Best Practices for Cutting Through Contract Chaos
Published: 31 Jul 2019
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Author: Jason Cammorata, Peggy Barber, Michaela Dempsey
Contract processes can be overwhelming, with different contract versions floating through emails, renewal dates approaching by surprise, and opaque approval bottlenecks slowing down workflows. Cut through contract chaos with Scout RFP.
This is an interactive discussion about the world of contract management with Scout customer MDC Partners. In this webinar hosted by IACCM, you hear from Jason Cammorata, Vice President of Strategic Sourcing, about how MDC Partners is streamlining their contract process (including reviews, renewals, and more), what they are achieving by transforming this process, and the lessons they're learning along the way.
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• Ngamuru Advisory
•
2019-06-15 23:42:10
In terms of the 8 different payment schemes I was specifically referring to what we call 'payment curves' (see attached graphic) as opposed to payment regimes such as cost+ (time and material), fixed price, cost + fixed fee, etc. In this light these are grouped into 5 main families with a couple of variations inside each. These are as follows:
- 'all or none' payment curves
- Linear payment curves
- Non-linear payment curves
- Alternative payment such as demerit point and visual payment curves
- Matrix payment curves
The intent of this discussion is to simply highlight that the choice of payment curve, similar to the choice of performance measure and level, can have a significant impact on the success (or otherwise) of the overall performance management framework. My blog (www.performancebasedcontracting.com) has 3 posts specifically on this topic including the graphics.
I hope this helps and answers your questions. However, please let me know if you have any further questions.
Replies: 1

• Allianz Technology
•
2019-01-10 08:45:28
Hi,
I'm just trying to understand your position.
Considering that you are managing all contractual relationship with another company (buy and sell side) sounds actually good from your company perspective. It would mean, that your leadership can expect you to have a full overview about the contractually back and forth with this JF. Therefore I assume it's hard to change the mind of your leadership, since I would expect them to see your doublerole as positive.
However on the other side, there is your personal position, meaning being something in the middle of a sandwich, right? I'm not sure about your empowerment, but in worst case you have also very limited authority to change some company rules (discounts, penalties, payment conditions, acceptance criteria etc.). And on buy side you usually have different contractual expectation than on sell side. I assume, this is the tricky part in your situation. Fulfilling the internal requirements for buy- and sell side with the same contractual partner at the same time (and maybe also your partner asks you if you are a bit crazy, since requesting sooo different contracts when you are either on sell side or on buy side).
When the conditions your company expect in contracts are very different on sell side and buy side, this should be communicated as an issue (to your leadership). I think there are 2 options as solution: either the requested second CM as you suggest, or an escalation to the leadership to align clear buy and sell conditions between your company and the JF, which are equal to both parties. such framework conditions would make at least your position more clear. And maybe there won't be anymore need of a split of the CM roles buy side and sell side?
Since I couldn't find many information in your post, I hope, this is somehow helpful?
If your uncomfortable position has other reasons, please let me know.
BR
Kristin

• Omaha Public Power District
•
2019-01-21 20:58:03
I probably would start collecting facts: Firstly, establish the relationship between Your Company ("Y Company") and Company X ("X Company") by looking at any specific, written agreement about the services ("X and Y Services"). Also, establish clarity around (1) Y Company's services to be provided to X Company, and (2) X Company's services to be provided to Y Company. At this point, are there any conflicts that you can see/anticipate in your ability as the Contract Manager during the provision of X and Y Services, that perhaps could result in non-performance or non-compliance? Also, how do you escalate and cure any issues of non-performance (for example)? Secondly, I would review the files documenting any legal review, if any, prior to said agreement being reviewed for signature/execution. Were there any concerns that were raised and eventually resolved (internally)? AT the very least, you could start with the resource allocation -- that is, regarding your time management and how to better allocate your skills - in developing your case. Hope this helps. Regards ~ Rose

