On your marks

For those organisations facing large-scale business change, it is crucial to have someone on your side with both the requisite levels of skill and, most importantly, previous experience, to take responsibility for managing the delivery of all your programme work streams.

Equally, for organisations keen to take advantage of business opportunities in today's competitive climate, it can be tempting for them to either negotiate supplier relationships in advance of winning client business (so that they are able to move more quickly to the point of contract delivery) or to negotiate client contracts without having secured the underlying subcontractor commitments. Both routes can be fraught with disaster. Although having a network of carefully selected suppliers on board can help to influence the sales cycle, it can also mean that an organisation is left with no negotiating leverage and ends up being squeezed at both ends when contracts are signed.

A far better approach is to ensure that your supplier/subcontractor commitments are synchronised with those required by the client and to secure conditional commitments from potential sub-contractors that can be enacted upon a successful client tender award. Having the right sequencing in place will pay dividends in the long run, especially when it comes to negotiating the fine print.

For a complex technology outsourcing or similar project, three months tends to be the appropriate time to set aside for contract negotiation - assuming that your business records are all in good order and you have a fully briefed and mobilised team ready to hit the ground running.

Any shorter period and the supplier may have had inadequate opportunity to undertake a thorough due diligence leaving the client vulnerable to post contract claims. A longer period will result in multiple data collection iterations and the likelihood of original data being out-of-date by the time it is needed to incorporate into the agreement. The latter case may lead to staff attrition and staff management issues as uncertainties surrounding the transaction leak out into the workforce. In such circumstances, the value of the business can be adversely affected.

Many organisations get into trouble because they focus on the legal aspects of the contracts they are putting in place and forget the common-sense practical aspects that will make the transaction work in practice. A well-defined Service Agreement is critical to programme success. Within its Service Offering Portfolio, DAV has created a unique framework to guide the design and delivery of complex, large-scale technology contracts. Additionally, our advice is to take time to build your commercial management team and identify independent third party experts who can support you if you don't have the right skills in-house.

Finally, projects often stumble because clients aspire to transfer risk to their suppliers but fail to give them the flexibility and freedom they need to deliver it. Contracts where there are interdependencies will often trigger project failure because they block the transfer of risk rather than support it. Such contracts can also be very demotivating for prospective partners because they seem to be front-loaded against the supplier.

Because successful commercial management is about setting the frame for an ongoing relationship, your contract should ideally act as a vehicle for driving the kind of behaviour that you think will deliver the best solution for your business. While your contract must protect your organisation, it must not prevent the job that your technology programme sets out to achieve from being done.

To learn more about the practical aspects of sound commercial management, please click on the adjacent link to read, 'Wake Up and Smell the Coffee' by DAV's Commercial Director, Pat O'Sullivan.