Same number of bids. More wins. (Part 5 of 6)

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For most of my time as a VP of Preconstruction & Sales for a specialty subcontractor, I never considered how a GC’s Agreement with the owner might change how we bid and win projects. In my mind, it didn’t matter! Build relationships, be low (or close to it) on bid day, and hope the GC isn’t a jerk. That’s what I knew. And it honestly worked well enough to win some great and profitable Contracts. But it always seemed like way too much work—a 10%-20% win rate just isn’t enough! 

Then, I learned that the GC’s agreement with the owner matters a lot, and in fact, subcontractors can gain a competitive advantage by being smart about it—especially because most subcontractors are like I was: clueless! After that, while other subs were out there bidding every job the same and treating every client the same, I started treating each project and client in a unique way depending on their agreement with the owner. It made everything about the bidding, sales, and preconstruction processes so much simpler. 

Over the next 6 weeks, I will give you a clear understanding of 6 common delivery methods used in the construction industry, and some really good tools to get smarter in how you approach each of them. Today is about Method #5: Negotiated Greatest Maximum Price (GMP) 

In this series, I hope to help you subcontractors who want to increase your win rate. I also want to help general contractors understand what their subcontractors go through when pursuing a project.  

Please note that there is increasingly very little difference between the terms GC (General Contractor) and CM (Construction Manager). As a result, I use the terms interchangeably throughout the below. Let’s dive in. 

Method #5: Negotiated GMP 

What it means:  

GMP means the same as above. The key difference in this method is the word negotiated—possibly the sweetest word in all of construction. Negotiated projects are typically awarded to a GC/CM based on relationship + price rather than simply price. The owner does not invite multiple GCs to bid, but instead invites a specific GC who they love to work with.  

How it works: 

The owner and GC will work together to get to the best possible GMP. And because the owner understands the value of having a trusted contractor-partner (why else would they negotiate with one?), they usually have a better understanding of why the GC may have preferred subcontractors that are not the low bidder, but will bring the most value to the project. This is a high-trust relationship. Everything else works the same as in the competitive GMP scenario—open books, input on subcontractor selection, understanding of GC fee, etc. 

Why it’s used: 

This is often used because the owner and GC have an aligned philosophical belief that projects are built by humans, and humans that know and trust each other are much more effective at their jobs. So, instead of making everyone get low all the time, the owner trusts the GC to act responsibly and with their best interests at heart. It’s a big choice to go negotiated. 

What you need to know: 

In our professional opinion, as a subcontractor, this is one of the best places you can be in the market: working for CMs who negotiate a majority of their work. If your clients are negotiating with their owners, then you should be spending a lot of time building relationships with them. Show them that you are truly better than your competition. Give them compelling reasons to set you up with a similar negotiated relationship. Treat them even better than you treat your other clients. 

One way you can do that is to pull out all the stops during preconstruction: budget every round, give awesome constructibility feedback, propose cost-saving VE options, etc. It’s worth it because you’ll be rewarded for it come bid day. Just make sure you confirm that you’ll be rewarded for it first. In other words, just because the GC is negotiating with the owner doesn’t mean you’re negotiating with the GC! Get the rules of your partnership clear before you expend resources that aren’t getting a return on their investment. 

If you want to thrive in this environment, you must have an extremely well defined sales system in place. One where you walk clients down the path to partnership and it ends with them naturally wanting to negotiate work with you. If you don’t have this, stop before you do anything else. We have helped hundreds of subcontractors install custom sales processes into their businesses to the tune of hundreds of millions in awarded Contracts. So, if you need help, reach out to me mverderamo@wellbuiltconsulting.com to discuss. 

Key question to ask yourself: How are we going to be so much better and different from our competition that we will be turning away clients who want to negotiate with us? 

The Great Ones Have Coaches 

The owner of one of our general contractor clients once said to me (we are both huge Baltimore Ravens fans): “Lamar Jackson didn’t get a $250M Contract by going at it alone. He has coaches for almost every part of his game. That’s the same reason I wanted to hire you guys.” 

And he’s right! Hiring a coach or a consultant is something all the great athletes do to up their game, yet business owners are often hesitant to do the same! (Imagine trying to play tennis against Roger Federer without ever going to a coaching lesson) 

So, if you’re reading the above and wondering: 

• How do we become sophisticated like the top Contractors out there? 

• How do we set a strategy for the type of company we want to be? 

• How do we set a strategy for the type of work we want to chase? 

• How do we create a sales process that increases our hit rate? 

• How do we make our operations truly better and different? 

Then I hope you’ll reach out to us. Our consultants and coaches have hundreds of years of construction experience and are well-suited to help you make the kind of changes you are looking to make. If you’re ready to talk, then email me at mverderamo@wellbuiltconsulting.com 

Good luck, and happy growing. 

Spark Notes:

• Negotiated GMP is all about trust—unlike competitive bidding, the owner hand-picks a GC they have a strong relationship with, and together they agree on a fair, open-book GMP that prioritizes value over just the lowest price.

• As a subcontractor, this is prime territory—when your GC is negotiating with the owner, your job is to prove you’re the kind of partner worth negotiating with too (and yes, that starts in precon).

• But don’t assume you’re in a negotiated deal just because the GC is—set clear expectations upfront so you’re not burning time and resources without a return.

• If you want to build a business that thrives in negotiated environments, you need a sales system that walks clients to partnership—because the great ones don’t win alone, they have coaches.