Speaker 1: How to negotiate a contract. Would you like a pattern for negotiation which literally works every time? How can you show up well during negotiations? How can you prepare? And what will you get if you take this seriously? If you want to know this then stay with us on this video to find out. So before I begin I do want to say we never ever ever ever use negotiation techniques to mess people out of money, to find a win-lose situation, or to manipulate an owner or a client. Ever. Ever. So what I'm talking about is in a negotiation setting to be able to reach fair terms in a win-win environment in a powerful and effective way. That's what I'm talking about. So I'm never talking about messing people out of money, never talking about something unethical, I'm never talking about messing our owners. I believe that we can negotiate in a way where we have a really fair deal for our clients, a really fair deal for us, and a really fair deal for our trade partners and that we find that win-win-win. So let's talk about that now. The basis for this is a book called Never Split the Difference. I have talked to you about this before but a really really great senior project manager and now project director said Jason you've got to read this book Never Split the Difference. It's fantastic. And I will tell you for a fact this is not hearsay me. I have learned, I read the book, I learned the content, and I used the homework sheets or the the preparation checklist that they recommend in that book before negotiations that were fair win-win type scenarios to negotiate change orders which were at a risk of not being approved. And it was fantastic. I highly believe in this. I know that it works. I've experienced it over and over. So let's go. So the key here is with this I'm going to give you the steps and you can learn this information from the book Never Split the Difference. By the way in the description below I'm going to give you a guide for the Never Split the Difference framework. Then I'm going to give you some tips for how to tie that to construction. So let's start with these one by one. Number one, emotional intelligence. This is huge. You have got to have at least during this period, you don't have to have it anywhere else in life, but you have got to be emotionally regulated and be mindful of your emotions. And come at the negotiation fairly neutral but lean in so don't get mad or triggered on this end. And be empathetic to the other person with whom you are negotiating. So if you want to disarm somebody, you always listen to them, you always hear what they're saying, you always empathize with them, and you connect with what they're saying and they have to feel heard. So if you are defensive, if you are angry, you're not going to be able to do that. So step one is always regulate your emotions with emotional intelligence. Number two, active listening. I know that a lot of us, especially as guys, we're like, oh active listening I can do that. Wait what did you say? Like I don't know you know I wasn't paying attention. So when you're listening, you're paying attention to the tone, the body language, the person's needs, the person's feelings, the context, and this is even an owner. So you can use the negotiation technique with your owners, with trade partners, with anybody. The bottom line is realize the people on the other end are human beings and you've got to listen to them and you've got to do it in an intentional and effective way. So active listening. Number three, something called mirroring. And you might hear this and be like, well that's manipulative. No, it's not. We are trying to build rapport. So rapport with somebody really is where you start to connect, you build commonality, you start to align, you start to feel like you're more similar, you understand each other better. It really, when you're building rapport, you're forming connections. So when you start mirroring somebody, you're going to match the way they talk, their tone, their speed, their body language. You're going to attempt to match and that's not for the purpose of manipulating. It's the purpose, it's for the purpose of going to where they are. Like think about it like a parent standing over and towering and yelling at a kid, right? What do you think that environment communicates? Danger, fear, unsafety, right? Nervousness. But if you actually get down on the level of that child and speak softly or in the same tone and start to connect, they'll feel safe and now you have a deeper connection. So always use the technique of mirroring in your negotiations. Number 4, labeling. This is crucial. When the person you're negotiating with is talking about certain things, you want to label those things. Like if they're saying for example, that they feel cheated or they're like, this price is too much, you might repeat back to them, okay, so what I think I'm hearing you say is that you really want to be treated fairly with this change or this negotiation and fairness, cost fairness or price fairness or getting to a fair number is important to you. So you see what I've just done? I've just labeled that and they'll be like, yes, yes, that's what I want. And so now once you've anchored it, right, now you have alignment and that person feels listened to and you can build off of that. Number 5, use the FBI negotiation techniques. That means to form a connection, to build rapport and always lead out with empathy. So nothing you do in a negotiation is going to work very well without empathy. So always in every conversation and if the conversation in the negotiation ever goes badly, always revert back to let's re-establish a connection, let's make sure that they feel heard even if it takes additional time. Number 6, use calibrated questions. These are questions that are there for the purpose of understanding and listening to the other party. They're not manipulative by the way. I have to keep saying that. There are questions that are non-threatening and fairly open-ended to get the other individual to talk. Now don't keep giving questions where they feel like they have to repeat themselves but getting more information allows you to connect, acknowledge it and make sure that they feel heard and that you fully understand. Number 7, negotiation leverage. This is a key concept which I absolutely love from the book which is where you understand their parameters. Like if you say, okay, I'm assuming with this you're under a deadline or you can acknowledge, okay, I'm assuming with this you have to report to certain superiors or hey, I'm assuming with this that you are not the sole decider on this