How To Avoid Low Construction Budget Estimates
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How To Avoid Low Construction Budget Estimates

How many of your Clients suggest a low construction budget, hoping it will lead to more favorable design fees? 

Today I want to show you the best way to address this issue by applying a negotiation strategy called ‘Principled Negotiation’. Let’s start with the basics – what is principled negotiation?

Principled Negotiation & Construction Budgets:

The term ‘Principled Negotiation’ comes from one of the bestselling negotiation books of all time: Getting to Yes – Negotiating Agreement Without Giving In.

In this book the two authors, Roger Fisher, and William Ury, suggest that the best way to resolve conflict is to adopt a negotiation strategy they call ‘Principled Negotiation’.

What is Principled Negotiation?

Principled Negotiation is an interest-based approach to negotiation that relies primarily on four basic principles for a successful outcome:

• Separate the people from the problem
• Focus on interests, not positions
• Invent options for mutual gain, and
• Use objective criteria

How can Principled Negotiation help establish a realistic construction budget?

While all four principles play a crucial role in any negotiation process, it’s the fourth principle, ‘Objective Criteria’, that is of interest in this situation.

(Note: To help you with your design fee negotiations we’ve created a free Starter Kit packed full of useful resources):

Fee Proposal Starter Kit

‘Objective Criteria’ suggest that if we rely on our own opinions, experiences and/or training to support our requests we’re far more likely to engage the ego and end-up bartering for position at the negotiation table. 

Instead, Fisher and Ury suggest that our arguments will carry far more weight if we use factual, relevant and qualified information (that’s independent from either party) to support our requests.

For example, the next time a Client presents you with an low construction budget, instead of addressing the issue by confirming your position and saying:

“… experience tells me that a building of this size and quality is going to require a much bigger budget…”

You may want to address the issue by focusing on ‘Objective Criteria’ and saying:

“I wasn’t sure how much this type of building would cost so I’ve brought along three different cost publications that present average construction costs, for your type of project, on a square foot (or square meter) basis. Would you like to take a look?”

Cost Publications:

In this situation, we’re using information that’s available in the public domain to deliver (perhaps) unwanted news. 

Focusing the discussion on factual, relevant, qualified, and (most importantly) independent information is far more productive because it avoids direct conflict… if it’s written down somewhere it must be true! 

Principled Negotiation is a negotiation strategy that’s taught in almost every business school and is also a subject that we discuss in detail at the Fee Proposal Workshop. To learn more about how you can apply Principled Negotiation to your fee proposal please click on the following link: Fee Proposal Workshop.

Let us know what you think:

Which publications do you use for construction cost data? Let us know in the comments section below.

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Ready to improve your Negotiation Skill?

Here are three resources that are available right now to help you become your firms best design fee negotiator:

• How to Respond When Asked to Lower Your Design Fee (Blog):
https://blueturtlemc.com/blog/how-to-respond-when-asked-to-lower-your-design-fee/

• To learn more about Principled Negotiation visit (eGuide):
https://blueturtlemc.com/product/the-design-professionals-guide-to-negotiating-fees-contracts/

• The Ultimate Fee Proposal Workshop (CE/CPD points available):
https://blueturtlemc.com/feeproposalworkshop/

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