How To Get Every Dollar You Deserve From Change Order Negotiation

have always been a hub of disputes and delays for subcontractors. At any given moment, subs can have hundreds of thousands of dollars in unpaid change orders hanging in the balance. Sharpening your negotiation skills can help address these tricky situations and achieve better outcomes. That’s why Billd gathered a panel of construction dispute and negotiation experts for a roundtable discussion. They gave their best advice on how subs can refine their approach to change order negotiation and secure faster, fair payments.

Although changes can be requested by owners, for the purpose of this article, we’ll exclusively focus on changes that originate from the GC.

3 Change Order Negotiation Best Practices for Subcontractors

Adopt the “Panda” Mindset

One of our panelists, Shane Ray Martin, talked about the “panda” approach. On the outside, pandas appear cute and harmless. In negotiations, it will benefit you to be externally pleasant, amiable, and accommodating — this builds trust and strengthens your relationship with the GC. However, pandas are also said to be able to bite through steel; they’re not to be messed with. Show your GC that you have teeth. By having a friendly outer shell but being able to be strong and formidable when you need to be, you’ll be a force in your negotiations.

The main takeaway: don’t start hardball. Start with a “good cop” demeanor, win the other party over, and escalate if you need to. When you need to get serious, Martin insists you should be “hard on the problem, but soft on the person.”

Ask No-Oriented Questions

This means asking your questions in a specific way, like “Would you be opposed to X?” or “Would you be against Y?” By framing a question around their option to say no, you can make them feel safe and in control. This is the least confrontational way to ask questions and get the info you want. Martin believes you can arrive at an agreement easier when you cultivate the impression that they’re in control.

Hold the Line

Holding the line means you should keep going, against all odds. Advocate for the terms you want until the last second of the negotiation. Figure out your negotiation “must-haves” — the terms you just can’t budge on. Then decide your “nice-to-haves,” which you can push for without fighting tooth and nail. If you have to give up a nice-to-have, use it as a bargaining chip to show you’re a flexible partner.

Where Subcontractors Usually Slip Up in Change Order Negotiation

According to Ross Feinberg, a construction mediator of 16 years, the biggest mistakes subs make around change orders are:

• Letting the GC get away with not being extremely specific — A lack of specificity leaves room for misinterpretation. Feinberg has seen subs take on far more work than they’re contractually obligated to because of vague change order language.
• Agreeing to change orders over phone, email, text, or stray pieces of paper — Don’t accept anything less than a formal, contractually binding change order agreement. Feinberg has seen plenty of subs get stiffed for lack of an enforceable document.
• Accepting change orders not signed by the same parties as the original contract — The enforceability of a change order hinges on having the right person’s name on the signature line. Don’t accept just anyone’s.

You want to seem agreeable to the GC — but if you’re so agreeable that you waive your own rights, you’re not protecting your best interest.

Preparing for Your Change Order Negotiation

The more work you put in upfront, the more the outcome will be swayed in your favor.

• Come with specific goals in mind — If you’re willing to do the change order but only for a specific price, set that price ahead of time with your team.
• Keep their goals in mind — Think through what the GC will want and what you’re willing to give. There may be aspects of their situation forcing their hand that you’re not aware of.
• Write out how you’ll decline certain requests, if necessary — Articulating your refusal ahead of time ensures it’s both firm and tactful, so you’re not winging it in the meeting.

Feinberg suggests the “3 to 1 rule” — spend 3 times the amount of time preparing for the negotiation as you spend in the actual conversation.

6 Things to Keep in Mind As You Negotiate

Taoufik Lachheb, our third panelist and construction consultant, had an additional set of tips:

• Don’t oversimplify your “opponent” — Subs often assume GCs only want to cut costs, but that’s not true. Seek to understand the nuances of the GC perspective.
• Use your value and the difficulty of their request as a bargaining chip — Support your cost quote with qualitative factors: how good you are at what you do, the time impact, and the cost impact of the change order. It is incredibly costly for a GC to find another sub to do change order work. You have leverage.
• Leave emotions at the door — Don’t become heated or let emotions get the better of you. Listen and ask questions. The more data you have, the more you can remove emotions from the equation.
• Arm yourself with solutions to their problems — Come prepared with information and solutions that resolve the problems the GC is facing.
• Bring in decision makers — Find out who the key decision makers are and get them into the conversation.
• Don’t clean up someone else’s mess — You don’t have to take on a change order to fix another trade’s mistake. There are limits to agreeability.

The tactics above can serve as a jumping-off point as you build an approach that works for your business and trade. A well-thought-out negotiation approach will be your best asset in securing fast, fair change order payments.