• CoreLogic
•
2019-05-17 09:01:17
Its an interesting role and I recommend your decision to bring in another manager to take one of the contracts.
I would recommend to present this as two different roles:
On the buy side - Contract Manager would play role of a customer and to manage Company X, need to drive and establish Vendor Management Discipline around Contract Administration / Governance / Service Performance / Financial Management / Risk and Compliance
On the sell side - Contract Manager would play role of an engagement partner to drive business relationship / Value addition to Company X/ increase revenue generation from Company X to your company / Joint go-to-market strategy if possible.
Regards,
Dave
Replies: 3

• IACCM
•
2018-12-07 15:30:57
Interesting point, Michelle.
I´d strongly encourage you to raise this question also within the IACCM technology network, which is a micro-community, where you will be able to get insights to new trends in this specific field and where I am sure you´ll have the opportunity to share ideas regarding the topic you have brought:
www.iaccm.com/gp/technology
Also, please check our library: www.iaccm.com/resources/
where, you will find some articles about 'escrow agreements' for the software arena and other topics associated with risk management in the hardware world as well. By analogy you will explore ideas regarding hardware coming from best practices and escrow programs with the goal of risk mitigation
www.iaccm.com/resources/;
Best regards
Pablo

•
2018-12-29 21:07:59
Hi Michelle - saw your post. For hardware: having a refresh plan with your supplier following a bit of a mutual benchmark, to see how best to provision for your upcoming capacity needs, might give some assurance. For services or subscriptions-based tech: having a documented 'cookbook' of key players and tech needed to recreate the service, including a list of any solutions 'not commercially available' or not easily re-purchased in Canada updated, might also be helpful to gage the difficulty of transitioning off your current tech,if needs be.
Those two governance-type processes, along with the typical supplier obligation to reasonably cooperate with any successor and to provide some mutually-agreed orderly termination assistance, might serve you well (outside escrow for software). Hope that offers some ideas...good luck. Cheers, Robin
Replies: 2

• ConocoPhillips
•
2018-10-03 10:55:30
I do not think there are any legal roadblock to do so, if the parties agree to make the amendment that should be it.
Replies: 1
Anonymous
2018-01-06 22:53:15
Exception on a NDA
Hi everyone,
I have, like Vladimir Koval, a question regarding the Non- Disclosure Agreement.
Imagine the following situation: you have to issue a standardized Non-...
Hi everyone,
I have, like Vladimir Koval, a question regarding the Non- Disclosure Agreement.
Imagine the following situation: you have to issue a standardized Non-Disclosure Agreement to your suppliers, that ultimately your Client will review (and he expect that all documents will look the same). However, some suppliers would be keen on modifying clauses, in order to preserve their own company's interest, which as mentioned could be an issue to your Client at the end, as he is expecting a unique document.
I was therefore wondering when working with multiple suppliers, if the terms of an NDA can me modified for some of them or standardization in this case is the norm.
thanks for any thoughts. I hope I am clear.
Mathieu

• Freeport LNG
•
2018-01-08 15:33:22
Mathieu,
While standardization may be a noble ambition, achieving it is usually quite difficult. You can improve your odds through the use of mutual NDAs that protect the confidential information of both parties and by having fair and balanced agreements, but expecting all suppliers to sign them as-is may be expecting too much.
Your role is to understand their requested changes and to determine the impact to your company and whether the changes are acceptable, and to advise your internal client accordingly.
Hope that helps. Sincere regards.

• CommonAccord.org
•
2018-01-14 10:29:18
Consider whether you might be able to use a "standard" and have each negotiated difference stand out as a specific change. There are a number of ways to do this. The most systematic would be to use a master and generate each of the documents from the master, with a patch for the differences. That's possible in a number of technologies. A broad example is shown here: www.commonaccord.org/index.php

• Tata Communications
•
2018-02-22 04:33:24
Hi Vladimir,
We have standard NDA template and additional clauses in the clause library if the vendor pushes for Mutual NDA. This helps build the agility in NDA execution. My experience says that we are able to push 80% cases on standard NDA template and the balance needs engagement.

