and immediate concern, we have assigned the following points to this issue:

* all clean = 10 points

* clean/dirty = 4 points

* primarily dirty = 0 points The point spread reflects the fact that we would like to prevent Harborco from developing food- processing plants that could compete with our own. Ecological Impact. This last issue is of very minor concern to us, relative to the other issues up for discussion. Though we would like to see Harborco face additional costs associated with improving the ecology, we do not care enough to assign points to this issue. Nevertheless, you should probably treat this issue with caution, for we do not want to antagonize potential allies. Perhaps we can use this issue strategically, since the other parties may not realize that this issue is not important to us.

* * * * * We have attached a one-page scoring sheet that summarizes the points assigned to each issue. This information is CONFIDENTIAL!! Do not show your scoring sheet to anyone. You may convey some or all of the scoring information verbally to a mediator, but do not show him or her your scoring sheet. Good luck. We're confident that you will either succeed in derailing an agreement, or negotiate an extremely valuable agreement for us.




Confidential Score Sheet for OTHER PORTS Issue/Option Total Points 1st vote 2nd vote 3rd vote A: Industry Mix (10) 1. primarily dirty 0 2. clean/dirty 4 3. all clean 10 B: Ecological Impact (0) 1. harm 0 2. maintain & repair 0 3. improve 0 C: Employment Rules/








TOTAL (your goal) (100) MINIMUM NEEDED FOR AGREEMENT = 31 Remember: * If negotiations fail and no port is built, you earn 150 points. * If negotiations succeed and a port is built, you can earn anywhere between 31 and 100 points, provided you vote in favor. If you vote against a final proposal worth more than 31 points, your points for that outcome will be discounted by .8 for uncertainty. * If a bad port is built (worth less than 31 points) -- over your objections -- you can still earn 31 points by withholding your support and challenging the port in court.




Confidential Summary of Points for OTHER PORTS Your name: Group #: Did Harborco get an agreement? (circle one) YES NO If "yes" who signed (or voted for) the agreement? Federal DCR Union

Other Ports Governor Environmentalists If your group reached agreement, please describe the agreement and identify the number of points it generated: ISSUE: OUTCOME POINTS A. Which industry mix was agreed to? B. Will Harborco harm, maintain and repair, or improve the ecology? C. Will unions receive preference? How much? Unlimited? 2:1? 1:1? D. How much in loans will DCR guarantee? (amount) E. How much compensation will other ports receive? (amount) TOTAL POINTS GENERATED BY AGREEMENT: (ADD ITEMS A THROUGH E) If total exceeds 31 points and Other Ports voted ”no,” multiply by 0.8: If no agreement was reached, points = 150.




APPENDIX A Discussion of the Scoring Scheme (For the OTHER PORTS' NEGOTIATOR) We have several interests in today's negotiation. Our first preference is to see the negotiations end with no agreement. If agreement seems inevitable, we would like to see Harborco's competitive advantage limited by being forced to hire union workers and restricted to an all-clean industry mix. We'd also like immediate and full compensation for our projected losses. This is clearly a complex negotiation for us. Several issues will be discussed, and a variety of outcomes are possible. There may be no agreement, or there may be one that gives Harborco its maximum competitive advantage. If agreement is reached, we may lose or compromise on compensation. Therefore, we have decided to use points in our instructions to indicate how no agreement or different agreements serve (or harm) our overall interests. Under the scoring scheme described in the instructions, no agreement would be worth 150 points -- the best possible outcome. If the other parties appear to be approaching agreement, then an agreement worth 100 points would be the best we could do. In contrast, an agreement worth zero points would be the worst possible outcome. (Note than an agreement worth zero points may have a "non-zero" effect on us, i.e., may involve net costs or net benefits. It is assigned zero points only because it reflects "zero gains" over the worst possible outcomes.) Differences in points can tell you which issues (or specific outcomes) are most worth arguing for. For example, in this negotiation we are most concerned about the compensation issue and have therefore assigned it 60 out of 100 possible points. We would not want to end up with our worst outcome on this issue (no compensation), if the port were approved. In contrast, we are least concerned about the ecological impact issue and therefore assigned it zero points. None of the ecological impact outcomes would have much of an effect on us. Because we will be evaluating you on the basis of your score in this negotiation, you should examine your score sheet closely when planning your negotiating strategy. But remember, you should not vote for any agreement worth fewer than 31 points (if you vote for an agreement at all). Supporting such a project would cost us more than we could gain. Do not, under any circumstances, show your score sheet to any other player. You may try to express the strength of your interests to other players, but you should not show them your actual score sheet. They will have to trust you to give them accurate information about your preferences – just as they would if this were a real-world negotiation.




