“At CJ Lang we have had a mentoring arrangement with Best Practice Group for some years, allowing us to submit IT supplier contracts for their review so they can coach us through the agreement process. In addition to the immediate benefits of their professional advice, by continually imparting professional knowledge, BPG is ensuring we are becoming better equipped to manage this process.
Virtually all contracts are skewed in the supplier’s favour. In a recent project where we were agreeing terms for the provision of a number of key systems, the original terms would have resulted in the supplier receiving full payment in advance of completing the critical deliverables. Clearly this is where problems are most likely to be experienced, and if the supplier has already received all their cash then they hold all the cards and any solution or even compromise will be on their terms.
The changes BPG recommended were aimed at redressing this balance by, among other things, stipulating a deposit with phased payments and a significant retained amount until such time as the delivered solution fully met our specifications. This means the supplier is incentivised not to procrastinate and cannot make a profit until they fulfil their promise.
If you think about it, the T&Cs of a typical contract are framed to protect the supplier from a negative outcome and give rise to a kind of minimum-standards mentality. Indeed, one usually only refers to it when something has gone wrong. By making the contract more equitable to both parties, BPG ensured that everyone was motivated to work as a team and the risk is shared. The trick to a good contract, as I learned from the process with BPG, is to make it specific to the project and include detailed deliverables so that both parties understand what is required of them.
It’s hard to believe but many customers just sign the contract, and only realise later the mistake they have made when things turn sour. A BPG-style contract review process brings a level of due diligence and best practice that I would never be without.”
Graham Murdoch, Computer Director CJ Lang