Working in the field of construction and development requires a wide range of both hard and soft skills, including strong negotiation skills. After all, professionals working in this field often have to navigate the complexities of construction contracts while mitigating risks and ensuring compliance with strict industry regulations.
So, what are some essential tips for improving contract negotiation in construction, and how could a Master of Legal Studies degree help you build these and other skills?
The Importance of Effective Negotiation in Construction Projects
There are many reasons as to why effective negotiation skills are so important when it comes to taking on construction and development projects, especially when it comes to reaching the end goal of a negotiated contract in construction.
An In-Depth Look at the Stakes in Construction Contract Negotiations
First, consider the inherently high-stakes nature of construction negotiations. Even a relatively small construction or development project can come with steep financial stakes, as these projects require a lot of capital and up-front investment. Meanwhile, in today's realm of global supply chain challenges, poorly written contracts may lack the protections that involved parties need to ensure timely and cost-effective completion.
Also consider the strict regulatory compliance laws and regulations that can come into play in any construction and development project. Well-crafted contracts increase the likelihood of projects being completed on time, on budget, and within compliance regulations.
Key Factors That Influence Construction Negotiations
There are various factors that come into play in construction and development contract negotiations, including:
- Current market conditions, including the potential for supply chain delays, material shortages, and material costs.
- Project scope, also known as the scope of work. This covers the desired outcomes and goals of the project, its deliverables, milestones, and deadlines.
- Stakeholder interests, or the wants and needs of all parties involved in the project.
Professionals entering into contract negotiations need to take all of these factors and more into consideration throughout the process.
Preparing for Negotiation: Essential Steps for Success
Before even entering negotiations for a construction or development project, there are a couple of steps professionals can take to help them prepare.
Gathering Comprehensive Project Information
First and foremost, contract negotiation professionals need to conduct extensive research and data collection on specifications regarding the project itself. This includes gaining a solid understanding of the scope of the project, the stakeholders involved, and any potential obstacles or conflicts that may be anticipated as part of the negotiation process. Knowing as much about the project as possible before entering into negotiations can help professionals prepare for success.
Identifying Your Negotiation Objectives and Limits
Another important step for negotiators before entering into contract meetings is to define clear goals and boundaries ahead of time. Ideally, professionals negotiating development and construction contracts should enter into initial meetings with a solid understanding of what they want to get out of the contract and what terms they will (or will not) agree upon. This is critical not just for achieving successful negotiation with other parties, but for maintaining leverage as well.
Core Elements of Construction Contracts to Negotiate
Professionals in construction and development must be prepared to negotiate various elements of a contract, ranging from the scope and deliverables to payment terms, conditions, deadlines, and more.
Defining Scope and Deliverables Precisely
One of the first and most crucial elements of a construction contract that needs to be negotiated early in the process is the project scope, which includes:
- Specific responsibilities and duties for each team member.
- Terms and conditions of the project's completion.
- Long-term goals and outcomes of the project.
- Specific deliverables.
Defining the scope of the project as clearly as possible is important to help avoid misunderstandings and disputes later on.
Payment Terms and Conditions
In addition to clarifying the scope and deliverables of a construction or development project, it is also essential to include details about payment terms and conditions within the contract. This is where negotiations may become more intense, especially as different stakeholders strive to obtain the most favorable payment structure to suit their needs.
In writing a development and construction contract, professionals must also include specific milestones and contingencies for payment. For example, if 50 percent of a project's total payment will be due up-front, the contract should specify this and contingencies for paying the remaining 50 percent.
Timeline, Milestones, and Deadlines
Including detailed project timelines, major milestones, and specific deadlines for project completion is also a critical part of the contract negotiation process. Without these details in writing, projects can easily fall behind without accountability.
On the other hand, when realistic timelines and key milestones are addressed, this can ensure that all parties involved are aligned on expectations and help keep projects on-track.
Strategies for Effective Communication During Negotiations
When it comes to contract negotiation in construction and development, communication is one of the most important skills to possess. With proper communication, it is possible to keep all stakeholders on the same page while fostering a productive sharing of ideas.
