Want a Better Contract? You've Got To Make Your Case Category: General Contractors
Subtitle:
Full text:
Want a Better Contract? You've Got To Make Your Case
"If this is the best of all possible worlds, what can the rest be?"
-Candide, Voltaire
As every experienced subcontractor knows, good subcontract agreements do not appear out of thin air. They are crafted and negotiated. This may not "the best of all possible worlds," but with skill, subcontractors can stand up for themselves and get better deals. But how?
When a subcontractor is involved in contract negotiation, it will need people with strong persuasive skills to obtain the best possible subcontract terms. The ability to persuade is a "soft skill," i.e., a skill that is more art than it is science, but it is a critical skill you need to identify in your firm so that you can negotiate the best subcontract agreements.
The ability to persuade may not seem that important to your business at first glance. Doesn't the economic leverage of the general contractor trump any of your ideas that the general contractor doesn't like? The answer is "No."
While a general contractor has an economic advantage over a prospective subcontractor because the general contractor controls the award of work, this inequality does not automatically give the general contractor the "final say" over the specific subcontract terms with a specific subcontractor. On the contrary, the subcontract is subject to mutual agreement, whether that agreement comes in the form of the general contractor's acceptance of your bid, your acceptance of the general contractor's counter-offer, or a negotiated solution such as a mutually agreed-upon subcontract rider.
The process of convincing the general contractor to accept your proposal with terms your firm wants begins well before any actual conversation or correspondence with the general contractor. It starts with customer research and preparation of the bid package, including supporting documents such a scope of work letter. Your bid package communicates your expectations to the general contractor about the work your firm is prepared to perform, and under what conditions.
From the point of view of a negotiator, the strategic objective of the bid package is to convince the general contractor that your firm can perform the work at the promised price, or at least that your firm is worthy of approaching with a counter-offer or a negotiation process. Thus, when bidding, the question your team should ask is not, "How do we obtain this work?" It is: "How can we convince the general contractor to accept our proposal for the work at the most favorable terms to us that the general contractor will accept, make a counter-offer to, or negotiate?" You want a strong starting-point for negotiation in case your bid is not accepted as-is and you do not accept the general contractor's counter-offer.
Your bidding strategy should anticipate what kind of negotiating room your firm will have if the bidding process takes your firm to the negotiation phase. Will the bid package, if not accepted as-is, leave your firm the room it needs to seek the terms that are most important while giving your firm the ability to compromise on less important terms? For example, the general contractor may like your price but dislike your specific description of the work in the scope of work letter. That's something you may be able to work out through negotiation. Is there room for "give and take" from the original bid package that will still achieve your firm's goals? Allowing for negotiating room will give you the best persuasive tool of all: Making the other party feel that it is gaining a real benefit through changes to your proposal.
Finally, but certainly not least important, is selection of the person who will conduct the negotiations on your behalf. When the negotiation phase begins, you'll benefit if your negotiator is someone who:
* Is capable of persuading others effectively, including possessing necessary writing and verbal skills.
* Understands what subcontract terms are important to your firm, and what terms are less important.
* Has the authority and ability to make negotiation decisions "on the spot."
* Can put himself or herself "in the shoes" of the general contractor.
* Knows the history of your company's relationship with the general contractor.
With the background and skills necessary to persuade others, and with sufficient room to negotiate subcontract terms different from the original bid package, your negotiator can stand up for your company in negotiations and achieve a better subcontract agreement.
Learn more about empowering your company to advocate the best possible subcontract terms through ASA's Stand Up! Web page. Click on the Stand Up! image on the ASA home page www.asaonline.com .
© 2004 Naylor Publications, Inc., and the Foundation of the American Subcontractors Association, Inc. This article may be reproduced in construction and business media and media databases. All other rights are reserved.
"This article is reprinted from the Fourth Quarter 2004 issue of The Contractor's Compass, the quarterly educational journal of the American Subcontractors Association, Inc. www.contractorscompass.org ."
|