•
2018-03-27 17:30:53
If a NDA is well drafted, clear, fair and equitable then it should be signed without issue.
If the client has specific requirements that are reasonable and equitable they should be acceptable to all parties.
If there is an element of inequity or unreasonableness then expect suppliers to push back. The simplest test is "would I sign this on behalf of my organisation": if not, then why expect the other party to sign?
What could be up for discussion: whether the NDA is one-way or mutual? what law and jurisdiction apply? the length/duration of the NDA and of any surviving obligations? whether personal NDAs/statements are required?
I would have concerns if I have received unacceptable terms in an NDA - it wouldn't bode well for any subsequent contract discussions negotiations.

• Health Quest
•
2018-07-12 21:57:19
In my organization we use a Mutual Non-Disclosure and Confidentiality Agreement. I can see where there may be a need for specifics to be outlines, and in that event, I would consider an addendum as a sufficient protocol. The addendum can include the customer specifics that would otherwise present as "sticking points" that tie up getting the project off the ground.
Replies: 5

• CGI
•
2018-06-04 21:09:37
Hi Stuart,
I suppose that this has been resolved in the meantime, however, I wanted to share My view. Your idea About a review after 3 months, or even 6 or 12 months, is quite common and would be My advice. Typically, KPIs have some specifics depending on the Environment, hence a review and Adjustment after somee time would be beneficial for both, the customer and the supplier.
Maybe, if you read this, can you share how this was finally approached and resolved?
Volker

• CAE
•
2018-07-09 05:52:40
Hi Stuart,
Clearly a lot of advice and this may get lost in the deluge. In contracts I negotiate we always a Performance Implementation Period (PIP) with the agreed aims (between the parties) of determining whether the KPIs are:
a. driving the desired behaviour,
b. measuring the the actual outcomes, and
c. are fair for both parties.
We would normally request 6 months, but this depends upon the length of the contract.
Remember that it is not in the client's interest for you to go bust.
Two things I always work towards:
1. Both you and the client have the same goal - a needed product. Both of you want the program to succeed.
2. KPIs should be output focussed - what is the client needs in the end. No more than 2 -3 KPIs.
Introduce System Health Indicates (SHI) as a tool to measure the detail.
Hope this helps
JonCB

•
2017-07-11 04:58:47
Stuart - I am not sure a UAT (assuming this is User Acceptance Test) would fully ensure the KPI's are ideal, as the UAT could potentially only assess whether there will be compliance to sub-optimal KPI's, leading to a sense of reasonableness but not necessarily effectiveness.
So, the ideal approach really needs to rely on a process. If you do not have an end-to-end contracting process the KPI's will usually prove problematic.
Early in the process, before ever approaching the contractor/supplier market, the customer entity needs to identify the overall objectives and goals from the project and related transaction - both from a relationship and contract document perspective. For example, one might identify risk mitigation, or cost leadership, or perhaps cyber-security as the key purpose and objective. Then the customer enterprise must identify the sub-objectives that enable the broader purpose. This all needs to be performed as a team, include those who will be leading the post-award phase. The KPI's need to then be included in the RFx/tender documents, as well as negotiated.
But, it sounds like you do not have the ability to take this steps now. The option that you suggest of a three-month trial period represents a potential solution. Plus, the three months might afford you time to undertake some of the above steps as well.

• Tullow Oil plc
•
2017-07-12 19:06:19
Hi Stuart, just a few of thoughts building on the below - They may not commit to any change of the KPIs as these are often standard for all customers - the below are just observations around the theme that may or may not be useful, and their strength will depend on what the software does, how much you've spent on it, how core to your business is etc.:
1) They'll be most open to discussions when annual maintenance renewal time comes around, as that's when there's normally money on the line - so if the user community can be corralled into speaking with one voice, they could be a powerful ally in helping review whether the KPI's are useful in the first place and then challenging those that aren't
2) Also consider whether there are other potential purchases or expansions into your business - the person who originally sold you the software will probably have some sort of target to sell you more (even if via an audit...), so if it turns out that you can use the opportunity of future sales to sharpen up their performance then that might help
3) My cynicism is that a number of vendors will deliberately sell software that hasn't been fully tested, and then their customers essentially complete the testing through raising support tickets and the supplier improving the software through trial and error. See if the supplier has a user support community where you can compare the number of tickets you're raising vs. others, and whether root causes of any issues that arise are training or software-based
4) Maybe compare the functional specification with performance in reality - given that vendors typically warrant that the software will perform with the documentation, the argument most likely to drive change is more likely to be whether the system isn't performing against spec rather than they're missing KPIs
Hope this is in some way helpful, let me know if there are aspects you'd like to follow up on.
Stephen

