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History is a Great Negotiating Tool

History is a Great Negotiating Tool

Establishing a starting-point and benchmark for costing out new projects is greatly simplified if you have good information to start with. When negotiating prices with subcontractors or suppliers, it helps to have good historical trend and benchmark data to support your negotiating position (at the very least to know what things have cost in the past, and how those costs have changed over time). Looking back on past projects and reporting on, for example, the average cost you’ve paid for a particular material over the past year or two; can be incredibly empowering during negotiations.

A further advantage is being able to side-by-side compare costing items such as average material rates and total amounts purchased - by Supplier and even by Project. Additionally, Side-by-side comparisons of subcontractors, in terms of both rate and productivity, will give you further sway in future contract negotiations with those and other contractors.

Vendors will often up their rates without much of an announcement and also add in their own contingency factors somewhere in their bid to make up for historical losses. Rate increases are obviously a normal course of business and are often justified. But, if over time, consistent rate increases are sneaking in without your notice, then you’ll have little or no position to negotiate a better rate if you don’t have good historical reporting and trending tools to position yourself with.

Looking at it from a slightly different angle – if you’re a Contractor and you’re bidding on projects, it’s vital to know how your charge-out rates have played out over time to give yourself maximum credibility in your customer’s eyes. It also positions you with a good strategy of how, when, and how much to increase your rates when that time is appropriate.  You may have executed on past contracts with a repeat customer in which your margins ended up being consistently lower than expected. Sharing this information with your customer - along with why this happened like it did – will help your customer better understand why you’re proposing a rate increase.

Negotiations are tricky enough as it is, without firm historical numbers to back up your position, you’ll be going in weak and ill-prepared. 4castplus is an ideal construction project management software solution to help you track, report and trend this critical information.


By Christopher Ronak | April 30, 2011 | Categories: business process improvement, project cost controls software, Construction Project Estimating | 0 Comments

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