5 Negotiation Tactics for Construction Contractors

Negotiation Hero

One of the most important aspects of any construction project happens before the hammering starts. That's right: agreeing on a contract. A successful contractor-client relationship comes with rounds of negotiation on both sides, and it often feels like the power is in the hands of the client - but it doesn't have to be. Here are five tips that may come in handy when nailing down the specifics of a construction contract.

Be Upfront About Your Concerns

It's crucial to approach the negotiation process with honesty when it comes to your concerns. If a project deadline doesn't seem feasible, let them know from the outset, otherwise you'll only create problems for yourself and your team down the line. If an element of a project seems excessively complicated or requires bespoke parts, make it clear that this could cause delays.

These types of conversations are a great time to discuss the change order process, which you can also document in your contract. Agreements on change orders can excessively delay a project, so it's helpful to establish the process ahead of time. By being communicative and firm about your perception of the project, and its anticipated hurdles, you're demonstrating your own expertise in the field.

Understand Their Overall Needs

An underutilized negotiation skill is simply listening. Clients like to feel involved in the process, and want their opinions heard. Plus, the more you listen to your client, the better you'll understand their true goal - and therefore, what they'll be more willing to compromise on.

Perhaps they're really only concerned about the project deadline, so they'll be more flexible on shifting contract language to accommodate delays. Or perhaps budget is the issue, so costly materials and expensive design elements need to be exchanged for alternatives. Once you get an understanding of what really matters to your client, you'll be able to meet them in the middle.

Present Alternative Solutions

Nobody likes to hear a flat-out "no," so keep this in mind as you work through the contract negotiation process. Instead of refusing to do something, try to present alternatives so that your client can see a silver lining.

For instance, if a state law specifically prohibits a certain aspect of a project, use your own expertise to pitch a legal solution - otherwise, negotiations could drag on as a client scrambles to figure out what is allowable. If you know certain choices will break a budget, come prepared with a backup. These small gestures will go a long way in establishing client trust!

When in Doubt, Overestimate

One of the most difficult aspects of any project is budget, and it's for this reason that estimates are crucial. An experienced contractor should be able to provide accurate estimates, but when in doubt, don't go too low - because it's never easy to return to the client for a budget increase. Plus, starting high gives you room to be flexible when the client likely returns with a counteroffer.

This idea can also apply to a project calendar. Be sure to factor in potential delays, as every client expects a project to finish on time (and is thrilled if it's finished early).

Work with the Right Advisors

No contractor should be without protection when engaging in a new project. Having solid legal counsel is crucial when entering into a new business relationship, as they can review your contracts and help identify any areas of concern - most, if not all, clients will have legal counsel of their own.

Similarly, work with an insurance advisor to ensure that the insurance requirements of any contract is satisfied. This is not something you want to simply leave up to the hands of your client and will be crucial to your protection on future projects as well. Coming to the bargaining table with professional assistance only makes you look more polished and bolsters your overall negotiating power.