There have been many instances where an outsourcing engagement fails miserably. One of the main reasons for the failure is the poorly negotiated contractual terms and conditions. It is found that many outsourcing service providers try to manipulate with some of the clauses in the contract to take full advantage of the partnership agreement. This usually happens when companies try to quickly outsource some of the hefty or troublesome process.
It is a fact that not all the companies are familiar with such tactics of the service providers. Below discussed are those outsourcing clauses that service providers try to manipulate.
- Early Termination:Service providers will argue that the outsourcing buyers should pay compensation in case of any early termination except in case of poor performance. While this is reasonable, some service providers try to charge high in the name of termination clause.
The companies can avoid such situation by agreeing to pay a reasonable cost during the bidding period and include that in the contractual agreement.
- Agree to Agree arrangements:In some cases the service providers insist the buyer to put aside the clause that is confusing with a promise to furnish the details later. However, the companies should be aware of the hidden danger under such situations. This is because the companies in future cannot hold the service providers accountable for the issues that the companies have not agreed formally.
- Include advice and requirements in the contract terms:
Most often the service providers quote claiming that the prices are based upon the standard contract terms. But the fact is that the prices they quote exclude charges for advice services that the buyer is supposed to receive as per the standard contract terms.Companies should ask the service providers to incorporate those key elements in the agreement while bidding for the contract.
- Bonus payouts:
Usually when service providers bid for the contract, they argue that they should be given bonus for extra performance. Instead the companies can agree for bonus payments based on the desired business outcome.
- Mutual Cooperation:
It’s a common fact that when something goes wrong, the service providers tend to blame the clients for not rendering full support. To avoid such situations, companies should clearly define their roles and responsibilities in the contract as per the requirements of the service provider. This will help the companies to balance their roles and responsibilities towards service providers.
These are the five top outsourcing clauses the service providers try to manipulate with. The outsourcing buyers should be careful with these clauses during the bidding process. If any doubt persists, clear the confusion before entering into the contract.
It is always better that the companies be clear of these manipulating clauses every time they enter into an outsourcing agreement.