HARBORCO Confidential Instructions for the Union Negotiator (From the Union Executive Committee) We are very excited about the job creation potential of a deepwater port in Seaborne. As you are well aware, the volume of trade and overall economic activity in this state has declined dramatically over the last five years. Without a major boost in economic activity, we will face extensive layoffs in the very near future. We must not appear too eager, however, to support this project. Harborco's initial proposal leaves much to be desired from the union's perspective. Of the five issues scheduled to be discussed at this meeting, four are of direct concern to us: employment rules, industry mix, federal loans, and compensation to other ports. The fifth issue -- ecological impact -- is not of direct importance, but may prove instrumental in securing allies. Scoring. In order to help you plan your negotiation strategy, we have constructed a special 100-point scoring scheme to illustrate which negotiable outcomes are of greatest and least importance to us. Under this scheme, the most preferred set of outcomes is worth 100 points to us; the least preferred is worth zero. Compromising on one or more issues is worth somewhere between 0 and 100 points, depending upon how each of the issues is resolved. The use of points may seem artificial and abstract. For the purposes of this negotiation, it enables us to combine our several interests -- new jobs for our members, new members for our unions, and increased credibility for our organization -- into a single "currency." This, in turn, allows us to compare the potential gains and losses associated with different issues. In addition, the points allow us to compare the benefits (or costs) of a negotiated agreement to our alternatives. In this case, it would be worthwhile for us to support an agreement if it yields at least 50 points. But any agreement worth fewer than 50 points would be worse than no agreement at all. We do not dare support an agreement that does not explicitly benefit our members. Your task is to try to earn as many points as possible in this negotiation. This is not being greedy -- it simply means that we want to further our legitimate interests as far as possible. We will support any agreement worth at least 50 points, but we certainly hope you will do much


HARBORCO: Confidential Instructions for the Union Negotiator

Copyright © 1984, 1988, 1989, 1994, 1995, 1996, 2002, 2007 by the President and Fellows of Harvard College. All rights reserved. (Rev. 9/07)

better. Employment Rules. We are obviously most concerned about the distribution of new jobs created by the port. We would like to see Harborco guarantee that all jobs for which union workers are qualified will be offered to union workers at union wages. We are strongly opposed to letting Harborco sidestep the union by employing non-union or out-of-state workers. We have assigned the following points to this issue:

* unlimited union preference = 42 points



* no union preference = 0 points Note that winning this issue is worth 42 points -- almost half of the points possible in this negotiation. We have assigned fairly high values to the two compromise positions for two reasons. First, any union presence will help prevent Harborco from introducing labor-saving technologies into the port over time. Second, once the union has a foothold in the port, no matter how small, organizing the rest of the port should be less difficult than if we were not on site. Unfortunately, Harborco probably realizes the same, and is therefore likely to argue strongly against any preference for the unions. Federal Loan. The federal loan is important to us for two reasons. First, the project has a far greater chance to get off the ground (i.e., receive FLA approval) if federal dollars are involved. Second, the long-term success and stability of the project is likely to be enhanced if the federal government makes a substantial investment in the project. (Private investors may be more willing to participate in the project if they see federal involvement, and the federal government may be less willing to abandon the project in the future if it has a great deal of money sunk into the port.) We have therefore assigned the following points to this issue:








Industry Mix. This issue is important to us because it will determine the number and types of jobs created for our workers. We have assigned it fewer points than the preceding two issues because it is based on very uncertain projections.

* clean/dirty = 20 points

* primarily dirty = 15 points

* all clean = 0 points Of the three types of industry mix being discussed, the clean/dirty mix is the best option from the union's perspective. This mix will probably involve food processing and light manufacturing plants -- both of which would create jobs that are typically unionized. In addition, the jobs created by these kinds of plants tend to result in fewer health hazards than posed by dirty-industry jobs. The all-dirty mix is second best in our minds. It would create far fewer jobs for union workers and would involve work environments that are far less comfortable and far more hazardous than those in the clean/dirty industries. It is still preferable to the all-clean industry mix (which would create the fewest number of union jobs). Compensation to Other Ports. This is a tricky issue for us. Our first allegiance is to our local members, and so we would rather not see the profits of the new port threatened by massive payments to out-of-state ports. On the other hand, we must answer for our conduct to the national union -- an organization which (need we remind you?) provided us with considerable financial assistance during our last strike three years ago. The national union is obviously concerned about the local unions at the other ports; they fear these other local unions will face substantial layoffs if the ports are denied compensation. We have therefore assigned the following points to the compensation issue, but with the stipulation that these points remain absolutely confidential:









