Using the functionality of Microsoft Word™ in Negotiating Contracts.

Word™ has certain functionality that everyone that negotiates contracts should know about and be able to use.

First, under the Tools pull down menu you do two things
1. Select protect document. Click on changes and then password protect it.
2. click on “track changes” to establish how you want changes shown. You have three options on how the changes will be shown. One uses the Balloons that appear in the margins showing the change. A second provides a red line version of the changes with items inserted highlighted and items deleted showing strikethroughs. The third option is to use the Balloons only for comments and formatting, where all other changes are shown as red-line. This is my preference.

Once you receive a document with changes the easiest way to work with that depends upon the Version of Word that you have. For Word 2010 you should have individual pages called "Home" "Layout" "Document Elements", "Tables", "Charts", "Smart Art" and "Reviewing" Click on the reviewing page and you will see the buttons. For prior versions of Word you do that by adding the “Reviewing” pain to your Word™ Buttons. To add the Reviewing Button you click on the Toolbar Options Button that is dark and has a downward facing triangle on the bottom. Select “Customize” and click on the Button “reviewing”. When you turn on the reviewing functionality it will add a number of buttons to the toolbar that help you navigate through the changes.

To use the functionality you highlight the word, words or section you want to accept or reject. You can do that several ways:
•By clicking on your mouse and holding it down and dragging it over the change.
•Double clicking on an individual word will highlight the word

The Button that looks like a sheet of paper with a Pen with a left facing arrow when clicked will move you back to the last change.

The Button that looks like a sheet of paper with a Pen with a right facing arrow when clicked will move you forward to the next change in the document.

The Button that looks like a sheet of paper with a Pen with a check mark on it when clicked will accept that change.

The downward arrow to the right of the Accept Change Button provides additional functionality in accepting changes. For example, if you highlighted a paragraph with multiple changes in the paragraph you can click on accept all changes shown.
If you want to accept all changes to the document, it allows you to do that such as when the document with all the changes represents the final agreement of the parties and you want to produce a clean document for signature.

The Button that looks like a sheet of paper with a Pen with a RED X on it is the Reject Changes Button and when clicked will reject that change.

The downward arrow to the right of the Reject Changes Button allows additional reviewing functionality.

The Yellow button that looks like a file folder with a star on it is the Comments Button and allows you to insert a comment in the document such as why the change is not acceptable.

The Button in the Reviewing Pane that includes an upward arrow is the reviewing pane. If you click on that it will provide a split screen of the document that highlights the change and who made the change and when it was made.

There are additional things that you do need to be aware of in using Word™. For example, if you sent out the contract internally for review all the changes made will still be retained by Word™ even though you have used the reviewing tool to accept or reject them. To prevent the Supplier from seeing those internal changes, simply do a save as on the document to another file name and that will eliminate the history.

Word™ has several other tools that you can use as part of the negotiation process.
On the tool bar there is a “display for review” Button that allows you to view the original, the original showing markup, the final and the final showing mark-up. If you want to see all the changes that have been made, click on original showing mark-up.

In the Print functionality you can also decide which version of the document you want to print. For example sometimes there could be a dispute over who made a certain change. If you click on Print and in the area that says “Print What” if you select “List of Mark-up” what will be printed is all the changes that were made, when they were made and who made them.

The last tool you can use to make sure that you are seeing all the changes that have been made can also be found on Tools pull down menu. If you click on the Compare and Merge Documents it allows you to electronically compare the documents for changes.

Here’s how to do it.
In the current document that is under negotiation click on accept all changes and do a save as to a new file name. This keeps your original document untouched.
Open the new document; make sure track changes button is off. Then click on Compare and Merge documents and Select the Original document that was sent to the Supplier before any changes were made. Word™ will show the differences between the two and will show any changes that may have been made to the document with the track changes functionality turned off. Print out that document and use that to compare to your current document in negotiation to ensure that it represents a correct picture of what has been agreed to be changed.

