Life is full of negotiations. If we look closely enough, we can find strands of negotiating in nearly every situation we find ourselves in. Whether it be choosing a restaurant, debating opinions with friends or convincing a kid to eat their vegetables, we can find ourselves in a negotiation without even realizing it. In the world of project management, contracts and big-picture discussions come to mind when the word “negotiate” arises. This is not where a project manager’s negotiation skills end, though. I guarantee that every project manager is involved with at least one negotiation per day, even if it isn’t seen as one. So why is it such a necessary skill for PMs? In this article, we’ll discuss the importance of negotiation in project management!
What Is Negotiation?
According to Merriam-Webster, the definition of negotiate is “to arrange for or bring about through conference, discussion, and compromise“. Let’s break that down a little further.
The term conference implies a meeting between parties where each of presents their point of view and specific requests that go along with it.
Discussion obviously means, well….discussion. In negotiation, this is a specific back-and-forth dialogue between the parties involved where one party makes a statement and the other responds, often with a counter-statement. This volley between parties is all done in an effort to reach an ultimate…
Compromise. The ultimate goal of a negotiation is to reach a point where both parties agree to, and feel satisfied with, the deal the parties have reached. Everyone agrees to move forward in a certain fashion, or under specific terms and conditions.
PROMOTED
Of course, not all negotiations involve a sit-down meeting and an official format, but these are the main components of any negotiation in at least some form.
What Is The Importance Of Negotiation In Project Management?
The Project Manager’s main role on a project is to make sure the project is completed in a satisfactory manner, including the big three: time, cost and quality. Negotiation is a vital tool in a PM’s toolbox for making sure these variables are maintained.
In terms of time, deadlines must be met. Performance needs to keep up with schedule requirements. Coordination between all parties is vital to maintain progress and hit deadlines. P.M.s must be able to bring a project to a timely conclusion, despite stress, surprises and delays between parties.
In terms of costs, a budget must be maintained. This speaks for itself, but so many problems arise on projects due to money. Subcontractors want more money, vendors increase prices and resources sometimes don’t hit their production rate. A Project Manager must mitigate these situations when they happen, particularly in the face of surprises, delays and disputes.
An incomplete or under-delivered project cannot be considered a success, no matter how quickly it was delivered or how low the costs end up being. Therefore quality standards must be maintained to make a project a success. Whether it be a contractor that under-performs, material that does not match what was specified or incomplete project deliverables, a Project Manager must see to it that these problems be remedied and made good by whoever is responsible, all while also maintaining schedule and budget.
These are just a few of the many reasons as to why negotiation is so important in project management.
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Examples Of Negotiating In Project Management
Example time! Here are a few actual negotiation stories from my time working as a Project Manager on commercial construction projects. These are specific to construction management, but the intent and result are typical of situations that occur in many industries.
Negotiating Additional Time & Resources On A State Contract
My first job in construction management was with a general contractor in the bridge and highway industry. The majority of our contracts were held by the State. This specific project included about 10 overpasses along a major highway outside the city.
We were starting to get pressure to provide a final completion schedule. This is a normal request, but in this instance we had trouble promising a hard date. The project was significantly behind because we needed to access the highway at night, which meant the State needed to put out a lane closure with barrels, cones, etc for us before we could work out there. These closures were coordinated ahead of time, but every night there was a major delay or error in actually getting access to the work. Sometimes our crew would only get in as few as three hours of actual work in an eight-hour shift.
After several confusions, delays, lost time and heated conversations, we had to come together for a solution.
The State obviously wanted us done as quickly as possible – including a written schedule outlining the remainder of the work. We wanted a guarantee that we’d get lane closures on time, or we’d be compensated for the stand-by time.
The solution: We came to terms on how we’d be paid in the event of stand-by time. We also agreed to pad the final schedule by an extra 25% as a contingency. In turn, we needed to provide a written schedule to the powers-that-be within a week.
Negotiating A Budget Overrun With Our Manufacturer Due To A Grey Area In Scope
An order of custom-made windows, worth several hundred thousand dollars, were partially delivered in the wrong size for a large portion of the building. Each one needed to have a slightly different sized window sill in order to retro-fit an existing structure, but were delivered in all the same sizes. They could still be installed, but needed to be remedied onsite.
Our company initially planned to back-charge the manufacturer for a fairly large sum of money to cover our labor costs for doing so, plus the time we’d already spent discovering the error. The window company then halted their production on the rest of the windows until a resolution could be reached.
They felt that it was our responsibility to field-measure the exact size of each sill, and that we should’ve specified the sizes. We felt that the dimensions of these sills were their responsibility based on the terms of the contract. We wanted to be paid for our additional labor costs, some of which were incurred prior to us noticing the issue.
The resolution. We came to the following agreement after a few “loud” conversations:
- The manufacturer would pay us 33% of the labor cost we spent – we acknowledged that we should’ve caught the problem earlier.
- Our field crew will take measurements for the new sills, but the manufacturer must remake them free of charge.
In the interest of maintaining the project’s schedule, we decided it would be more important to keep manufacturing moving and take the hit on our own costs. We compromised a portion of our budget and the manufacturer compromised some of theirs.
Negotiating The Quality Standards Required For A Custom-Made Building Component
Our company was bidding on a restoration project that required a custom-made skylight system – a replica of the original. As the general contractor, we were responsible for finding a manufacturer to fabricate this replica out of steel and thin glass. We couldn’t find a large company that would take on the job, so we needed to get creative with custom fabrication.
The Design Team on the project provided a performance specification, which called for the system to satisfy a specific performance level that’d be more typical on modern high-rise building, plus a fairly long warranty. It’s also supposed to be a close replica of what was originally there.
The project needed to get underway as quickly as possible and this skylight was a large portion of the scope. No manufacturer was willing to produce a warranty and performance certification. We in turn couldn’t take the job unless those requirements were waived.
PROMOTED
The Client needed a renovated building ASAP, the Design Team was requesting for a specific end product and we were hoping to get the job.
The resolution: we agreed to take on the project right away for a certain price, so long as the warranty and performance requirements were waived. The Client got the timeframe they wanted, the Design Team had a contractor willing to at least provide an aesthetic match to the desired appearance and we got the project.
Negotiation In Project Management: Summary
While negotiating might sound intimidating or overly serious, it’s nothing more than people having a conversation about each of their needs and coming to a resolution. The importance of negotiation in project management can be seen in countless examples, from large to small – I hope the examples I’ve provided are useful and helpful. Thanks for reading!