In short, we favor some (but not too much) compensation. You should avoid publicly opposing large compensation payments, since our national organization might become very displeased. Ecological Impact. This last issue is not one that concerns us directly, and so we have assigned no points to it. We are willing to let the environmentalists worry about the environment. Still, you may want to treat this issue with caution, since we do not want to antagonize potential allies. In addition, we may be able to use this issue strategically since the other parties do not know that this is not important to us.

* * * * * We’ve attached a one-page scoring sheet is attached that summarizes the points we have assigned to each issue and outcome. This information is CONFIDENTIAL! Do not show this score sheet to anyone. You may convey some or all of the information verbally to a mediator, but do not let him or her see your scoring sheet. Good luck. We're confident that you will negotiate an extremely valuable agreement for us.




Confidential Score Sheet for the UNIONS Issue/Option Total Points 1st vote 2nd vote 3rd vote A: Industry Mix (20) 1. primarily dirty 15 2. clean/dirty 20 3. all clean 0 B: Ecological Impact (0) 1. harm 0 2. maintain & repair 0 3. improve 0 C: Employment Rules/








TOTAL (100) (your goal) MINIMUM NEEDED FOR AGREEMENT = 50. This is also your score if no agreement is reached.




Confidential Summary of Points for the UNIONS Your name: Group #: Did Harborco get an agreement? (circle one) YES NO If "yes" who signed (or voted for) the agreement? Federal DCR Union

Other Ports Governor Environmentalists If your group reached agreement, please described the agreement and identify the number of points it generated: ISSUE: OUTCOME POINTS A. Which industry mix was agreed to? B. Will Harborco harm, maintain and repair, or improve the ecology? C. Will unions receive preference? How much? Unlimited? 2:1? 1:1? D. How much in loans will DCR guarantee? (amount) E. How much compensation will other ports receive? (amount) TOTAL POINTS GENERATED BY AGREEMENT: (ADD ITEMS A THROUGH E)




APPENDIX A Discussion of the Scoring System (for the UNION NEGOTIATOR) We have several interests in today's negotiation. We'd like to see as much union preference guaranteed as possible. We'd like to see an industry mix that creates the most union jobs. We'd also like to see the federal government make a major commitment to this project. This is clearly a complex negotiation for us. Several issues are being discussed, and a variety of outcomes are possible. We may win unlimited union preference or we may have to settle for special quotas. We may succeed in negotiating a clean/dirty industry mix or we may face an all-clean industry mix. We may be excluded from an agreement (and end up facing a project with no concession to organized labor), or there might be no agreement at all. Therefore, we have decided to use points in our instructions to indicate how different agreements serve (or harm) our overall interests. Under the 100-point scoring scheme described in the instructions, an agreement worth 100 points would be the best agreement you could negotiate. In contrast, an agreement worth zero points would be the worst possible agreement. (Note that an agreement worth zero points may have a "non-zero" effect on us, i.e., it may involve net costs or net benefits. It is assigned zero points only because it reflects "zero gains" over the worst possible outcome.) Differences in points can tell you which issues (or specific outcomes) are most worth arguing for. For example, in this negotiation we are most concerned about the employment rules issue and have therefore assigned it 42 out of 100 possible points. We would not want to end up with our worst outcome (no union preference) on this issue. In contrast, we are least concerned about the ecological impact issue and have therefore assigned it zero points. None of the outcomes described in this issue would have a direct effect on us. Because we will be evaluating you on the basis of your score in this negotiation, you should examine your score sheet closely when planning your negotiating strategy. But remember, you should not vote for any project worth fewer than 50 points. Do not, under any circumstances, show your score sheet to any other player. You may try to express the strength of your interest to other players, but you should not let them see your actual score sheet. They will have to trust you to give them accurate information about your preferences -- just as they would if this were a real-world negotiation. Finally, resist the temptation to compare your score with the scores of other parties in the negotiation. A score of 75 points may mean more (or less) to you than to other parties. While your bottom line is 50 points, theirs may be 40 or 80. Their bottom lines depend on their valuation of the alternatives to agreement -- a psychological factor that makes comparison across parties difficult to interpret.

Harbor Co Simulation - Negotiation Law Resource

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