Author: John Koehler, Process Plus Director of Sales
January 20, 2014
So, your respected sales person just spent a lot of time and effort bringing in a new customer, only for you tell them “Hold on, let’s take a look at their contract before we do any work.”
For a variety of reasons; many engineers, architects and sales people view the contract negotiation process as an unnecessary step during the customer onboarding process. Here are a few reasons why:
They (the customer) have good projects and need help right now.
It delays the sales team claiming a win.
It delays starting the project.
It might upset our new customer and turn them away.
Well, it’s true. Our customers always have good projects and they always need our help.
Sure, the sales team can’t claim the win today; but next week’s still pretty good; isn’t it?
When working with a new customer, how often does the project need to start immediately? Is it not a reasonable expectation to become a little familiar with each other before starting the first project?
I propose the review and negotiation of customer contracts during the onboarding process is one of the best ways to get to know the customer and understand their expectations.
The following are two good reasons for contract review and negotiation:
Limitation of Liability: Is there one? If so, is it within your insurance and financial limits? Most contracts have insurance limit requirements, but don’t account for your company and personal liability above and beyond any available coverage. It is advisable, at a minimum, to at least limit the liability
to any insurance limits you have available.
Hidden Project Scope: The scope requested within a customer Request for Proposal (RFP) is usually fairly straightforward. However, many customer contracts have boilerplate project scope embedded within. A couple common boilerplate scope requirements include the following:
a. Regular site visits during construction.
b. Record drawings after construction completion.
The implications for both can be significant. Your services have been completed, deliverables issued and final invoices sent and paid. Now, there’s no funds left available for those last efforts.
Another less common, but significant requirement within the contract can be the requirement to have a professional engineer or registered architect stamp ALL documentation prepared in association with the project. This may require a level of project oversight not typical to the responsibilities of the project engineer or architect.
By taking just a little time before working your first project; you will have the opportunity to understand, and hopefully limit, your financial contract obligations. More importantly, you will have a means for establishing and building relationships and rapport within the customer’s organization. You will also be able to understand the flexibility of your customer and their willingness to negotiate.