Why Would a Client Want to Negotiate a Balanced Agreement?

by Michael Strogoff, AIA
Strogoff Consulting

Summary: During challenging economic times, knowing how to negotiate effectively with clients—reducing collective risks, avoiding future disputes, aligning expectations, and getting paid commensurate with the value provided—takes on added importance. In this issue of AIArchitect, we kick off a series of articles authored by Michael Strogoff, AIA, titled “Negotiating the Economy” to help our members and their clients reach successful agreements and accomplish their respective goals.

Architects instinctively possess many of the skills required to negotiate: problem-solving, listening, creativity, intuition, inquisitiveness, and strong communication skills. Throughout this series of articles, I advocate using a highly collaborative style of negotiating, probing to understand underlying concerns and always approaching discussions from the other parties’ perspective. Although this series will address many aspects of negotiating successful agreements, there is one central theme to keep in mind: getting your interests met depends on understanding the other parties’ needs and crafting solutions that satisfy their goals.

I have been privileged to work closely with many skilled negotiators in our industry in my ongoing search to learn. As you read these articles, please consider sharing your knowledge with the AIA community by posting your thoughts, contributing Best Practices articles, and hosting “Negotiating the Economy” discussions within your local AIA chapter.
– Michael Strogoff, AIA

Clients who insist on using their own agreement forms usually adopt a tough negotiating stance when design professionals propose modifications. Among the reasons cited by clients:

“Our attorney spent considerable time drafting this and won’t allow any change”

“Other design professionals are willing to accept our agreement without any modifications”

“Making changes will delay the project and jeopardize the ability to meet our schedule.”

Some clients think that citing these reasons is an effective negotiating tactic. Others honestly believe that discussing changes might be too costly, delay the project, establish a poor precedent, or result in unwanted liabilities.

Don’t waste your time and good will responding directly to these reasons, regardless of your client’s motives. Until your client has strong reasons to negotiate more balanced terms, no amount of debate will yield the results you want.

Instead, give your client incentives for modifying its agreement. Start by explaining the benefits that result from negotiating a balanced agreement.

• A healthy dialogue and efficient resolution of issues. A successful negotiation creates a constructive dynamic for effectively resolving difficult issues that emerge throughout a project—from the initial design meeting to the completion of the final punch list.
• Better understanding of the client’s goals. When parties delve into specific contract terms, the client’s goals and expectations invariably surface. For example, when discussing the design professional’s obligations should the final construction costs exceed the owner’s budget, the design professional might gain clarity about the relative importance the client places on quality, schedule, and price.
• Clarified roles and responsibilities. By discussing each stakeholder’s services and obligations, the likelihood increases that essential tasks will be completed on time and that fewer tasks fall through the cracks.
• Better risk management. A client can gain greater protections by identifying risks as early as possible and assigning each risk to the party with the authority and ability to best control that risk. For example, instead of the client imposing an overly broad indemnification or a largely uninsurable standard of care provision, the parties might discover a better way of addressing the client’s concerns about costly errors and omissions, such as incorporating a peer review of the construction documents or getting a contractor involved earlier in the design process.
• Better project management. A design professional can refine the work plan and approach in response to the client’s experience and resources. Also, the parties can determine ahead of time how to respond to problems and uncertainties, if these surface during the project.
• Elimination of unnecessary fee contingencies. Clients know that unknown site conditions or an onerous set of general conditions for construction leads to higher contractor prices. The same holds true for design professionals and their fees when faced with inadequately detailed scope and project descriptions or confronted with an unbalanced agreement.
• A higher caliber of design professionals. Given the choice between working with clients who negotiate equitable terms and those who insist on unbalanced terms, the most qualified and in-demand design professionals actively pursue the former.

Remember, your negotiating success depends on your ability to persuade clients that modifying their unbalanced agreements is in their interests. If you effectively make your case, even your client’s attorney will find it difficult to argue with these reasons.

© 2008 Strogoff Consulting. Reprinted with permission.