Hello, everyone.

This is Enta.

Hi, this is Enta.

"Negotiating contract amounts" is an essential part of daily life in the construction industry.

During a meeting, the general contractor’s representative said, “Hmm, that price is a little high…,” and

This person is wringing their hands, thinking, “If prices drop any further, the company won’t survive!”

I’m sure everyone has experienced situations like that, whether as a general contractor or a subcontractor, right?

 

Why is there such a difference in how the two sides perceive things?

Today, we’ll take a closer look at the background of this issue from the perspectives of both the “prime contractor” and the “subcontractor.”

 

From the Perspective of a General Contractor Representative

First, the general contractor

A sense of money where any amount higher than one’s own take-home pay is considered “high” (the line between what’s “high” and “low”)

The person in charge of managing the site is what you might call a “salaried worker.”

Their salaries are fixed, right? (Although they do fluctuate depending on overtime and other factors.)

I receive a steady monthly salary from my company.

That's why I don't really feel that "profits = my salary."

That's because I get a steady monthly salary, and my entire take-home pay is mine to keep.

All money spent on-site is considered an expense (company money).

The evaluation focuses on cost reduction

My boss is constantly putting pressure on me to "keep costs down."

There is a tendency to view placing an order at even a slightly lower price as “good work.”

 

Their responsibility is to “keep costs down on site.”

So when it comes to negotiating unit prices, I can’t help but keep saying, “Can you lower it a little more?”

In fact, there are quite a few times when I’ll even lie just to get a better deal! *

 

In other words, for the person in charge at the general contractor, protecting “their position and reputation” is the top priority.

That’s exactly why I can’t imagine the circumstances of the subcontractors behind the numbers.

Or rather, I’ve never been in that position, so I don’t know.

 

I used to feel the same way—if the unit price goes up by just 100 yen, the total ends up being 1 million yen!!

A million is an outrageous amount of money!! How many times my salary is that, anyway?!?? I have to cut back!!!

That's what I was thinking, lol (I guess this is normal when you're young)

 

From the Perspective of a Subcontractor's President

On the other hand, from the perspective of a subcontractor’s president, the situation looks completely different.

 

I have too much on my shoulders

Employee salaries, social insurance premiums, loans for vehicles and heavy equipment, material costs, fuel costs… None of these can wait.

Even down to the last yen?! (Actually, it's in 1,000-yen increments.)

Even a slight reduction in profit margins can throw the company’s entire cash flow off balance. (Things tend to get particularly tough on general contractor job sites.)

This is a matter of life and death, especially for small companies.

"We don't take on projects that run at a loss" is our ironclad rule

If a company runs a deficit, it can easily go under. (It doesn't mean it will go under immediately.)

That's why if you compromise during price negotiations, you'll end up shooting yourself in the foot later on.

In other words, for the president, the contract amount is a lifeline that safeguards “the livelihoods of employees” and “the company’s survival.”

Even an amount that the general contractor’s representative might consider a “small figure,”

For the CEO, this figure is likely to be a major factor in determining whether the company goes bankrupt or survives.

(Because where I am today is the result of all those small steps I’ve taken over time)

If we push through with this, the losses from that project will eat into the profits from other projects!

What's more, if we don't take on that project, we won't run a deficit—and there's even a chance we could turn a profit on other projects!?

 

Reasons for Misunderstandings

Even when looking at the same amount of money, the “view” differs because their perspectives are different.

Prime Contractor Representative: "To protect my reputation and position, I want to keep the total cost as low as possible."

Subcontractor President: "To protect the company, I simply can't lower the price any further."

 

As long as this gap exists, it is only natural that friction will inevitably arise during negotiations.

When you find yourself thinking, “Why are they being so reluctant?!” it’s actually just because you both come from different backgrounds.

Real-Life “That Happens All the Time” Moments on the Job”

During a meeting, when the general contractor said, “This amount won’t get approved by upper management,”

The subcontractor protested, saying, “We don’t even get paid for the machine costs!”

When the general contractor cuts costs, it puts undue strain on the job site, which ultimately compromises worker safety and quality.

If a subcontractor takes on a project it can’t handle and ends up operating at a loss, it will lose the financial strength needed to support its next project.

The reality is that these “common on-site experiences” have accumulated over time, leading to the overall exhaustion of subcontractors across the industry.

In the worst-case scenario, I won't work for that company anymore.

It ends up being like, "I'm not going to Mr./Ms. ○○'s worksite!"

 

How can we find a compromise?

There isn't just one solution, but there are some hints.

 

Imagining What Lies Behind the Numbers

The general contractor should try to imagine, “Can we protect the company and our employees with that amount?”

"Won't that cost more?" and so on.

 

Be transparent

The subcontractor must explain “why this unit price is necessary,” along with the basis for equipment and labor costs.

 

Building Collaborative Relationships

We prioritize building relationships that can be sustained over the long term, rather than just meeting short-term targets.
(I think things like this have become less common lately—maybe they don't even exist anymore.)

(*Please refuse—any claims that they’ll return it at the next job site are all lies!)

Just by trying to understand each other's perspectives, we should be able to reduce unnecessary conflicts, right?

The reason negotiations over contract amounts break down is that “even when the amount is the same, people perceive the value differently.”

The representative of the general contractor is protecting his position as a company employee, while the president of the subcontracting firm is safeguarding the survival of his entire company.

Just knowing this structure should help you stay calm and discuss matters rationally during negotiations, without getting emotional.

At the end of the day, it’s “people” who make things happen on the ground.

I think that if we can imagine each other’s perspectives just a little, we might be able to build a better relationship.

 

That said, in the end, the subcontractors end up taking the brunt of it, don't they?

That's the reality, lol.

And then, the general contractor...You must have made a profit this time!!?That's what I ask, lol

This is the worst.

"What exactly are you basing that on?" the subcontractor's boss is thinking to himself, lol.

You'd better not say that.

 

At this site, I do my best to contribute as much as possible.

It's enough just to say that ^^

 

See you later.