Every year, the successful construction companies stop and take a look at their last 12 months and then make decisions and commit to next year's contract and sales goals.
What Are Your Customer Contract Goals?
Does your company have a customer contract strategy? Consider these following business development targets and goals as you think about what type of construction business you want to seek or go after:
- Lump Sum Bid vs. Negotiated Contracts
- New vs. Repeat Customers
- Repeat vs. Loyal Customers
As you consider seeking to negotiate more construction contracts, there are several factors to consider. The first is to decide what your potential construction customers want. Today, every construction customer wants and expects you to meet a fast schedule, provide quality craftsmanship and be very competitive. These project requirements are the minimum required to just get on their bid lists. However, customers who are willing to negotiate a contract want more than the minimum construction services provided by most contractors and subcontractors.
What else do customers who negotiate construction contracts want?
- Less risk
- No field problems
- Full service and value
- Open book communications
- Less headaches and no hassles
- No cost overruns or change orders
- An on-budget guarantee
- A guaranteed completion date
- Design assistance and coordination
- City approval and permit processing
- Utility company coordination
- Financing programs
- Expertise and technical skills
- Trained and competent field supervision
So, if you want to negotiate more contracts, the real questions to consider are:
- What else do you offer that your customer will value enough to earn trust to negotiate a construction contract?
- Why should a developer or general contractor negotiate a contract or subcontract with your company?
Negotiated Advantages & Disadvantages
Negotiating a contract with your customer has many advantages. But, the big disadvantage that most customers fear is leaving money on the table -- not hiring the lowest price contractor or subcontractor. To overcome the preconceived notion that a negotiated contract will cost more, offer the following answers to your potential customer. A negotiated contract will:
- Create common project goals and objectives
- Develop a single point of responsibility
- Enhance project communications
- Focus all project team members on solutions
- Ensure the project is not over-designed
- Provide full value to the customer
- Ultimately end up with a lower overall cost
- Complete the project faster
- Eliminate safety issues of concern
- Reduce field problems
- Reduce the customer's involvement of time
- Help eliminate disputes, claims and confrontations
- Stop adversarial challenges
- Get everyone on the same page
- Make the project a success for all
Conflicting Goals With Low Bid
The traditional "design - bid - build" approach to construction creates adversarial goals and roles between the owner/developer, general contractor and subcontractors. When companies are awarded projects based on providing the minimum per the project plans and specifications based on the lowest price, conflicting priorities and challenges will occur. These low bid companies protect their profit by maximizing their returns via: change orders, providing the manpower that best works for them and not caring about the overall project goals. The pressures of pleasing several customers on numerous projects at the same time conflict companies awarded contracts based solely on price.
With a negotiated contract or subcontract, the customer has awarded the project based on getting full attention from the contractor, extra services they have committed to perform and a goal to help make the project a success. This trust and contractual format binds the parties together with a common mission. This overcomes the low bid mentality and gets everyone working as a team.