You run a construction firm with unique capabilities. An architecture firm you have worked for in the past is working on a proposal for a new building that could earn them huge profits. They are considering one of two unique design concepts that either
exploit your capabilities or those of another contractor with a different set of capabilities. They contact you to determine if you could actually get the job done and to get a quote to be included in their bid. The client makes a few changes that will have a small impact on your operations but awards the contract to the architect's plan that includes you. How does the awarding of the contract with changes affect how much your final fee for your services?
You know the architect is going to earn huge profits and you would like to get a piece of this action. However, before submitting your quote, you are competing with another contractor and so you cannot set a high quote. Once the architect is awarded the contract that includes your quote, he now is tied to your capabilities. His committing to use your firm represents a relationship-specific investment that would be costly for him to get out of – a sunk cost. He is vulnerable to hold up from you. If you can find an excuse to inflate your original quote, you can earn much more. The changes that the client wants to make might provide the opportunity for you to do this. The contract was for specific services and now the services have changed. If the architect was not thinking ahead, you negotiate anew because he is not accepting the specific quote you tendered. If the architect was thinking ahead, the quote would have enough flexibility to address any changes in a reasonable manner. But no contract is perfect and it is unclear what "reasonable additional charges" are. It is possible that you can exploit this language to seriously inflate your reimbursement due to these additional changes.
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