A Project Manager's Guide to Negotiating with Contractors

As a project manager, I spend time during every workday dealing with various vendors and subcontractors. An important part of there interactions involve negotiating prices and contracts. For a project manager, it is very important to properly negotiate in order to minimize costs and maximize profits. Here are some easy ways to get the most bang for your project bucks.

Shop Around

The first step in any negotiation with a contractor is shopping around. Knowing what other vendors are charging will help you determine that correct pricing for the job and give more leverage when asking multiple companies to bid against each other.

Never Accept the First Bid

Most companies expect their customers to try and negotiate the price. For this reason, many of them pad their quote with some negotiating room. By doing this, they are still able to make a decent profit after negotiations or even make a great profit when dealing with naive consumers who accept the first bid.

Amount of Work

If you have multiple projects going on at one time, you may be able to save money by offering multiple jobs to one contractor. For example, a contractor might offer to work on one project for $1000. If you have three jobs going on, you might be able to get the contractor to take all three for $800 each.

Negotiate Completion Times

We've all heard the saying "time is money". This saying is king in the world of project management. Schedules can also be a nice bargaining chip when negotiating a contract. There are two ways that this can go. First, if your contractor is not budging on the price, you might ask for them to meet an earlier deadline. Another option is to allow them a longer deadline in exchange for a lower rate. This allows the contractor to have greater flexibility in their schedule.

Supply Materials

Depending on the type of work, your contractor may need to supply certain raw materials to complete the job. The problem is that these materials are usually marked up. If you are looking to save some money, consider purchasing the materials at wholesale and supply them to the contractor.

Take It or Leave It

For most projects, there will be a budget set prior to hiring contractors to complete the work. An easy approach is to make an offer to your contractor up front when you give them the scope of work. For example, if you have $1500 to offer for a job, tell your vendor up front. This eliminates the back and forth of negotiations. They either will do it for what you are offering or they wont.

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