Mentor's Corner
Toolkit for Consultants: Contract Negotiation Process
By C. Thomas Tyler, Chief Technology Officer of The Go To Group, Inc.
A good contract negotiation process improves your consulting business. Contract negotiations are an integral part of your sales pipeline, and doing it well conveys the confident, professional, and ethical character of your business.
What makes a contract negotiation process good? In this article, we'll take a look at some characteristics of a negotiation process, and provide some contract negotiation process tips.
Reduce Time Spent Negotiating
A good contract negotiation process minimizes the time spent negotiating, so you can get to the fun consulting stuff. Having a fully defined contract negotiation process allows you to quickly guide clients through the process. This is particularly important when dealing with small to medium sized businesses, or with people inexperienced in working with consultants.
Contract Templates
To get started quickly, you'll want to have a contract template. As ICCA members, you have access to a standard contract template, which is good to use as a starting point for developing your own contract.
Separate SOW from Legalese
It is helpful to develop separate templates for a Statement of Work and Contract. Work that you propose to do will be reviewed by two different groups, which I'll oversimplify for purposes of this article into managers and lawyers. Managers care about what you're going to do for them, what it will cost or is expected to cost, what your fees, prices, or billing rates are. Lawyers care about many, many other details of the business relationship, such as whether or not you are insured, who owns the work product, and whether it is appropriate for the client to recruit your employees.
To best target these two audiences, the managers and lawyers, separate the SOW (Statement of Work) as a separate document. Generally, you'll collaborate with the managers first to come to an agreement on the SOW, and then you'll send the full contract, including detachable SOW, for legal review.
In a typical contract negotiation, the SOW document gets revised a few times. Be sure to use some sort of document version id tag in the SOW document, and be careful to increment the version each time you distribute a revised SOW to a client, so that, when referenced in the full contract, it is clear exactly which version of the proposal is being referenced by the contract.
Following is a sample paragraph from a template for a full contract that references a separate SOW document:
Exhibit A: Statement of Work
The Statement of Work is established as the proposal documented in the file EDITME-PROPOSAL-FILENAME.pdf, Document Version EDITME-PROPOSAL-VERSION, delivered EDITME-PROPOSAL-DELIVERY-DATE. This document outlines work to be completed, prices, and deadline dates where applicable, and will be referenced as the Statement of Work for this agreement.
Tip: Defer Details from SOW to Implementation
Clients sometimes want an SOW to be exceedingly precise, so that they know exactly what they are paying for and what they are getting. That's fair enough - clarity and transparency in your process is a good thing for all. However, you should minimize the details in the SOW, allowing only those details that are important to clarify what is being done, or which affect the cost or schedule. If any of the details in an SOW are anything but 100% certain, you're better off describing them in vague terms, and deferring to some future deliverable. For example, rather than defining in the SOW, "We will import the data content into the following directory structure ...", you might instead opt for something like, "We will import the data content into a directory structure to be identified by the planning team." You still have clarity of core mission, only the details are deferred. Remember, any detail in the SOW must be finalized before getting the contract signed, and it's in everyone's best interest to reduce the number of details on the critical path to getting SOW signed. You may need to remind your client that signing an SOW means they trust you to get the job done, and that you'll work collaboratively with them as details are defined, refined, or changed.
Tip: Assess and then Implement
What about those details really matter, such as those that will impact the price or timeframes of the SOW, but which aren't easy to know up front?
It can take a tremendous amount of project planning and estimation work to put together an SOW, and often that is work that is effectively free to the client, since you don't yet have a signed contract. Depending on the amount of business you hope to get, you may be willing to do more or less free planning work in order to pursue the business. The trick is to avoid getting yourself into a situation where the client is driving you to do more free work than you're comfortable with. A common technique is to break your proposal Assessment and Implementation phases. The Assessment is a small, low-commitment engagement to the client, the primary deliverable of which will be a detailed project plans for.
IANAL
Well, you may not be a lawyer, but if you're going to run a consulting shop, you at least have to be able to play one on TV. Use an attorney to help customize your own contract template. Before you hire the attorney, though, think about your business model, and what you might need to modify. An experienced attorney can save you time and help you get a better result faster. Their mission will be to learn something of your business, and then guide you through your own process of thinking the contract through to make sure it is in line with the needs of your business.
Your Contract or Mine?
Some clients, particularly larger enterprises, may want to impose their process and/or contract templates on you. It is often a good idea, or even necessary, to offer the flexibility to accept the client's standard form contract, at least as a starting point for negotiations. Be sure to review contracts in detail, and take the time to negotiate carefully, request clarifications, and do what you need to ensure that any concepts key to your business, such as those you wove into your own contract template, are reflected in the negotiated version of your enterprise client's standard form contract.
Stop the Presses
There can be a strong desire to rush the contract negotiation process, so you can get the business started quickly. Don't let that desire cloud your judgment, and don't let the pressure keep you from bring up valid concerns. It is your prerogative and your duty to your own business to raise issues as the appropriate time, before things are signed. Of course, if you stop the presses, be sure to articulate your objections clearly, and have proposed alternatives ready, to help keep the momentum and energy levels high.
How long should it take?
A good contract negotiation process doesn't need to take very long. If a customer is able to clearly articulate what they want (even if you help them with the wording), the process can take just a few hours, from proposal generation to getting a signed contract. On the other hand, if the SOW needs several iterations, or follows a rigid process outlined by a client, it can take several months, so don't get easily discouraged if things don't go quickly.
By C. Thomas Tyler is the Chief Technology Officer of The Go To Group, Inc. and the Former President of the ICCA Greater Boston Chapter.
He can be reached at
Tom.Tyler@Go2Group.com or you may view his website at
www.Go2Group.com
