# [Best Practices] - Contract Negotiations



## kentdalimp (Aug 15, 2013)

Hey Everybody, 

Hoping to do some regular posts that will serve as sort of a “Best Practices” theme from those of us involved in the more Commercial Side of the Industry. I figure we can do various posts like this as time permits where others can comment both their thoughts, their experiences and how they do things now. 

Hopefully we can all learn from each other, and improve our own practices moving forward. Seeing as how this is the closest thing to a peer group I have found for those of us in the Industry, I figure it will serve to help some of the other up and coming guys as well. 

Today’s Topic: *Contract Exceptions. *

When negotiating a Commercial Contract, what are the common Exceptions that you look for? 

Ours:

*1)	Schedule* – We try to negotiate for “Mutually agreed upon durations” 

Why: We don’t like the scenario where the GC screws up the schedule then tells us we have to accelerate and we are not due any extra monies.

*2)	Indemnification* – We negotiate for indemnification “proportional to fault.” 

Why: We don’t want to indemnify and hold harmless someone for something we had no control over. If we are 20% at fault, then we should pay 20% of the costs, not 100%. 

*3)	Protection of the Work* – We are not in control of the jobsite. Its unreasonable to protect our work until the end of the project. 

Why: We don’t want to have to repaint everything for free at the end of the job. 

*4)	Termination for Convenience* – It must be a mutual agreement. 

Why: We don’t want to lose the work if we are not at fault. We can still be terminated for Cause. 

Anyway, these are 4 of the major clauses we take exception to. We approve of the Consensus Docs and will sign them without exception, but considering very few Large GC’s will consider it, we usually end up negotiating their contracts. 

What are your experiences with the above, and what do you look for when negotiating a Commercial Contract? 

(P.S. - Sorry I have been gone for so long. I was on the road for over 8 months in 2018, was evacuated off a project in Haiti twice and had another child in the meantime. I have been busier than I should be, but wanting to get active on the forum again. Maybe someday I'll be able to continue with the Podcast...)


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## Masterwork (Sep 13, 2020)

Negotiate?

Where I live, you read the specs, look at the drawings, and submit your bid. There's no negotiating. If you don't like something, you can increase your price, or not bid. 

The only thing we do here is ask for clarification on drawings or specs, if something isn't clear or maybe conflicting.


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## kentdalimp (Aug 15, 2013)

Masterwork said:


> Negotiate?
> 
> Where I live, you read the specs, look at the drawings, and submit your bid. There's no negotiating. If you don't like something, you can increase your price, or not bid.
> 
> The only thing we do here is ask for clarification on drawings or specs, if something isn't clear or maybe conflicting.


Just to give some context: We are a Commercial Only firm out of SoCal. Been in business almost 100 years. Typical projects are between $20K - $1.5M. Average Yearly Revenue is between $6-8M. 

We deal mostly with Bigger GC's (PCL, Hensel Phelps, Turner, WE Oneil, Etc.) 

We negotiate 90+% of our contracts. The only one is recent history is where the Estimator posted a Bid Bond and agreed to accept the contract without exception in his bid. (Spoiler - It was a Bad Job) 

On our proposal, one of our clarifications is: "All Contracts must be Negotiated." After we are awarded a project, we have a form letter we send out that states that we review each contract and usually take exception to the following things....etc. So if you aren't open to negotiation, lets save everybody time and go our separate ways."

I am interested to know if you have tried to negotiate or not. I know when I had my own business, I didn't even know it was possible. It wasn't until I came to work here that I even knew it was common practice. Of all the Contracts we are awarded, there are maybe 2-3 a year that will not negotiate. So I questions how you have approached negotiating before? (Hope I'm not coming off as a jerk, I am honestly curious to know!)


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## Masterwork (Sep 13, 2020)

I did try to negotiate. Here's an example. 