Always save the original and each version of the changed document as a history until the agreement is executed. If there is a dispute about what was agreed you can then use that to show what was change, when and by whom.

Market Intelligence

On linkedIN someone suggested that market intelligence could aide in negotiations. That is true and market intelligence works on both sides.

For a supplier there are a number of different forms of market intelligence they may perform.

1.There is market intelligence that occurs in the product or service development stages where companies seek to identify a unique feature or service the can develop that they will use to differentiate their product or service from their competition,

2. There is market intelligence to understand what your potential competitors have or don't have at the present time. This type of intelligence can include not just the products or service they offer and their pricing or terms. It can also include keeping track of things that can affect their competitors being able to meet the customer’s needs such as available capacity and lead-time.

3. Another form of market intelligence goes on in the selling process where the sales person is seeking to understand what the customer’s problems are, what they need or prefer. This gives a supplier an edge in understanding how they stand against their competition and how they will need to price them item or what they may need to agree to for terms to be competitive.

4. Another form of supplier market intelligence is being able to read the bid or proposal documents to clearly understand what the customer is telling you about what they want and what is important. For example if they find that schedule is very important and they have done market intelligence and know a key competitor will not be able to meet that schedule, they will know they don’t have to compete with that supplier to win and may be able to charge a premium as they can meet those needs.

Purchase decisions are frequently made based upon the features a product or service has and the perceived benefits to the customer. If the Supplier can accurately read the situation that may be able to charge a price premium and still get the business when compared against competitors that don’t offer those same features and benefits. If a supplier determines they don’t have those advantages or the customer doesn’t need or want to pay the premium for what you offer, it that unique feature provides you no advantage. In that situation if the supplier wants to win they need to compete on price or show other value they can deliver that the customer will see as benefitting them and be willing to pay for.

For buyers they can also perform a variety of market intelligence that can both aide in the negotiation but also in determining the right contracting strategy to use. Let’s look as some of the procurement market intelligence approaches:

1.Pre-qualification of suppliers and their potential competitors is a form of market intelligence.
2.Tracking product or industry trends is a form of market intelligence.
3.Understanding where a product is within the life cycle of the product is a form of intelligence to help determine the length of the contract or the fixed period for pricing.
4.Benchmarking is a form of market intelligence to help determine what is both standard and best- in-class.
5.Requests for information or requests for quotations is a form of market intelligence.
6.Interviews of suppliers, their references and subcontractors or material suppliers is a form of market intelligence that you may use in determining who to select or what may be needed in a contract.

On the buying side its important to manage and control the amount of market intelligence a supplier can perform within your own company as you simply do not want to be providing them with information that can be used against you or be providing them with information they will use to attempt to charge you a higher price.

Insolvency - should it be an event that allows termination for cause?

Insolvency is described as the condition of having more debts or liabilities than total assets available if the assets were liquidated. Many agreements provide for the right to terminate for cause if the other party becomes insolvent,files for bankruptcy protection or has bankruptcy claims filed against it a petition in bankruptcy. As there are specific laws regarding bankruptcy you may only be able to terminate to the extent permitted by law. The question is why would you do it? There are a number of reasons:

1. You simply don’t want to accrue additional obligations to a company that is not be able to perform. For example a supplier doesn’t want to be obligated to sell more to a company that already isn’t paying them.

2. If the company goes into bankruptcy, the trustee in bankruptcy does not have to honor the agreement.

3. It excuses you of existing contract obligations other than paying for what you had already received and accepted. That frees you up to source product or sell your good or services elsewhere. For example, firm purchase commitments or requirements type provisions would not need to be honored. This allows you to manage you own future destiny.

4. If you terminate you can sue for damages you sustained, While a court judgment would not make you a secured creditor, it would place your claim for payment above the company’s shareholders in any liquidation of the assets.

5. You avoid having to deal with the bankrupt firm and the bankruptcy trustee whose primary focus is the interest of the creditors.