Contract Renegotiation Tips

Every Contract which is finalized comes for renegotiation whenever there are changes in business environment. Jamie Liddell recently wrote a very good article at SSON on contract renegotiation titled as “Top Ten Tips for a Smooth Contract Renegotiation”. The article contains ten tips to smoothly renegotiate the contract. Excellent article and must read for buyers. Here is the summary of these ten steps:

1. Know what’s right for your business.
Have complete data about your Contract. Discuss internally with your stakeholders and leadership and clearly define goals and objectives you hope to achieve in the renegotiation.
2. Have clear rules of engagement.
Set out and agree fair rules with your supplier. Define time lines and people involved in the negotiation. Make your discussion fair and just in order to maintain a long lasting relationship with your supplier.
3. Make sure it’s worth everyone’s while.
It takes two to tango. There needs to be an incentive for the supplier to renegotiate specially in case it’s a midterm negotiation, you must offer him some reward to conduct a smooth renegotiation.
4. Bring the right people to the table
Assemble the right team. The team should have people who can make long term decisions. These teams also need to preserve an effective relationship so that they can work well together after the revised deal has been struck.
5. Aim for success, plan for failure
Every negotiator should be prepared for the BATNA (Best Alternative To Negotiated Agreement). Should the parties not be able to come to agreement, what happens? Both parties should understand the floor and the ceiling boundaries.
6. Understand the status quo
Understand the details of contract. What is going right and what is going wrong in the contract and importantly what could be the ramifications of changes proposed in the negotiation.
7. Learn from your mistakes.
Every contract is negotiated with some assumptions of quality of service and productivity of the service. However things normally don’t go as per planned. So understand why things didn’t work out the way it was negotiated. You should think about long and hard, and work towards overcoming in this next iteration of the deal.
8. Your tone matters - a lot.
Don’t be too aggressive or weak & defensive in your tone. Present a solid, factual, respectful case to the supplier in the best professional manner.
9. Know your other options.
Always understand your options. Whether you have a source ready or a competitive source could be easily found out or you have to ensure that current service provider provide the service. It’s imperative to understand where indeed you can go in the event of things getting bogged down
10. Don’t dawdle.
Instill a sense of urgency. Clearly communicate your objectives and attempting to find ‘the middle way’ to achieve those objectives.