In a perfect world, a construction project is designed and constructed on time, within budget, and all concerned get what they bargained for. The owner gets the project it desired, and the designers and construction firms and suppliers receive the compensation agreed to, and the satisfaction of practicing their professions and skilled trades. To make this perfect result happen, the various parties make deals. Written contracts will usually spell out the basis for the performance promised and expected by the parties.
Negotiations set the tone of the project and can be frustrating when one party abuses its leverage. Tracy Kidder’s 1985 book House tells the story of the construction of a residential project from pre-design to completion, from the perspectives of the architect, the owners, and the general contractors. Among the many lessons to be learned from this classic book is the warning that winning an aggressive negotiation can mean losing. The owners beat the contractor down on many nickel and dime issues, conveying a lack of trust, and in the process they damaged the spirit of collaboration that is essential to project success. When problems came up later, the contractor was inflexible, and gave only what he had to. Many of the extras in workmanship and finish that might have been thrown in out of good will, didn’t happen.
The lesson is that a party with perceived leverage should not use that leverage to extract unrealistic and oppressive contract terms. What do you do when the other side acts like it never learned that lesson? It is a red flag when the other side will not negotiate—will not even discuss– important terms.
So what do you do? Walk away? Or take a calculated risk?
Walking away, if done well, can be the best decision. A respectful letter to the other side, addressed to a decision maker, thanking him or her for the opportunity to discuss the project, and explaining in a non-whining way the reasons why you needed certain concessions, and your decision not to risk default, will leave the door open for next time. Someone else will get the work, and probably not succeed. You will be remembered as having the integrity and the acumen not to proceed.
Taking a calculated risk cannot be absolutely ruled out, however. It may make sense if you have had experience with the other party and understand how they operate. If the benefit is great, and the risks can be managed with special attention, and the project is within your core-expertise, it is not unreasonable to take a risk even if the contract is not perfect. But be wary of the “planning fallacy.” We tend to be overly optimistic about our plans. We underestimate the time necessary to complete tasks, and we discount unknown factors. When the planning fallacy kicks in, we rationalize that we do not need fair provisions in the contract because there will not be problems.
In the end it may be wise to discipline yourself not to take certain risks—ever. If the other side will not address those issues with you, look for another opportunity.