Clear and Concise – Contracts need to mean what they say
By Peter Titmus, Managing Director of Networks First
Every one of us in the technology world comes in contact with a third party at some stage of our business life -- which usually means a contract has to be signed. In fact the number of providers winning contracts has risen by 64 per cent in the past four years.
But competition is also increasing. With so much at stake it’s vital that the contract is properly understood. Unfortunately the truth of the matter is that not everyone truly understands what they are signing.
So how do disputes arise in the first place? The fundamental problem is invariably money. The user often wields power in negotiations, particularly in a competitive market. As a result, the chief information officer will be inclined to negotiate very tight terms and conditions, while the supplier underbids to win the business.
Look at the recent problems between the BBC and Siemens. The ten-year deal saw 1,440 BBC staffers move across to Siemens. Signed in 2004, the contract was meant to save the corporation some £35m a year.
However, £60m of costs were excluded when budgets were put to the governors for approval. So instead of the huge savings initially discussed it actually only saved £22m - 38 per cent lower than originally forecast. And the BBC is definitely not the only one having problems with its service contracts.
Although many contracts tend to be far easier to read nowadays and use plain English, it’s the actual phraseology which isn’t explicit enough and often it is only when a problem arises, that the real interpretation comes out. Many customers fail to check the terms and conditions in sufficient depth. Not understanding the impact on business if the contract isn't met, they too readily accept the content at face value.
For example, an agreement between a customer and a network support provider could include ‘an engineer will be with you in four hours should a problem arise’. But is this precise enough? Someone will be with you in four hours but it doesn’t mean the problem will be resolved in four hours. This common mistake could cost a business thousands of pounds in downtime.
So what’s to be done? The first thing is to ditch any vague or confusing wording in a contract. Starting from the point of quotation, when you are dealing with a third party provider, insist on clear and open communication. Ask yourself ‘does it really need to be this complicated?’ and never feel that you are asking too many questions. Exactly what support are you being promised, within what timescales and from whom?
Above all, don’t sign anything until you have reviewed every aspect of the contract to ensure that you will really get true value from your service supplier. Companies need to start comparing quotes like for like because clear and concise contracts offer value for money whereas vague contracts can potentially cost far more than the figure at the bottom of a quote. Mind you, the IT industry doesn’t necessarily always make it easy for clients. When it comes to contract content, how about bringing back the old acronym WYSIWYG -- What You See Is What You Get?
