One example sticks in my mind. I’d responded to an RFP on a big paving job at a shopping mall: eight driveways from two main roads into the mall; 14 parking lots; more than two miles of sidewalks; extensive landscaping. Our total bid was $1.7 million.
The project manager, someone I’d worked with before, called me in and said, “Frank, I like your proposal. But we’ve got a problem—your price is way over our budget.”
In my experience, “way over” was relative; it might mean 5 percent or 40 percent. So I asked: “What is your budget, Carson?”
“I can’t tell you exactly, but it’s around 25 percent under your bid.”
I did the quick math: 25 percent was $425,000, which would take me under $1.3 million. “Shoot, Carson, that’s below my cost. I can’t do the job for that, and I don’t see how anyone else will, either.”
And he said, “Well, there’s a couple guys who must be really hungry, because they’re close. I’m not saying they’re the best in SoCal, but they can get the job done. Look, Frank, I’d like to go with you, but I need you to get a lot closer.”
There’s a critical moment in any negotiation, and I’d reached it. Was I angry with the guy on the other side of the table? Not really. What stood between me and a good profit was an impersonal budget. So I began thinking more creatively. Was there a way to help Carson meet his number and still make the job worth my while?
My proposal had met the RFP’s requirements, no more and no less. But now I looked at the scope of work with a more critical eye. Needing more information, I asked Carson why he’d specified 10-foot-wide sidewalks.
“That’s the width at the mall we built last year in Brooklyn.”
I said, “Anything you build in Brooklyn will get loads of foot traffic, but this mall? Everyone’s coming by car. Six-foot sidewalks will save you $50,000 in material costs, right there—that’s a small part of our difference, but let’s keep looking.”
A few minutes later, Carson agreed that the sidewalks could be paved in macadam rather than concrete—another $40,000 saved. Creative conflict gathers its own momentum; over the next hour or so, we found a slew of other tradeoffs. Instead of an elaborate fountain in the middle of the mall, we subbed in shooting waterspouts—a bigger attraction for the kids, and much less expensive. As we hashed things out, I discovered that Carson had a maintenance crew that could handle much of the landscaping, sparing me a pricy subcontractor. We de-scoped that work out of the plans.
And in return for lowering my price a notch, Carson agreed on larger up-front progress payments, saving my company on financing.
We wound up shaving $300,000 in costs, bringing the price down close to budget. Meanwhile, I’d rid myself of some less profitable parts of the job, increasing my margin. We’d managed to capture more value for both parties, the holy grail of negotiating. Our differences successfully drove the creative process. Carson and I were competitors and partners at the same time.
Let’s rewind for a moment. I might have handled our conflict more mechanically. I could have taken the path of least resistance: target the lowest price I could stomach, offer a few grudging concessions, and sprint to the finish line.
Instead, I went the creative route—and that made all the difference.
