Creating and adhering to an approved budget is a core responsibility for project management consulting professionals. Part of your job will frequently be to work with your vendors and providers to get the best cost for the services or hardware your project requires. Becoming a savvy negotiator takes practice, but remembering a few core guidelines will help to quickly boost your negotiation skills.
Know the market
Before you try to finagle the lowest bid in history for the service or equipment you need, it’s important to know what the going market rate is in your area. Why? Because paying significantly below market could be a sign that you’re not getting what you think you’re getting—either in inferior products, inexperienced service providers, or even lackluster warranty coverage—and will end up paying more in the long term to resolve issues, upgrade equipment, or purchase additional parts. Beware, too, the risk you run if you continually expect vendors to submit ultra-low bids: it’s likely the most qualified and experienced vendors will stop bidding on your jobs, and while the remaining vendors may be hungry enough to stick around, you may no longer have access to top-tier providers.
By developing a thorough understanding of the market, you’ll also gain insight into where you can negotiate with the best chance of success. Are raw material costs highly volatile? Is manufacturing the most expensive phase? Can installers in another region be more competitive? Knowing the process from beginning to end will give you significantly more leverage.
Know your resources and limitations
Oftentimes, successful price negotiations are all about knowing exactly what you need, when you need it, and how you need it done. Do you need to pay for expedited shipping, or will a standard lead time meet your target date? Are your needs too complex for the local vendors? If you aren’t able to negotiate a good price, are you stuck paying a premium, or is there someone in-house qualified to do the work? Be careful that you don’t exclude vendors solely because of price, only to discover you have no other options.
Negotiation takes time and effort—when working with providers to get the best price, it’s important to remember that you have timeframes to maintain and other issues to monitor. Once you’ve massaged the bids to your liking, it’s time to pull the trigger and move on. A fair price for the services or equipment you need is the goal, and excessive negotiations could put the rest of your project in jeopardy.
Know what can—and can’t—be negotiated
A number of project items simply aren’t negotiable. Fees for permits, items required by a regulatory agency, specialty disposal services, some insurance costs, and many other expenses are often set by a municipality or government entity, and aren’t open to negotiation. For these items, gathering real-world costs early in the budget cycle is crucial, as you won’t be able to shave anything off them later.
It’s critical that you examine each bid closely when working with these types of costs. If vendors feel they must offer the lowest price to win your business, there’s a chance the less scrupulous among them will omit these fixed costs from their bids. Carefully evaluate each bid to ensure it encompasses all the costs likely to be involved in the project. It’s also your responsibility to know which expenses can be funneled through your vendors, and which must be paid directly by you or, if you’re working for a client, the project’s owner. Again, this applies most often to fees incurred through a municipality or agency with regulatory oversight.