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Difficult conversations

Negotiating a change order price: know your walk-away point

By Review.LivePublished 3 min readHow we write

Your change order request to reroute a sanitary line under the slab went in at $48,600, with full backup. Nine days later the owner's project manager replies with one line: "We can do $31,000. Let us know." The easy move is to split the difference by lunchtime.

Across a meeting table, one person gestures with an open hand while two others hold a marked-up document and a pen.
Photo: Van Tay Media on Unsplash

A price negotiation is often lost before the meeting, when one side knows only its opening number. Preparation rests on three reference points: a target; your best alternative to a negotiated agreement, meaning what you will do if there is no deal; and a walk-away point, the least you will accept, set from that alternative.

  1. Rebuild your price from the backup — direct cost, markup as the contract allows, time — and know which lines are firm and which are estimates.
  2. Set a target that is ambitious but defensible line by line.
  3. Value your alternative if no price is agreed, counting time, cost and risk.
  4. Set your walk-away point from that alternative, approved beforehand by someone with authority.
  5. Estimate the owner's alternative: another contractor, doing without the work, or what a delay would cost them.
  6. Trade on terms, not only price: access, sequence, payment timing, or a unit rate for the uncertain part.
  7. Confirm the agreement in writing the same day, with the scope, price and time it covers.

Talking price

  1. You:Before we talk numbers, can we go through the backup together, so we're looking at the same quantities?
  2. Owner's PM:Your excavation hours look high.
  3. You:They assume hand digging around existing services. If your survey shows they're clear, that line comes down. What else?
  4. Owner's PM:The markup.
  5. You:The markup is the contract rate, so that stays. Where I have room is access. Close that area to your staff for two days and we work days, so the night premium comes out.

Common mistakes

  • Splitting the difference, which rewards whoever opened lowest.
  • Setting the walk-away point during the meeting.
  • Negotiating without authority, then going back for approval.
  • Agreeing the price but not the time, and losing the time later.

Checklist

Ready to negotiate when you have

  • Backup understood line by line
  • A written target
  • Your alternative valued in money and time
  • A walk-away point approved by someone with authority
  • An estimate of the owner's alternative
  • Two or three terms you can trade

Check your understanding

The owner's final offer is $1,000 below your walk-away point. Is it worth taking to keep the relationship?

Show the answer
Only if something you left out of your alternative changes its value, such as future work with this owner. If you counted honestly, the offer is worse than no agreement: thank them and move to the alternative calmly. A walk-away point only protects you if you are willing to use it.

Sources

  1. Negotiation Preparation StrategiesProgram on Negotiation at Harvard Law School · accessed

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