Key Takeaways
  • Successful contract negotiation begins with a comprehensive analysis of potential challenges and rewards, assessing competition, regulations, and revenue potential.
  • Leveraging creative and innovative pricing strategies can significantly enhance negotiation outcomes, especially when they reduce costs for the client.
  • Embracing risk and maintaining flexibility in post-negotiation execution are key to achieving long-term success and delivering on promised results

Creating a contract that appeals to the needs and goals of both a contractor and a client demands a strategic approach that encompasses thorough data collection and analysis, innovative solutions that embrace flexibility and compromise, and collaborative engagement between both parties and between multiple departments within your organization. Success depends on leveraging creative strategies to overcome obstacles, craft appealing proposals, and foster mutually beneficial long-term agreements.

Evaluate Your Options: Assess Challenges and Opportunities

When first approaching a contract negotiation strategy, analyze the challenges inherent to pursuing that contract, and whether the potential reward outweighs potential obstacles. Consider factors such as:

  • Intensity of competition and the saturation level of the market 
  • Regulations, such as local, state or federal requirements, that could pose limitations to the negotiation process and achieving desired terms 
  • The revenue generation potential should negotiations be successful. Will the agreement afford you substantial market share compared to competitors?

Once you’ve evaluated the viability of pursuing the contract, consider various contract types and evaluate which one will best fit the needs of your client. The context of the contract negotiation and the industry of both contractor and client will influence which type of contract is best. Common contract types include: 

  • Cost-plus contract. These agreements reimburse the contractor for all allowable expenses incurred during the project, plus a predetermined profit margin, usually stated as a percentage of the contrac...