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Contracts – You Get What You Negotiate

In preparing a contract, you need to be specific, and absolutely clear about what you want, will agree to, and the responsibilities of the parties. When negotiating, the objective is to obtain an outcome where all parties feel that a fair and balanced agreement has been reached. If one party feels like they have been treated unfairly, forced into accepting a contract, or provision, this could impact the relationship, as well decisions that could influence services and performance on the project. For example, if a firm feels their fee has been reduced to unacceptable levels to be profitable, they may use less experienced, and costly staff on the project. This would impact the overall quality of services, performance and client satisfaction.

During contract negotiations, it is important that you do not let the desire of winning, or concern of losing a project cause you to accept unacceptable risk including underestimating services, staffing requirements and schedule for completing services in an effective manner on a project. This will only create higher risk, and more difficulty successfully completing, and being profitable on a project.

Contract Negotiating Tips

• Always strive for a win-win situation.

• Demonstrate an understanding of the clients needs and expectations for the project.

• Understand the details regarding the scope of services, and relationship to the fee and project schedule.

• Decision makers for both parties should be present. Negotiate with someone who has the authority to make decisions.

• Identify the “deal breakers” such as uninsurable provisions, inappropriate certifications, warranties, guarantees and client favored indemnity provisions.

• Mention these are uninsurable provisions and if they cannot be deleted or changed to your satisfaction, you will have to walk away from the project.

• Prepare a confidential list of items that can be deleted from the scope of services without compromising the integrity of the project.

• Never give a concession without getting one in return.

• Track concessions. The amount provided could be used as leverage later in discussions.

• Before the meeting, identify a minimum acceptable level of services and “walk away” point.

• Concessions should move the negotiations closer to the goal of reaching an agreement. Spend concessions wisely.

• If a client makes a unreasonable demand, don’t make a counter offer. Insist on a reduction in the demand and state the reason why.

• The goal is to reach an agreement that is fair and beneficial to both parties.

• If you are asked to take on more risk on a project, ensure you are adequately compensated. Perform a risk vs. reward comparison. 

• When negotiating, remember that you do not want to sacrifice your firm, place them at higher risk, or impact the quality of the project.

SmartRisk

SmartRisk is a leading risk and practice management consultancy for design and building professionals. Through firm specific risk assessments, training and consulting, services focus on improving overall performance, profitability and reducing insurance costs through tailored risk management solutions.

If you have any questions about our services, or would like dicusss how we could assist your efforts, please contact us.

Thank you,

Timothy J. Corbett, BSRM, MSM, LEED GA
Founder & President
626-665-8150
tcorbett@smartrisk.biz
www.smartrisk.biz.

Copyright and Information Only. This newsletter is for information purposes only and should not be construed nor relied upon as guidance, regulatory or legal advice. Readers should consult with appropriate counsel regarding their specific situations and circumstances. SmartRisk shall not be liable for any errors in content, or for any actions taken in reliance thereon.

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