• Toyota Material Handling USA
•
2017-07-19 16:42:01
Stuart, Agree completely with other's comments/ideas posted. Really think the key will be in communicating and documenting your overal objective. It doesn't sound as if you are certain that a clear overall objective has been communicated to your software provider,. If that i truly the case, would get to work on detailing it as soon as possible (at the time of the RFP would be best). Be prepared to have a conversation with the software provider after you're comfortable that the overall objective is clear. It may be that an amendment to the agreement will be needed.
Would also consider creating a process for determining your overal objective prior to your next RFP going out. For example, create a cheat sheet of gemeral key topics to be covered; legal entities to the agreement, key contacts, pricing, payment terms, purpose of the agreement, etc. Find that when a process has been defined and I follow the process everytime, there are fewer of those UhOh moments.

• Kainga Ora-Homes and Communities
•
2017-07-20 22:07:27
Hi Stuart, All great comments to consider. having been in exactly the same position 1 year ago, these were some of the key lessons learnt.
1) Keep it simple - don't unnecessarily overcomplicate it.
2) Inputs or outputs based KPI's
3) What is your customer's / business key requirements - requires alignment
4) What's more important the KPI's or SLA's (there is a difference)
5) determine if the urgency to get the agreement signed outweighs the importance of fully developing the KPI's/SLAs.
While we don't have the full details, your proposed solution to this can be a way forward and can have teeth; provided you clearly articulate the review criteria in the agreement. But as mentioned before, vendors typically have standard SLA/KPI's and anything bespoke usually costs a premium especially after the fact. So I would urge you depending on the importance of this implementation and the impact on the business, to resolve this before you sign.

• Taystar Inc.
•
2017-07-28 14:57:24
Hi Stuart,
Perhaps this has resolved itself already, but perhaps consider looking at the 10 Pitfalls in the IACCM resources and working WITH the Contractor to identify (perhaps 5) KPIs that relate to the work being undertaken in the first calendar year. Then evolve those based on experience/needed improvements.
It is essential that measurement criteria be established and agreed up-front (documented in a Guide signed by both parties) and that measurement timelines are adhered to. Have experience with payouts against a x% holdback on a periodic basis based on a sliding scale scoring of measurement criteria - (significantly below expectation = full retention of holdback by Owner, significantly above expectation = 1.5 x holdback paid out, on par with expectations = holdback paid out.)
At least agree that some form of Perf Measurement will be undertaken (jointly developed) at the time of signing the contract. Implementation can follow asap thereafter.

• Academy Sports + Outdoors
•
2017-07-31 16:36:23
What about asking for some reference customers and reaching out to them?
Replies: 8

• IACCM
•
2016-06-01 19:58:11
Carolyn, while we wait for someone else from our community to share with us their "best practices" identified in regards to this point, I wanted to provide this link www.iaccm.com/resources/; where, as you will se, it is covered the matter related to the drafting of enforceable teaming agreements.
Regards
Pablo Cilotta

• Metropolitan Police
•
2016-06-02 05:17:50
I have gone through the process of ensuring flow down of terms from prime contracts to subcontracts and understand your feelings. It is laborious. The contracts that I managed had 'mandatory' clauses to be included in the sub-contracts; hence it was somewhat easy to navigate through. We also put in place a simple tracker listing all the clauses and if the sub-contract had complied with the mandatory term flow-down. We referred the matter to the legal team if there was any discrepancy. What I found was that once I completed verification of a sub-contract, other sub-contracts for the same prime contractor was easier to go through.
You could categorise your sub-contract into high (significant),medium and low groups and could vary the mandatory clauses for flow-down as appropriate.

