The Art of Negotiating Contracts
by Chris Travis, Chief Operating Officer, Capstone Building Corp.
Negotiating a contract is a learned art form. Without a doubt, you will travel up and down the learning curve initially. It took me a year of working with attorneys to understand the legal jargon and normal issues that come up during negotiations. Capstone Building Corp.’s clients find this as added value, as our firm negotiates directly with their attorney in an efficient, knowledgeable and cost effective way.
Typically, two attorneys come together to discuss the terms of a contract between builder and developer. Attorneys tend to know the legalities of contracts, but not fully understand the construction business and individual projects or nuances that accompany them.
As negotiations begin, looking at the terms of the contract from the other party’s perspective becomes imperative. It helps the contract become relatable and fair to the parties involved.
Relationships with clients are solidified during negotiations as you are able to spend more time with them versus their attorney. If they go the latter route, their attorney then speaks to your attorney who then speaks to you and the communication chain becomes more convoluted. Taking out the middleman makes the process move along quicker usually because you are able to come to an agreement in direct conversations. This face time with the client can also further develop your relationship and rapport with them.
The cost of bringing negotiations in- house plays a significant role with both parties, too. The client and our firm see a drop in legal fees which can certainly add up. As negotiations are internal, our firm saves money by not having an attorney in on negotiations, which in turn is passed along to the client via the agreed upon contract amount.
With repeat business, contract negotiations become less complex with each subsequent project. Once we have a solid contract in place with our clients, the core language remains relatively unchanged from project to project. This method reduces the amount of negotiating and results in fewer legal fees that the developer would pay out on each subsequent job.
With negotiations underway each party becomes familiar with the actual terms of the contract, making execution more effective. If an attorney were to negotiate, the chances of one person on the management team knowing all aspects of the contract are slim. Because of the knowledge of the terms, it is easier to communicate internally with staff to make sure all duties are fulfilled to successfully construct a project.
Management within our firm creates the exhibits containing the scope of work, then presents to the client to make sure both parties are on the same page. Our team takes the deal, plans and specs with any changes and puts it on paper to memorialize the scope of work that has been agreed to by owner and contractor.
After negotiations are complete, meeting with the project team to make sure they understand the contract, its terms and the scope of work is a necessity. This becomes a critical part of the actual construction process. The project team clearly knows what they are building and how they are to proceed with the plans to successfully build a project that the client is happy with.
Internal negotiations can significantly impact the way you do business and the satisfaction of the client. Knowing the terms, eliminating costs and solidifying relationships can take your business to the next level.
Chris Travis has been successfully negotiating contracts internally at Capstone Building Corp. for the past ten years.