How To Negotiate a Builder's Contract Using An Ice Block

“Can I play on your phone, please Dad?”

“NO.”

“Pleease.”

“NO. Ok, but only if you go upstairs and wear your socks.”

One minute later, socks and warm clothing on, open palm outstretched. Thanks Dad.

Three year olds are master negotiators. They always get their way. Well almost always.

Even as toddlers, they understand that to get something, you have to give up something. In the case above, give up the resistance to warm clothing; and get to play on the phone. Oh, isn’t that just so insanely simple?

So Why Do We As Adults Always Want But Seldom Give?

Well let’s get into building contract negotiation, shall we?

When it comes to building contracts, there actually aren’t that many things to negotiate on! But before we get into WHAT to negotiate. I’ve gotta ask…

Why do we need to negotiate?

Is there a reason? Do we even need a reason? Or is our brain hard wired to negotiate, no-matter-what? If yes, then why not negotiate with the little girl selling ice-blocks at the street corner. Surely, the ice-blocks don’t cost three dollars to make?

But we don’t, do we? Why not? Because we know ice-blocks usually sell for a few dollars.

Aha! That’s it.

We know the cost of ice-blocks

And that, my friends, is the key to any negotiation. No, not ice-blocks, but knowing the cost. And that brings me to the two most important steps of building contract negotiation.

The first step

Where are you going to negotiate to? Do you actually know what your house should cost? Seriously, do you? Because if you don’t, then when will you stop? And how will you know if you’ve already got a great deal?

And if it’s a discount that you’re really after? Is it a 5% discount, 10% or 50%?

Or are you happy with any discount, so long as it is a discount. Makes us feel good, doesn’t it. We feel like a winner. We feel superior.

But hangonaminute, have you checked the contract to find out if this superfluous discount can be charged back via other areas of the contract? And you’ll be back to square one in no time at all.

Got you thinking, didn’t I? Well, I’ll look into that a bit later on, but for now…

The second step

What are you going to negotiate on? For most people it’s cost, right? Well, cost isn’t the only thing that can be negotiated. Can you think of anything else?

How about:

  1. Risk?
  2. Or cost of variations?
  3. Or time to completion?
  4. Or flexibility of selections?
  5. Or provisional sum allowances?[1]

These are just some of the other things that can be used to negotiate a contract, other than price.

Let’s face it, what if you negotiated with the poor girl above to make you an ice-block for 70cents. You’d say you got a good deal. Wouldn’t you? But what if it tasted absolutely horrid. And you had to throw it away. Would it be much of a good deal after all?

Well The Same Applies To Building Contracts

The owner tries to negotiate the lowest price possible, with no idea as to what constitutes a fair price (or a great product).

The builder does whatever he can to win the contract, whilst scrounging around to ensure he recoups the discount somehow.

Who’s the winner?

Well, if I must spell it out. No-One! Would you rather contract a reputable builder at a fair price or a rogue builder at the cheapest price.

I know which one I’d pick.

Ok, So Let’s Ponder This Over An Ice-Block

By all means, if you can save a dollar by negotiating your contract. Don’t let me hold you up. However, consider these points, carefully:

  1. Never negotiate aimlessly without a clear, well defined goal. You could end up with a sour inedible ice-block.
  2. If you have no benchmark on pricing, it is quite counter-productive to negotiate on price. Builders are not silly. I’m generalising ok 🙂
  3. Your builder may already have given you a very competitive price and doesn’t have much room to move. If pushed too hard, may withdraw his tender, you could easily lose a great builder and be left with the plebs.
  4. If you are warming up to a builder and you have some idea of where the pricing should be at (but please be realistic with the limitations of your own expertise). Then be up-front with him. Perhaps he could offer some of the other benefits mentioned above?

Bottom line is, if the risks associated with the contract can be shared, then perhaps the contract could indeed be negotiated to where both parties are happy. But there has to be some give and take.

Remember my three year old above, wear warm clothing…then get to play games on the phone.


[1] Please see articles on Risk and Provisional Sums

 

 

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