Techniques for Assertive Yet Collaborative Dialogue
Professionals involved in construction contract negotiation must learn to strike a balance between assertive yet collaborative dialogue, which can be easier said than done. Fortunately, there are some techniques that can help professionals reach this balance, including application of emotional intelligence and even the use of nonverbal cues to convey a sense of assertion without being domineering. These kinds of actions can promote assertiveness while still fostering collaboration among stakeholders.
The Role of Active Listening in Reaching Agreements
One of the most important skills for contract negotiators in construction and development, however, is that of active listening. Active listening is a technique that involves giving one's full attention to another person and trying to understand their perspective as much as possible.
Professionals can practice active listening in contract negotiations by going out of their way to ask clarifying questions, entering into negotiation meetings with an open mind, and repeating the speaker's ideas in their own words to ensure understanding.
With active listening at play, it is possible for negotiators to understand the needs and concerns of other parties, which can facilitate better outcomes in return.
Overcoming Common Negotiation Challenges
Despite strong negotiation skills, construction, and development professionals should still expect challenges, particulary when dealing with numerous stakeholders with conflicting needs.
Handling Disagreements and Deadlocks Professionally
In some cases, negotiations can become heated. Professionals need to understand how to recognize when challenging negotiation moments may be approaching and be proactive about resolving conflicts before they arise.
One of the most effective strategies here is to focus on the big picture wants and needs of each stakeholder. From there, negotiation professionals can work to problem-solve creatively and potentially reach an agreement that will satisfy everybody involved.
Adjusting Strategies in Response to New Information
Sometimes, new information or changes may arise during the negotiation process. When this occurs, negotiation professionals must be prepared to adjust their own strategies and maintain a sense of adaptability in their negotiation tactics. Each time a change arises, it is also important for contract negotiators to clarify and explain the change to stakeholders so they are properly informed.
How an M.L.S. Degree Enhances Negotiation Skills
Having strong negotiation skills is a must for professionals working with construction and development contracts. While some negotiation skills can be learned and strengthened organically, many professionals opt to pursue a Master of Legal Studies degree to gain the practical skills they need to navigate complex contracts, understand regulations, and mitigate risks.
Legal Knowledge to Navigate Complex Contracts
For starters, an M.L.S. degree program can provide the legal framework necessary for real estate and construction professionals to understand and negotiate construction contracts. This includes specific details regarding the key components of a construction contract, responsibilities among stakeholders, and what the process of drafting and signing a contract typically entails.
Risk Mitigation Through Understanding Regulations
Similarly, an M.L.S. degree program can equip professionals in the field to identify and mitigate common risks associated with compliance and regulatory issues in construction and development. This may include information on policies surrounding environmental protections and the use of natural resources in property development, as well as issues surrounding housing laws, zoning regulations, and more. All of these are crucial to understand when writing construction and development projects that will effectively mitigate risks.
Practical Negotiation Strategies Learned in an M.L.S. Program
In addition to understanding the complexities of construction contracts and regulatory compliance issues, professionals in an M.L.S. degree program can also learn specific negotiation techniques and frameworks that can be applied directly to their work. This includes strategies for active listening, collaboration, and even the use of communication skills to achieve a successful contract that all parties can agree upon. These are strategies and techniques that professionals in the field can learn in the classroom and then apply directly to their own work in the real world.
Ready to Pursue an M.L.S. Degree?
Working in construction and development requires a strong understanding of the core elements of construction contracts, as well as an ability to overcome common negotiation challenges when drafting a development and construction contract. With these skills and foundational knowledge in place, professionals in the field can be prepared to negotiate with confidence.
Looking to build upon your contract negotiation and other essential skills? It may be time to pursue an online Master of Legal Studies degree from the University of Miami School of Law. This degree program is offered with six tracks to choose from, including one in Real Estate and Construction Law that includes coursework on the various types of construction contacts, express and implied warranties, and much more.
Get in touch to learn more about this program or any other program offered through the University of Miami School of Law. If you're ready to apply, you can get started with an application here.
Sources
https://admissions.law.miami.edu/academics/mls/
https://admissions.law.miami.edu/academics/mls/curriculum/
https://www.dol.gov/agencies/ofccp/faqs/construction-compliance
https://www.legalzoom.com/articles/19-things-every-construction-contract-should-have
