A 14 Point Vendor Contract Checklist

I’ll be the first to admit that sometimes even with the best intent and the best of stewardship practices, a firm hand is needed to bring a vendor to heel to acceptable behavior.  This applies to risk exposure in contracts, pricing, terms, quality of service delivery and beyond.

Let it be known, however, that once a successful relationship is in place, the need to “correct” is virtually eliminated. And in fact, you will be surprised at the energy and creativity the “vendor” brings to your venture.

Below is a partial list to use when reviewing existing or new agreements.

1. 1. Do you have other vendors currently offering a similar service to your firm and redundancy of service delivery is not needed for business continuity? If so, consider collapsing all into a single vendor. See the article “The Benefits of Scanning for Vendor Footprint Collapse.”

1. 2. Are the terms and conditions mutually beneficial? The typical MSA (Master Services Agreement) is written by the vendor’s attorney, whose job is to eliminate risk, regardless of how well their client performs for you. You deserve better.

1. 3. Is there constructive or restrictive renewal language? Ask that the renewal terms meet your needs, not the cookie-cutter solution which serves the vendor alone.

1. 4. Payment terms. Again, ask that they meet your needs.

1. 5. Control who has authority to incur cost. If the agreement is for a service that can be modified, which in turn increases cost to your firm, do you have control of who can invoke such costs by contacting the vendor? Ask the vendor to accept such requests only from your list of authorized contacts and in which particular fashion, i.e., email, phone, etc.

1. 6. Is an NDA needed? Would you like to ensure sensitive information your vendor might learn about your firm not end up in a competitor’s hands? Get a non-disclosure agreement in place.

1. 7. Escape clauses, whether due to performance gaps, business downturn, etc.

1. 8. Market pricing rate stability and adaptability? If you are buying internet access, for example, and sign even a three-year term, chances are good that before the term expires, rates will have dropped for the same level of service, leaving you stuck paying higher than current market rates. Get a clause in the agreement that gives you the flexibility to revisit without penalty – this can be good for both parties.

1. 9. Who owns it? By this we mean, what are the tasks owned by the vendor and client to ensure successful delivery of what’s being contracted. Finding out you own a key deliverable after the signature is not good.

1. 10. Where’s the data? What kind of data would you like to have that objectively measures the vendor’s performance on your behalf? This takes the emotion out of a situation that will inevitably arise when something goes wrong. A good vendor will typically embrace the idea of documenting the successful delivery of their service. Like a compensation plan drives the behavior of a sales rep, the contract and reporting requirements often drive a vendor’s performance.

1. 11. Do you need an SLA? Having a service level agreement in place that causes the vendor to pay you for lack of execution can be helpful. It’s not that we expect the payment to offset the loss, far from it, in fact, but it goes back to behavior modifiers.

1. 12. How’s the SOW (Statement of Work)? If you have any complexity at all to a deployment, a good SOW is likely a great idea. It should also include key milestones with mutually agreed dates and well-documented task ownership.

1. 13. Is this the kind of project which would benefit from a project manager? Too many underestimate the value of a good project manager and this is a cost the vendor can often absorb.

1. 14. Is training a service you want the vendor to provide to your staff?