Tuesday, August 30, 2011

Avoiding Contract Problems

In a post on Linkedin, a writer shared their tips on avoiding contract problems. I decided to take that one step further here, To make it even more valuable to the reader I decided to cross reference the specific point to all the applicable posts that I have written that apply to that point. My goals was to have you understand the issues better and also how to manage them.While the blog's Title is Knowledge to Negotiate, you will see that many of the posts I've written are also about avoiding contract problems.

1.Take the time in advance to qualify the potential supplier to ensure that they and their team will be capable of performing the work.See posts on Supplier Financial Analysis Jan 26, 2011,
Supplier Surveys August 12, 2011, Supplier qualification August 8, 2011 and Interviewing April 8, 2011, Checking References Jan 26, 2011.

2.Spend time with you internal customer to understand their needs and goals.See post on Communication - Internal Questions to ask in preparation April 8, 2011

3.Document all requirements and expectations.

4.Make sure that the specifications, statement of work or scope of work is clearly written and defines all the things that are required for performance.See posts on Writing Specifications, Statements of Work and Scope of Work July 4, 2011

5.Make sure that the contract is unambiguous and clearly written.See posts on Active Voice December 12, 2010, Compatibility between documents April 7, 2011, Contract Drafting with Precision April 6, 2011.

6.Make sure that the contract has the necessary tools to manage the known risks with the Supplier.See Procurement Risks Jan 18, 2011, Managing specific Risks Jan 11, 2011 and Jan 19, 2011 Quantifying Supplier Risk Jan 18, 2011

7.Make sure the contract has the tools necessary to drive the supplier’s behavior and to manage their performance.See Managing Performance February 6, 2011, Structuring Contracts to Drive Behavior Jan 7, 2011.

8.If multiple tiers will be involve in the work,require approval over who those suppliers will be.See Subcontracting - Negotiating Subcontracting Rights Feb 10,2011

9.Make sure that the contractor or supplier will manage those suppliers and you have the right to engage those subcontractors when there is a problem.Make sure the supplier is clearly obligated to or manage their subcontractors performance.

10.In your negotiation make sure that you have included the right standards of commitment for performance and have not agreed to carve outs or language that would dilute the commitments of the supplier. See Standards of Commitment January 11.2011,Qualifying words January 13,2011

11.Make sure that you have the right remedies included in the event of non-performance. See posts on Remedies Jan 23, 2011 and April 11, 2011

12.Make sure that actions that would constitute a material breach of the contract are clear.See Breach April 11, 2011.

13.Make sure that the types of damages and any limitation on either the type of damages or the amount of recovery are applicable for the damages you would sustain. See Damages March 24,2011.

14.Staff the program and management of the contract with the appropriate level of resources for the contracting approach you have used and the risks and performance you need manage. See Contracting Approaches July 2, 2011

15.Hold regular performance review meetings to measure and track performance.See Managing Performance February 6, 2011

16.Understand the supplier’s management chain and escalate problems and performance issues to them by holding periodic management review meetings. Escalate issues directly to them when you make no progress with the program team. .See Managing Performance February 6, 2011

17.Document everything in writing and use action item lists that get shared to management to identify open issues, status, time for resolution.See Contract Management April 6, 2011.

18.Manage the contract file so that at any point in time you can state what the contract was, and what issues, problems or correspondence was shared.See contract Management April 6, 2011

19.Manage performance by both companies. The supplier in meeting their committed obligations, and the Buyer’s team in meeting theirs.See contract Management April 6, 2011

20.Manage all changes so they are clear and so they describe what the change applies to. Write them so they don’t materially modify or waive a needed right or requirement for all items. See Amendments April 11, 2011, Amendments, Addendums and Change Orders July 7, 2011

21.Do a self audit of the contract to ensure that:
a.There is a contract. See Legal Requirements for a Contract December 13, 2011
b.It is enforceable and cannot be voided for any reason. See Contract Problems - The Legal Thought Process April 5, 2011, Enforceability December 10, 2010, and Enforceability Costs March 22, 2011
c.That the contract was written with a supplier entity that has the assets or resources to stand behind the commitments or there is a company guarantee in place. See Parent,Company Guarantees January 30, 2011

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