COLLABORATIVE CONTRACTING: COULD IT HELP YOU?
Maintaining vital relationships with contracting partners is essential for businesses not only to survive but to thrive. Unfortunately, many companies have a rather negative view of contracts and therefore approach the process with a preconceived mindset. This is understandable when you consider that, at least west of the Atlantic, contracts have for generations involved a quasi-adversarial relationship, typified by both sides jockeying for power and the upper hand. In recent years, though, this has begun to dissipate and there is growing recognition that the contracting process should entail compromise and collaboration, rather than competition.
Following are four goals to bear in mind when undertaking successful collaborative contracting:
Establish Goals and Metrics
A contract is more than just a formally written exchange of promises. Contracts are critical business assets, and instruments that can carry significant financial and legal consequences. Consequently, contracting parties must ensure that everyone is on the same page with respect to goals and expectations. This requires establishing concrete objectives on the front end, the first of which is to flush out in the open what each party wishes to gain by entering into the agreement. A lop-sided arrangement or ignorance as to what each party needs can spawn expensive conflict. By distinction, declaring the overarching goals of the contract and establishing specific measuring sticks for determining whether and when those objectives are being met, the deal’s participants will know precisely what they are working toward and be able to correct course to get there. This, in turn, will mitigate the possibility of confusion and improve the contracting relationship.
Many of our clients have been harmed by a contract gone bad. After all, it helped build our litigation practice! But, all kidding aside, such an experience can make it rather difficult to retain and trust future contracting partners. And, a natural consequence from that negative experience is often that the once burned company wants to control every last detail of the contracting process. “Never again; I’ve learned my lesson” is their motto. Maintaining oversight is clearly essential, but there is a distinction to be made between active oversight and micromanaging. Companies should fix their gaze on the outcome of the contract, rather than focusing so much on in what manner a contract's goals are met or the methods utilized by the other side in fulfilling its obligations. In a nutshell, emphasis must be primarily on the results and far less so on the way that it actually happens. So long as the agreed objectives are met in a timely, professional, and legal fashion, the remaining details become immaterial.
At the end of the day, succeeding in business comes down to building and maintaining strong working relationships. This is true in all economies, across all industries, and in every department of a given company. Treating contracting partners unkindly is a surefire way to end up with a contracting conflict and ultimately a court battle. Thus, irrespective of how badly a contracting deal goes, it is crucial to keep things cordial and to take all steps possible to salvage the situation.
Communicate the Good, Bad, and Ugly
Of course, one of the best ways to maintain a strong contracting relationship is by ensuring that there is open and honest communication. Companies usually want to avoid uncomfortable situations and thus hold off sharing bad news, in the hopes that things will go unnoticed. However, small issues that are pushed aside tend to accumulate gradually, eventually becoming a rather serious problem. It is irresponsible not to keep everyone in the loop, and the other side will clearly be far more miffed about a situation when they learn of it after it's already snowballed. Thus, to ensure a successful collaborative contracting relationship, every aspect of the deal, whether good, bad, or ugly, must be shared in the right way and at the right time.