We can work it out: The art of negotiation
What does choosing which film to watch with the better half after dinner, buying a property and dealing with a child who wants a new toy have in common?
They all involve negotiations and by its very nature, negotiating comes with the territory for people working in the construction industry.
For Thomas Ho Kwok-kwan, managing director of cost consultants TLS & Associates, accredited mediator and immediate past chairman of the quantity surveying division of the Hong Kong Institute of Surveyors, negotiating is a key skill to have, even more so in the construction industry when millions of dollars are at stake.
While there are various definitions of negotiation, Ho believes the best definition is as follows: “The process of joint decision making through back and forth communication to resolve opposing interests and reach agreement.”
Ho was delivering a seminar on negotiation earlier this week at the Hong Kong Institute of Surveyors.
Having previously researched the topic of negotiations for a postgraduate dissertation, Ho said there were five different styles of negotiating in the construction industry.
These are collaborating, competing, compromising, accommodating and avoiding.
And key factors influencing which styles are used depend on the stage of the construction process whether it is at pre-contract, tendering or post-contract, how much power a project leader has and the psychological makeup of that leader.
Ho said which person has the most power and hence most influence over negotiations will also depend on the contractual set up between the client and the contractor whether it was a traditional arrangement or other form, and whether it was a civil engineering contract.
Research by Ho in his dissertation revealed that for the most part project leaders, who are mostly male Hong Kong Chinese, would mostly use collaborating style and secondly competing style in negotiations.
Within each style, negotiators have a wide range of tactics on hand, 49 of them to be precise, according to Ho.
These include tactics such as anger, body language, delay and ignorance but Ho said you should think first before using some of them.
“Some of them cannot be used,” he said.
However with over 30 years’ experience in quantity surveying, Ho said there were some tactics that were commonly seen.
- “You will meet negotiations every day,” says Thomas Ho Kwok-kwan as he delivers a continuing professional development seminar on Negotiation Styles of Construction Professionals in Hong Kong to a packed audience at the Surveyors Learning Centre of the Hong Kong Institute of Surveyors on 10 June 2013. (Danny Chung)
Bad guy/good guy was one such tactic where the “bad guy” can be blamed for obstructing agreement.
Ho said the bad guy need not be a person but could be a regulation, contractual clause or a law.
Back channel was another one were superiors are brought in to make progress on negotiations when subordinates get stuck.
In government, this tactic is known as “escalate” and Ho said in such cases, the issue at dispute would rise up through the ranks right up to department head level.
“They have this kind of system,” Ho said.
Setting a deadline was another tactic that civil servants also liked to use especially when the end of the government’s financial year was approaching for a public works contract.
“If you don’t agree, there will be no money,” Ho said of this tactic.
Simply saying nothing or maintaining silence could be useful, according to Ho using the example of a girlfriend staying mum to the consternation of her boyfriend.
“Silence can get the other party to compromise,” Ho said.
Setting a bargaining range was another tactic that Ho said occurred in one case where the contractor had submitted a claim that was 10 times that of what was eventually agreed, with the contractor apparently being very pleased at the end result.
Strawman or talking about things that were not really important can come into its own especially when liquidated damages (LDs) are involved.
Ho said clients could use the threat of imposing liquidated damages to get the contractor to agree especially when the LDs are eventually waived to the relief of the contractor.
Asked by Construction Post for his views on the negotiations between the contractor and MTR Corporation regarding the troubled West Kowloon Terminus North contract of the Express Rail Link project where there have been delays and additional costs incurred, Ho said the contractor would usually have some basis in fact for any claims submitted.
In the past, the MTRC and the Kowloon-Canton Railway Corporation would usually rely on supplementary agreements to settle disputes as these agreements turned the disputes into commercial settlements.
However after a controversy over agreeing a supplementary agreement to communications systems contractor Siemens during the West Rail project, the government has discontinued use of supplementary agreements in favour of simply doing commercial settlements, Ho said.