Economic Value of Contracting and Contract Management

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2019-06-10 18:07:51

Effect terms and conditions have on the value of any given

In regards to commercial contracting what are the top 5 language terms and conditions that will effect the margin and or value of a deal?
 •  IACCM  •   2019-06-12 03:19:58
Hi Brian. Liability, indemnity etc are common terms which reflect the inherent deal risk or at least the desire for risk allocation. However, the rubber hits the road when you look at the Statement of Work (SOW) and Service Level Agreements (SLAs). The SOW is where the buyer/supplier either is fully informed about the requirements, roles/ accountabilities, and risks, hence, whether they have to factor in a contingency for risk (which is defined in ISO31000 at 'the effect of uncertainty on outcomes'). The more uncertainty then the more risk and the more contingency the supplier will typically build into the price. Then the SLAs typically attract 10-15% of contract value'service credits' for non-performance (the intent is to reflect the value of the margin). Depending upon how tough or unrealistic these are negotiated will also impact how much contingency the supplier will try to add in to the price. Trust this helps you Brian
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