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Focus on value in change order negotiations – Legal Desk, April 2024

May 6, 2024 | By Dan Leduc

May 6, 2024 – In the dynamic landscape of change order negotiations, it is not uncommon to encounter objections based solely on a perceived high price, leading to a defensive stance from contractors. However, when you shift the conversation from price to value, you have a greater chance at a better outcome.

Here is a common scenario: an owner or consultant expresses discontent with a quoted price.

“You are charging two times what others charge for that same change,” they might say. “We’re not paying that much!”

In such instances, it is crucial that you resist the temptation to apologize for the pricing structure and acquiesce, as a hasty readiness to adjust your price undermines the value of the change order.

Justifying the offer without compromising on price is paramount, and the key lies in redirecting the focus of the negotiation. Move the discussion away from price and toward value. You could say, for example:

“We both know that you are not paying for this change yourself, and no one will pay more for something than it’s worth. Let’s instead discuss the value we bring, and I will help you demonstrate that value to the actual payor.”

Repositioning the discussion encourages a deeper understanding of the intricacies behind the change, and how the corresponding benefits (e.g. unique features, quality assurances, expertise) serve the client’s needs better than price alone.

By fostering a productive and mutually beneficial exchange, change order negotiations can transcend mere price considerations. This not only reinforces confidence in the proffered services, but empowers clients to make truly informed decisions. It also fosters a collaborative environment where mutual understanding and alignment on value propositions can lead to favourable outcomes for all involved.

Dan Leduc is a partner at Soloway Wright LLP, and specializes in construction law. He is always happy to take on new clients from anywhere in Canada, and can be reached at dleduc@solowaywright.com.

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