issue or I'm assuming with this that you are incentivized to be under budget or to save money. Whatever the circumstances are, you have to understand what the negotiating party is constrained by, acknowledge them and instead of just ignoring them or fighting through them or pushing against them, acknowledge them and ask what typically the person you're negotiating with, okay, so like if this is something, if you have to meet this deadline, how could we get this approved before the deadline? Or if you have to get another person's approval, how can we find a win-win and get that person's approval and take care of your needs? And lastly, number 8, don't split the difference. Don't just give up, don't make concessions. It's all about having a conversation in an emotionally controlled manner where you can literally problem-solve in a collaborative environment and find the win-win. So, don't just give up, don't just to have concessions, don't make them give concessions. Make sure that you're creating an environment built on trust and empathy where you can problem-solve this together as a team. So, let me just go ahead and conclude that little part here by asking a couple things. I'm going to ask you to like and subscribe. Oh, wait. No, no. Hold on. It was something. Oh, well. While we're here, I would love for you to like and subscribe to the video. But let me ask you this. Before you go into a negotiation, please read that book. It's on audible as well and we'll link it to you in the description below. We'll also have a checklist for you as well. And we'll also link you to format it well. We'll probably just put it in the description giving the author credit because it's theirs. But use their form. There is a form that you can fill out before your negotiation that can fully prepare you so that you are ready at every single turn. This is not manipulation. This is about you doing your part to be ready. So, these things will be available for you. If you use the book, the preparation homework and the checklist, you will be set to go and you will win. Now, here are some tips and tricks for how to apply this to construction. Number 1, understand project requirements. When you are heading into a negotiation, make sure that you know all of the requirements for the negotiation at hand. Number 2, identify key priorities. What do you want out of this negotiation? Is it schedule? Is it cost? Is it approvals? What is it? Like know what your outcome is and make sure that everybody in the negotiation knows as well. Number 3, do your due diligence. Do the research about the negotiating party. Understand their track record. Understand their experience. Try to understand their intentions. Know the different circumstances that might play into their negotiation and especially like I told it talked to you about before, the things that they might be constrained by. Things that affect them that would hinder them from being able to negotiate something successfully with you. 4, when needed, seek legal advice especially when redlining or doing a redaction of certain contract types, right? Because you're negotiating contracts. 5, establish open communication so that we can get problem solved so it's not always a dead end. I know that with some of the clients that we work with, they're always like, yeah, I need 10 billion dollars worth of insurance of auto insurance for you to work on our project. And I'm like, I don't even have trucks. Like what do you want for me? Can we get this out in the leisure? No, no, no, no, no, right? And it's like, okay, we can't. I've actually had clients that we couldn't work for because I couldn't raise like 10 billion dollars worth of auto insurance for cars that we didn't have, right? Like so, when you're negotiating contracts, make sure you have an open line of communication with all parties and you don't have anybody stonewalling. Number 6 and this is key, negotiate comprehensive terms. So, you're going to want to negotiate all terms that cover a project including scope of work, payment terms, change orders, warranties, insurance requirements, indemnification and dispute resolution procedures. So, you want to have inclusive contract terms negotiated. Number 7, define the scope of work clearly. I have had or heard different PMs or directors say, no, just keep it vague. You're tied to the plans and specs and I've had others say, be very, very clear. I probably tend towards the be very, very clear. You're obviously going to say that you're contracted to this scope of work for the plans and specs. But if there are any other nuances, make sure that you have complete, a complete scope of work identified in the contract so that we're covered and anything that you want them to do is included. Number 8, address risk allocation carefully. Make sure that whether you're you're shedding that risk and putting that on the trade partner or you're sharing it or there are certain risks that need to be dealt with that the contract specifically prescribes what to do when those risks are encountered. Number 9, negotiate price and payment terms in the contract. Make sure that they're fair, competitive and representative of the entire project scope. Make sure you've included things like milestone payments or incentive based pricing. Number 10, document all agreements in writing. Number 11, plan for dispute resolution. What will you do if there's a contract dispute? And then 12, maintain positive relationships throughout with your contractors. So once it's negotiated, you want to make sure that you're holding to the contract and here's the best practice. Have the inclusions and exclusions printed out or on a tablet so that the project can see it and we make sure that we're only doing things by contract. Right, I remember there was a GS one time that says, I'm a contract man. Right, always know your contract and maintain good relationships throughout and don't automatically head into a fight. Pick up the phone ahead of time before you put them on notice. Make sure that you have the conversation and go use those techniques that I've taught you before you get into a fight, right? And always reach out for help if you need to. So in the description below, I'm going to link you to the book, I'm going to link you to the graphic and I'm going to link you to the preparation checklist that you can use when negotiating contracts and a list of all of the key things that you should do to remember in construction how to negotiate a really good contract and some of the best practices. I really hope you've enjoyed this video and that you can use this on your project. On we go.