How can you be a good negotiator if you have not read the contract?
That’s the question Attorney Mark Grieco asked procurement and supply management professionals attending a member meeting of ISM-Greater Rhode Island at Banneker Industries in North Smithfield.
Editor’s note: This article is part of the MyPurchasingCenter content archive. It was originally published in 2015 and appears here without revision.
“I highly recommend reading the contract,” said Grieco, Senior Partner at Grieco & Scalera PA, adding that procurement also should plan to spend 30 minutes a month meeting with their organization’s lawyer. “The more time you spend with them, the more accessible they will be.”
He continued, “Be dexterous with your contract. Know what’s in it. Every sentence is in there for a reason.”
Grieco, who is a frequent presenter at Institute for Supply Management events, including the annual conference, ISM2015, also led a workshop for members of the Rhode Island affiliate that day. At the member meeting held in the evening, he spoke on Power Negotiations: Unlock Your Power in Influence and Persuasion.
In his talk, Grieco said that other negotiation courses offer instruction on “win-win” contracts. “Not this session. I’m not teaching you to be friends with suppliers.”
The first step in negotiating a contract is to ask the supplier to sign a non-disclosure agreement (NDA). The supplier’s reaction, Grieco said, will foretell future behavior. He also suggested procurement do a good job on the scope of work (SOW) and not to let the supplier do it. Keeping accurate record of changes to the contract is also important.
Grieco suggested procurement create “a good set of internal documents,” an NDA, a purchase order (PO) with terms and conditions (Ts & Cs), a master agreement for services and one for goods, a service level agreement (SLA) and an SOW template, among others. “There’s a lot of power in always doing things the same way,” he said.
Another tip Grieco gave to ISM-GRI members is to create a handbook of clauses typically found in their contracts. “Alphabetize them, and write an explanation,” he said. “It’s time consuming, but a great negotiation tool.” He suggested working on this project with a student group, perhaps at a nearby university that offers a supply chain management program.
Grieco also shared his thoughts on the bidding process, reminding attendees that the Request for Proposal (RFP) they send to suppliers will provide information they can use in the contract and to create competition by qualifying more than one supplier. He favors face-to-face negotiation over email.
Of the contract, Grieco said. “The only thing that counts is the document/ Once you sign it, hold the supplier to it, but have a way out, a termination for cause.”
After presenting some of the basics, Grieco tested the group’s knowledge and encouraged participation in the discussion. He asked the procurement managers to work on, or “fix,” some contract clauses such as a force majeure from the seller, a warranty clause from the seller, a limitation of liability clause from the seller and a notice clause from the buyer.
To close, Grieco recommended procurement find a style of negotiating and stick with it. His best advice: “Stick with it.”
How to Negotiate Your Contract
- Start with an NDA
- Have a good scope of work and a standard form contract
- If working off supplier’s paper, get it in MS Word and make changes using “track changes.”
- Renegotiate the entire contract every go around
- Inform Legal of everything to get the best advice
- Know what you’re changing
- Decide if the other side is actually your partner
- Sign it or forget it
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