• Kainga Ora-Homes and Communities
•
2016-06-02 06:20:13
Interesting situation, I may be misunderstanding things here...and correct me if I'm wrong, but typically the point of having a Prime is to "manage" subcontractors and they should negotiate back to back agreements that adequately ensure that as a Prime they can fulfill their obligations...it should also reflect the spirit and intent of the agreement...happy to explore this further.

• Metropolitan Police
•
2016-06-02 07:12:40
Hi MC - Agree with you that purpose of the Prime is to "manage" subcontractors... In central Government (not sure if this is required in private sector) sector contracts, it is necessary to ensure that there is a flow-down of the terms to sub-contracts. For example the 'Data Protection' Clause. My response was in this context. The IACCM link given above is a good reference.

• Longsword Solutions Limited
•
2016-06-02 07:59:20
My current approach is to have the subcontractor "aware of" the whole contract (coupled to an indemnity if they cause us to be in breach - if I can get it!)
I then add a detailed flow-down of (i) the mandated flowdowns from client - usually things like anti-corruption and audit and (ii) the terms which are essential for us to ensure that the commercial risks are back-to-back - eg. the specific standard of workmanship that the subcontractor must exercise in their design.
Generally speaking this means 5-6 flowdown clauses, for which I either amend terminology by hand or rely on "mutatis mutandis" if I'm short of time.
For 'awareness of the whole' I think the donor clause was from the CECA Blue Book.

• Accenture
•
2016-06-07 15:38:27
Hi Carolyn,
I have also drafted some subcontracts in which I had to ensure that the subcontractor had the same commitment that the prime; as Girija stands, it is very laborious since you need to understand which of the obligations within the prime contract are transferable to the corresponding subco and also you have to modify the wording. I would never attached the entire agreement because of confidentiality concerns and also because usually prime contractors do not wish to share financial details with subcos in order to seek a more profitable negotiation with them.
Bon courage!
Elena

• Confidential
•
2016-06-09 09:24:57
Elena,
You bring up an interesting point. You as the contractor and the owner do not want to share the details of the contract, but want to subs to agree to them. Doesn't that seem unreasonable? I will never agree to something I have not seen. I do get copies where some details are redacted and that is fine, but the text has to be reviewed in order to be agreed to. I would be interested to hear your rebuttal as the contractor in this case when I say I have to see the prime to agree to it.
Kent

• Kainga Ora-Homes and Communities
•
2016-06-09 17:10:55
Some great discussion point coming through - A recent experience - last month our prime contractor needed to conduct a MRO work package at a location controlled by another party (Subcontractor). As the Prime, they commenced negotiation; however this subcontractor only provided 3 months warranty on their work while our agreement with the prime had a twelve month warranty. The prime formally requested dispensation from the twelve warranty and was rejected due to the following reasons:
1) It is the primes obligation to ensure the test and acceptance of standards and quality of the work
2) The prime included in their financial model, an element of risk which they would absorb based on their contractual obligation.
Part the above negotiation included some issues around IP ownership during the work package being conducted. In this instance we accepted the deviation from the standard IP clauses as we deemed the subcontractor clauses to be reasonable as it didn't affect the operation and future requirements to maintain the vessel.
So while the prime is ultimately responsible for the deliverables, we needed to assess on a case by case situation if any deviations were acceptable...and also had to be careful that we don't set a precedence.

• Lendlease
•
2016-06-19 17:24:04
In my experience the Prime Contract is the negotiated version which your company's legal eagles would have negotiated with your client so it would certainly contain more stringent clauses than your company's boiler plates. Usually once the prime contact is negotiated the necessary amendments are made to the the boiler plates to align them with the prime contract. The flow downs are usually attached as "Special conditions" of contract and they take precedence over the 'General Conditions' of contract due to the fact that the GCC are usually amended under SCC and the more stringent approach is adopted. this eliminates any misalignment between the two forms. e.g. 'Limits of Liabilities', 'Indemnification' and 'Insurances' are mostly dictated by Client and the risk must be transferred down to the lower level to protect your company's interest.
Cheers
Asif

• New Zealand Defence Industry Association (NZDIA)
•
2016-06-19 18:20:34
Hi
Australia is about to introduce new legislation about unfair contract terms with SMEs. This is going to make it harder for Primes to push terms down for fear of being void. Hopefully this will start new discussions about getting rid of clauses which are unfair!

