How NOT to negotiate a contract

You’ve scoured the market, you’ve completed a robust RFP process, the evaluation is done and everyone is ready to go.

Just one more thing to do, get the contract signed and you can move forward with all parties happy.

Anyone who has worked in Procurement will know that feeling, the dread of knowing you are so near and yet so very far from getting the deal done.

The fear that most of the stakeholders you work with will not even understand the complexity of getting a contract right, let alone the importance of protecting the business with clear documentation.

I’ve seen it all in my time, some brilliant contract negotiations and some that have been an absolute shambles with the deal ultimately breaking down.

Here are 7 sure fire ways to get the contracting wrong and to ensure you won’t pass Go, even if your stakeholders think you are ready to put pen to paper.

1. Leave it all to Procurement and Legal

The most common misconception amongst the business is that contracts don’t concern them and that Procurement can sort it all out with the support of the legal team.

This is the quickest route to failure.

You need a negotiation team that includes subject matter expertise from the technology teams, the operational leads, the data privacy expert, the info security team and ultimately the business lead that will be accountable for the performance of the deal.

Failure to align expectations of the contract review inputs up front will lead to a frustrating process for all.

You need a negotiation team that includes subject matter expertise from the technology teams, the operational leads, the data privacy expert, the info security team and ultimately the business lead that will be accountable for the performance of the deal.

Failure to align expectations of the contract review inputs up front will lead to a frustrating process for all.

2. Fail to have a commercial framework outlined

If you are negotiating the details of a contract and also negotiating the core commercial principles at the same time, you are basically playing kiss chase in the dark.

Agree the key principles and have the framework set out from the very beginning and reiterated along the way.

3. You’ve given away all your leverage

The old classic of ‘you’ve won the business subject to contract’.

Let’s face it, if there isn’t a viable alternative option or a credible stalking horse, even if that plan B is to remain with the current supplier, then you have no leverage as a buyer.

You are relying on the good faith of the supplier and hoping a partnership approach echoes through their organisation.

4. You’ve not built in any time

You’ve just run a brilliant RFP and the business wants to go next week. In fact they don’t understand why they even need a contract.

They want to get straight into realising the benefits and are excited about the new solution.

Failure to build in a realistic timeframe for the contract negotiations will lead to an inadequate contract negotiation phase, unnecessary pressure for the Procurement team and a breakdown in the stakeholder relationship as they just do not understand the deal.

5. You negotiate everything via e-mail

Anyone can sound assertive behind a keyboard but in truth this is where all good communication and supplier partnerships breakdown.

Unless you have clear allocated time and dedicated workshops to have good open dialogue, I guarantee you the contract negotiations will slow down or worse come to a grinding halt.

Most issues in life, as within business, get resolved through building an understanding, delivering compromise and working together to solve things.

This does not happen via e-mail communication.

6. Basic admin anarchy

I wince writing this.

It shouldn’t even need to be said really but this is a real issue and I’ve seen it go wrong many times. Set the expectations for document ownership, version control and the mechanism for tracking changes up front.

Build trust through doing this properly and be rigid in the controls throughout to avoid admin nightmares and wasted time for all.

7. The legal language battle

Agree the principles and ensure every clause is easy to interpret within the life cycle of the contract.

Very often it will not be those who drafted or negotiated the contract that will be responsible for referring to it during a dispute.

Hint: if it takes your legal team several attempts to help you understand the clause, it has been poorly drafted and needs to be simplified. The best contracts are the ones that everyone in the business can understand.

How many of these pitfalls have you come across and what have I missed?

I’d love to know your thoughts. It doesn’t have to be this hard.