Program Success Starts with the Contract

People are everything!

Positioning a program for success starts at the contract phase. Vendors occasionally sell with the “A” team but then staff the “B/C” team. Whether it is an Outsourcing deal or Consulting project, write specific practitioners into the contract!  Don’t fall for Vendor response: “SLAs will cover you,” because meaningful SLA penalties are almost always disputed.

Choosing the Right Pricing Structure

Pricing structures include: Fixed cost, Time & Materials (TM), and TM with a cap. I recommend the latter. With fixed cost, Vendors typically increase the cost of the project by 50%, and the contract itself is the size of a large binder. With TM, Vendors have little incentive to deliver on time/ budget. TM with a cap is preferred, as it provides the right incentives for all parties. Key to this arrangement are the “Assumptions” and “Change Request” procedures.

 

Assumptions (with a capital A)

Vendors will view ‘TM with a Cap’ contracts as favoring the buyer of services, so they will insist on detailed Assumptions. If there are too many Assumptions (say > 15), then the contract starts to take the form of a fixed cost agreement! Therefore, limit the assumptions to what is fair and reasonable to both parties, and negotiate those that provide the Vendor with unfair advantages.