Contract Negotiation for Architects

The Architect’s Essentials of Contract Negotiation by Ava J. Abramowitz has been sitting on my bookshelf since it was required reading in Professional Practice class in college.  Having never read it in entirety, I recently decided to give it the attention this subject deserves.  Contracts and contract fees are critical components of any design business.  Here are some of the notes I’m taking away from Abramowitz’s book.
 

Introduction
Ava Abramowitz is a highly regarded attorney in the world of construction law.  She was once the Deputy General Counsel to the American Institute of Architects.  Read her complete bio here.  This book identifies several concepts and underlying habits of good negotiation that should be engrained in one’s strategies for developing successful contracts.  Here are just a few of the concepts discussed.

Assertive Practice
Abramowitz refers to the issue that architect’s always have unforeseen and unfair circumstances thrown at them in a competitive market.  Basically, assertive practitioners don’t whine; they move past huge problems and reposition their projects for successful outcomes.  Complaints usually relate to the perceived value of architectural services.  Abramowitz notes that what society actually values are the people who provide the value.  Assertive practitioners increase their own value by taking on reasonable risks and managing them responsibly.

Front-End Alignment
Thoroughly understand your client.  The architect should know these aspects of his/her client.

• Their history with architecture
• Their management structure
• Their attitude
• Their value system and idea of good design
• Their reputation in the business world and the community
• Their reputation with dispute resolution
• Their chemistry

Contracts and Torts
These are the two legal theories under which architects can be sued.  Contract law makes commercial life predictable; it allows us to buy a product or service safely from a stranger.  Tort law makes daily life predictable.  Tort law requires each and every person over the age of seven ‘to act as a reasonable, prudent person would act, facing the same or similar facts and circumstances.’  Tort law sets a standard of care for everyone.  Under tort law a Contractor cannot sue an architect.  The architect’s sole responsibility is to the Owner.  As of this 2001 text, Abramowitz notes that a growing minority of courts combine contract law and tort law to create the new theory of economic damages or contort.  These courts take the stance that construction is an interdependent process and each party owes the other reasonable prudence and care.

Standard of Care

“If being reasonable and prudent is the standard of care for each of us as ordinary citizens, what exactly is the standard of care for architects?[...}  Architects, like all professionals, are held to the professional standard of care, which means that they must act as other reasonably prudent professional architects would act facing the same or similar circumstances.”

The Purpose of Contracts

• Make the progress of the job predictable
• Help parties achieve strategic objectives
• Set realistic expectations
• Assign exposure to the party in best position to manage the risk
• Provide framework for future negotiations
• Solidify working relationships moving forward
• Create a private law between two parties

Four Key Concepts. Upon deeply understanding these concepts, negotiations can move beyond you vs. me conversations and negotiate ‘what’s best for the project?’

• Exposure: The more knowledge you have about the risk, the less risky the exposure.
• Capability: Once you have one type of experience or project type under your belt, the next time will be less risky.
• Responsibility: Once you have analyzed the exposure and assessed your capabilities, you must decide if you want to take on the responsibility of managing the exposure.  The responsibilities you cannot take on might be assigned to consultants.
• Power: 2 components of power
  • You will need the authority to lead others (i.e. the authority to require an engineer’s drawings on a certain day).
  • Fee.  Beyond compensation, the fee is fuel to deliver projects successfully.

Negotiation

• Soft Negotiators: negotiate as if both parties are friends.  The soft negotiator tries to accept demands for concession in an effort always ensure an agreement.
• Hard Negotiation:  views participants as adversaries.  They want to win, even if winning means an unworkable agreement.
• Principled Negotiation:  Developed in the 70’s by the Harvard Negotiation Project based on research.  As opposed to hard or soft, you can negotiate on merits.  Instead of seeing others as friends or adversaries, Principled Negotiators see others as joint problem solvers.  It urges parties to seek out objective standards when they get stuck.
  • Know your interests clearly; and strive to clearly understand the client’s problem.
  • Develop options for mutual gain.

Preparation
Average negotiators spend preparation time concentrating on their own weaknesses.  Expert negotiators spend preparation time focusing on the issues.  Experts seek out other’s interests and strategize options for building common ground.  The noted research also identifies that expert negotiators focus twice as many questions on long-term considerations than average negotiators do.

Fees
When negotiating fees, you’re not asking for an allowance, you’re asking for the ‘grease’ to complete the project without friction.  If it’s thought that your fees are too high, you should be able to clearly explain how you arrived at them.  If you need to decrease you fees, take yourself out of the negotiation.. ask how the scope might be reduced or how you might reassign certain exposures to someone else.

3 Classes of Communication
Any meeting attempting to resolve a problem has to contain the following types of communication: Initiating (presenting idea initially), Reacting (others have to accept or reject) and Clarifying (questions).  Just like project meetings, successful negotiations require that all these communication classes are present and balanced in their use.

2 Persuasion Styles: Pushing and Pulling
Pushing: (Forceful) “We should do it this way…”
Pulling: (Involves Persuasive Questions) “What is important to you? What kind of evidence would make you choose one approach over the other?”
Both approaches have their uses.  Pushing works best when a quick decision is called for.  Pulling works best when a long-term, high stakes commitment is involved.

Conclusion
There is much more useful information in this book than I have summarized here.  Give it a read if you’re interested in more detailed descriptions of these concepts.  Please share any other resources on this topic in the comments below.