The Garrison Report #2002-10

How do you sell a change order?

The problem!

Last month a subscriber asked an interesting question: “How do you sell a change order?” After some thought, I’m not sure you can, especially if you rely on typical selling approaches. Why is this true?

1) Change orders tend to be confrontational.

2) People prefer to buy, rather than being sold. The buyer usually perceives change orders as something being forced on them, which creates resistance. When contractors turn in low bids with an expectation of making it up on changes, they are setting themselves for a fight. When contractors blame the drawings for the change order, they stir up more resistance. Whom do you think the architect is going to support after you blame them? With the architect’s support, the buyer now feels justified in denying your extra. In contrast, think how much easier it is to deal with a change initiated by the buyer.

3) People buy things for what they will do for them. In construction, the buyer usually doesn’t perceive that contractor-initiated change orders add any value or benefit to them, so why should they pay for them? When the contractor complains the drawings didn’t show the item and the architect argues any decent contractor should have known it, in essence, they both reinforce the buyer’s belief that it is not his or her problem.

So what’s the solution?

In a word: Preparation! Below are some specific recommendations.

1) Last month’s newsletter emphasized the importance of gaining the customer’s trust through continuous learning, openness, competence and thinking for the long term. The buyer’s trust is an essential ingredient. But openness about the extra, in lieu of defensiveness, wins points. I once was paid an extra when I admitted I made a mistake and left something out of the estimate but said I still thought I should be paid for it. The buyer agreed and paid.

2) Set the customer up for success. Regardless of how uncomfortable it might seem, the contractor must educate buyers to the reality there will be change orders—probably 3 to 5 percent of the total construction costs. When you explain this reality before the project starts, you have greater credibility. This education helps minimize surprises, which is often the biggest reason for difficulty. Further, the contractor should educate the buyer that construction project are prototypes. As such, it is impossible for any architect or contractor to anticipate every item, and trying might cost more than the change orders saved.

3) Change orders aren’t about selling. They should be about delivering a better project to the customer. Too often contractors just demand the extra instead of making an effort to mitigate the problem or explain the change’s benefits to the buyer.

4) A Gallup poll confirmed people attributes are more important than product or even price. Therefore, contractors need to invest in building a quality relationship with their customers because it increases customer satisfaction, which increases buyer loyalty. Effective communication is critical because it makes customers five times more likely to be loyal.

5) Don’t fight over little items. A relationship is like an emotional bank account. Every time you present a change order, you make a withdrawal. What is important to remember is that small change orders can deplete your account quickly because of the emotional toll taken by the “nickel and dime” effect.

The final thought: While nothing can guarantee buyers will welcome your change orders, if you remember to do your homework to minimize contractor generated change orders, educate the customer about them and invest in building a sound relationship, you will reduce the resistance.

 

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