• Pretorius Consulting
•
2016-06-20 01:39:53
1. Always remember that if you miss a Clause, it's not the end of the
world, because, as Contractor, you will always be responsible for the
delivery of your contract, regardless of who you choose as your
subcontractor.
2. Check your subcontract template. If your subcontract template and your
Contract and Procurement Principles match, then the Prime Contract
negotiated between you and the Client is much easier to flow down.
3. Semantics. Don't get caught up in the details of the Clause having to be
an exact copy of what you have in your Prime Contract. If it says the
same thing, then it doesn't matter if you use different words or the
words are in a different order.
4. Remember that you are a buffer between you and your subcontractor. As a
company, you do not want the Client getting into your business.
5. The top 8 flow downs (no particular order):
a. Warranty duration
b. Exclusion Clauses
c. Indemnities including pollution
d. Confidentiality
e. Insurance
f. Intellectual Property
g. Benefit Clauses such as paid suspension
h. Days, remember to allow for internal processing as well as Client
processing
There will always be exceptions but number 3 is where most people fail, including the Client.
Don't use the back to back Method unless there are high risks, high value and/or Client appointed Subcontractors and if you plan on using this Method, take that subcontractor's qualifications with you from day one. In addition you need to develop a standard template for Form of Agreement and Exhibits because it isn't possible to just blindly throw your contract at a subcontractor, they are a Third party, and it just doesn't work without some modifications to the Prime Contract.

• Rider Levett & Bucknall
•
2016-09-02 20:27:36
Hi Carolyn. Depending on cooperation levels of your prospective subcontractor / subconsultant, you can 'seal the deal' with an RFP document and a Letter of Acceptance. If you give me your email address, I can send you a template document I created for implementing back-to-back subcontracts to a prime FIDIC contract.
Replies: 12
Occidental Petroleum Corporation
2019-02-12 17:17:02
Cloud Contracting
I am interested in perspectives on various issues and contracting approaches for the use of cloud services, particularly from niche providers who may, in-turn, actuall...
I am interested in perspectives on various issues and contracting approaches for the use of cloud services, particularly from niche providers who may, in-turn, actually have their applications hosted on a third-party provider like Microsoft, Amazon, Rackspace, etc. I'm looking for perspectives on the entire gambit of issues, including - protection measures used for data at-rest and in-transit; protection of video and images; right of return of all data upon request of customer; obligations of the supplier to delete data when no longer needed (either during the course of performing the services or upon termination of the services and return of the data to the customer); background checks on employees who may have access to the data; monitoring of access by all supplier personnel; business terms like fluctuations in the use of the service (bandwidth, storage space, processing capabilities); right to move the data to different locations in the same country; right to move data to a different country for processing and/or storage; obligations to notify in the case of suspected or actual breach/compromise of data.

• AusNet Services
•
2019-02-28 18:18:23
Hi Mark, Happy to discuss. Send me an email via marie.cullen@medibank.com.au and I can talk about the principles I use.
In my view I don't believe, as a community, we have fully bottomed out all the risks associated with these types of engagement.
M

• Nokia Solutions and Networks Australia Limited
•
2019-06-04 05:22:18
Hi Mark
For a very good, concise review of the principles and issues of cloud agreements generally, covering most of your points above (my view anyway), you might also check out David W. Tollen's book "The Tech Contracts Handbook" online or via this website:
techcontracts.com/2018/06/01/dont-use-licenses-saas-contracts/
I did buy his book, and think highly of it. Notably good balance between concept and practical drafting approaches, not just for cloud matters either.
NB: Personal opinion only, not necessarily that of my employer.
kind regards
Andrew
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