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The Most Negotiated & The Most Disputed Terms

July 18, 2011

The IACCM annual report on ‘the most negotiated terms’ in business contracts was released last month.

For those who are familiar with the report, there will be few surprises in the ‘top ten’. Liabilities and indemntities, price and intellectual property rights, liquidated damages and performance undertakings continue their dominance. But there is fascinating new content because the study this year included analysis of the most frequent causes of claim and dispute – and this strongly reinforces the message that today’s negotiatiors are failing to achieve the right balance in both pre- and post-award activities.

Much could be written about this (and the full 2011 report can be found at http://www.iaccm.com/library/?id=3958&src=plc  ). But if I had to focus on three core messages, they would be these:

  • The IACCM studies reveal the tendency by most organizations to focus negotiation on terms which relate to the consequence of things going wrong. This strongly ‘positional’ approach to negotiation (i.e. hinging around ‘non-negotiable’ policy principles that are protective in nature) leads to loss of focus on the clarity of purpose and the process for governance. When they do not pay adequate attention to these key terms and the process that underpins them, organizations increase the probability of project failure.
  • There are several key phases where misalignments often occur – the translations between goals and scope, to selection criteria, to performance measures, to on-going amendment and change. The 10th annual survey has – for the first time – explored the most frequent sources of contract claims and disputes. The results are a powerful illustration of the weakness of today’s requirement management and relationship management procedures. The number one issue is acceptance and delivery – surely a massive indictment of project management quality if contracts can reach this final stage before fundamental problems are identified.
  • Our research shows that large organizations – public and private sector – rarely monitor and analyse their experiences from bidding, negotiation, or contract management. Therefore few are learning from repetitive conversations or outcomes – for example, what common factors may lead to frequent areas of claim or dispute? This reflects what is perhaps a fundamental weakness common to both contract management and project management – each situation is viewed either as ‘tansactional’ (and therefore subject to a standard form of contract irrespective of suitability) or as unique, in which case it is handled as a ‘one off’ or ‘one of a kind’ activity. Yet in truth, there is often significant cross-learning to be gained from the portfolio of activities under management. This is an area where ‘complexity’ is glorified, when it might be simplified.
2 Comments
  1. Reading this report was such a joy. As you say, the list of terms negotiated was no surprise, but AT LAST the ‘contracts are for when it’s all gone wrong’ approach is being questioned.

    I have built my business around helping clients develop relationship-based contracts – focusing upon preventing disputes by managing the expectations of both parties up-front and recording them in a way which is fair and reasonable. Unfortunately, however, I seem to have been a lone voice in the wildnerness amongst my peers in the UK.

    I very much hope that this report becomes a catalyst for change.

    • Margaret
      Thanks for your comments. I do believe we are making progress; the steady growth of IACCM has generated a large body of professionals who increasingly seek to put these views into practice. With more than 20,000 members, it means firstly that our message is resonating with many people, and secondly that we are gaining the critical mass to make change a real possibility.

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