The Top 10 Contract Clauses that Service Providers try to Manipulate in Contracts

By Allan Watton on April 6, 2011

Most large outsourcing, service commissioning and IT/software contracts go wrong at some point in their lifetime. In fact, research demonstrates that between 56% to 87% are either cancelled after millions have been spent, or the purchasing organisation ends up investing twice as much and the project takes twice as long to implement as was originally contracted for.

We have found over the hundreds of projects that we have been involved in that some (not all) service providers can try to be quite sneaky when negotiating the terms of a contract with you. It is understandable that they wish to limit their liability in the performance of the agreement, but often, these contract clauses actually help the service provider to ‘unfairly’ increase their revenues from you. There are times when it is difficult to defend such contract clauses which is why it is so important to ensure your behaviours around the contract are correct.

Top 10 contract clauses that service providers try to manipulate to help them increase their revenues are:

1. You pay for Exit Management
2. Lack of co-operation
3. Payments based on service provider ‘standard’ contract terms
4. Difficult to measure KPIs that trigger bonus payments
5. No ‘Set-Off’ – you have to pay them even if service is poor
6. Excluding their advice and what they told you the project would achieve for you
7. Excluding reasonable costs you incur when the project doesn’t deliver to your expectations
8. If their service is poor and you refuse to pay them, they will suspend services
9. An ‘agreement to agree’. Gives the service provider a blank chequebook.
10. You want to withdraw from the contract early without a fight – but your provider insists on full payment to the end of the contract.

There are many more contract clauses you need to be mindful of, but in essence, these are some of the key ones where you need to understand the commercial impact on your organisation and how, if they are followed, can de-rail your project.

Download the FREE accompanying guide that will help you:

• Understand the impact these contract clauses have on your project
• Reduce the costs of your project at the outset
• Provide you with practical information on how to get around these contract clauses