A retirement community builder, is doing a new community near me. I've done some work for them, but it was basically "we pay $3.40 per square foot for these houses, take it or leave it". I did a few houses, but their expectations are way to high for what they're paying. They recently asked me to sign a contract. I had some issues with one section regarding a 24 hour window for touch-ups, or they would do it and bill me for the work. I told them I'm not on-call for them, and I wouldn't sign the contract unless they took that part out.... I haven't heard back from them, or gotten any work from them, in months.

The nearest paint store is only open 30 hours a week, it's a small town. The next nearest paint store is 1.5 hours away. If the paint store isn't even open 7 days a week, how can I be expected to show up within 24 hours? 

Anyways, I left it with them. I'm happy doing a house here and there if their main painters can't keep up, but I'm not the company who was awarded the job in the first place, so no signing of anything for me, thanks.


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## CApainter (Jun 29, 2007)

Clearly, there are painting arenas where negotiating equitable contract terms are not only good business practices, but are also an obligation for the health and well being of a business. 

On the other hand, the weight of negotiation should be carefully considered before deployment. In other words, demanding a lot of terms and conditions prior to painting ninety two year old Jane Magilicutty's eleven hundred square foot single family dwelling off of highway 101 in San Mateo California, could start the service off with a little more intensity than it should, had it developed a little more organically. But then again, she's not Bechtel.


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## finishesbykevyn (Apr 14, 2010)

Masterwork said:


> I did try to negotiate. Here's an example.
> 
> A retirement community builder, is doing a new community near me. I've done some work for them, but it was basically "we pay $3.40 per square foot for these houses, take it or leave it". I did a few houses, but their expectations are way to high for what they're paying. They recently asked me to sign a contract. I had some issues with one section regarding a 24 hour window for touch-ups, or they would do it and bill me for the work. I told them I'm not on-call for them, and I wouldn't sign the contract unless they took that part out.... I haven't heard back from them, or gotten any work from them, in months.
> 
> ...


This is why I stopped doing commercial work. Thier contracts are always bigger tougher and stronger than mine. You need a personal assistant or lawer just to get through the paper work and everything is always an emergency.
I do like the sounds of negotiations though. Thats sound much more reasonable. 
However I'll stick to the job's under 10k I think. My heart and patience would't take kindly to that bigger stuff.


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## Masterwork (Sep 13, 2020)

The biggest job I've done was around 65k. I think that's my limit, as well. I'm not interested in becoming an employer, if I have to babysit too many guys. It's fine if I have to hire a couple of guys now and then. 

I've worked alongside several guys who turn a 2 hour job into an 8 hour day...no thanks. I'll leave as soon as I'm done.


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## kentdalimp (Aug 15, 2013)

CApainter said:


> Clearly, there are painting arenas where negotiating equitable contract terms are not only good business practices, but are also an obligation for the health and well being of a business.
> 
> On the other hand, the weight of negotiation should be carefully considered before deployment. In other words, demanding a lot of terms and conditions prior to painting ninety two year old Jane Magilicutty's eleven hundred square foot single family dwelling off of highway 101 in San Mateo California, could start the service off with a little more intensity than it should, had it developed a little more organically. But then again, she's not Bechtel.


I see you are one of those types who will only Contract with the Owner! GC's be damned! :vs_laugh:


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## kentdalimp (Aug 15, 2013)

finishesbykevyn said:


> This is why I stopped doing commercial work. Thier contracts are always bigger tougher and stronger than mine. You need a personal assistant or lawer just to get through the paper work and everything is always an emergency.
> I do like the sounds of negotiations though. Thats sound much more reasonable.
> However I'll stick to the job's under 10k I think. My heart and patience would't take kindly to that bigger stuff.


Its no mystery why as contracts and required Paperwork get more and more extensive, productivity continues to decline across the industry. Doing work on major projects require so much paperwork, that unless a change amounts to over $500, it costs us more time in the office to prepare and submit the paperwork than we make on the change. 

Commercial work is a headache, If you don't have the systems in place already, its an expensive learning curve.


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