Construction Business Negotiations

In business there is never a shortage of opportunities to negotiate and I’ve found myself at the negotiation table a number of times throughout my career. In the construction world, it’s great to find negotiated work, but most jobs are bid. That does not mean, however, that negotiating skills are not important for contractors.

I was talking to a heavy highway contractor friend of mine recently about negotiating in the construction industry. He mentioned that most of the negotiating his company does is with vendors and that, as expected, both sides give a little to get something they value (that is what negotiation is all about, after all). What was surprising is that he said his negotiations were rarely based purely on price for both parties.

One example he gave was that in return for a lower price, he promises to pay the vendor twice a month. In my friend’s other contracts, vendors aren’t paid unless the owner pays him, and then they are paid once a month. Under the negotiated terms, the vendor knows he’ll always be paid, regardless of whether the owner’s check has come through. Given the current financial issues many companies are faced with today, it’s not all that surprising that companies are willing to trade the promise of improved cash flow for pricing.

How many of your jobs are negotiated versus bid? What are some negotiating tactics that have helped you?

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