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Why you should try to negotiate a better contract

Look, I get it. Proposing changes to the contract is hard. It might mean a difficult conversation with your client. But here are some thoughts about why you should try to negotiate a better contract.

“We don’t want the client to think we’d be hard to work with”

In Australia, we have a sales culture that encourages a “client is always right” attitude. As a result, people resist having difficult conversations with clients. But is this avoidance in the client’s interest? Or your interest as the service provider, for that matter?

The allocation of risk in Australian commercial contracts tends to be oppositional. Each party wants the best for themselves, usually at the expense of the other party. I could write a book about why I think the adversarial model is old-fashioned and inefficient, but it’s a long way off changing. For now we need to work with what we have.

I was the in-house lawyer for a global engineering consultant for almost 9 years. I gave advice to hundreds of commercial teams about project contracts, commonly at the tender stage. In competitive markets, bid managers didn’t want to put anything in the tender that might make it less attractive. They would ask me to comment on the risks in the contract without proposing any amendments. They didn’t want the client to think that they would be “difficult” or “contractual” on the job.

Maybe you’ve applied this tendering strategy too. But have you thought about taking a different approach?

But the client doesn’t always expect to be right…

The “client is always right” approach generally does not lead to a robust contract or to a satisfactory project outcome for either party.

The service provider ends up trying to cut costs to prop up the margin, which increases risks.

Cut corners do not produce the project the client wanted.

Plus, when you submit a bid with no contract clarifications, you are overlooking something critical. Your client knows their contract is one-sided. They expect you to review it, understand it and propose appropriate departures to balance the risk. That’s why you should try to negotiate a better contract. Don’t miss this early opportunity to set your project up for success.

My job is to help you understand the risks a contract creates for your business or your project and suggest strategies to reduce or control them. Sometimes, I’ll talk to you about whether there is any practical prospect of the risk eventuating in the context of your scope. If the risk is remote, maybe it is something you’ll be comfortable conceding.

Other times, we can discuss whether the risks are controllable with project management strategies. Maybe you can transfer the risk by buying insurance. These strategies may allow you to concede a one-sided term in the contract.

Robust contracts = successful, profitable projects

Sometimes, however, I’ll recommend that you propose contract departures at tender stage. Other times, I’ll recommend negotiating amendments post-award. I’ll keep them as simple, practical and plain English as possible, but I wouldn’t be doing my job properly if I didn’t encourage you to press for changes to the contract.

Use my advice as a learning opportunity. The more you and your commercial team understand about the nuts and bolts of the contract, the better placed you are to analyse my advice. Not only that, you will be infinitely more confident in lobbying your client to re-balance or appropriately price the risk, resulting in a more successful and more profitable project.

Combining practical legal advice with real-world, hands on training

A sound contract is the foundation your project needs to succeed, and I can help you achieve that from tender stage. You can further enhance the project’s prospects for success by arming your commercial managers with a practical understanding of contractual risk. I can also help you with that by developing and providing tailored training packages for your commercial team.

At the end of the day what all the parties want is the best possible project outcome for everyone involved. That’s why I think you should try to negotiate a better contract. Need some help to do it? Give me a call.

Photo of Gemma Nugent

About Gemma

I help construction, engineering and consulting businesses create and negotiate clear contracts so they can achieve great project outcomes. I founded SoundLegal to help SMEs in the engineering, construction, consulting and light industrial sectors manage their risk to support business growth, by finding practical, common sense solutions to contractual and other legal challenges. Subscribe to the SoundLegal newsletter “No Jargon” to hear monthly business insights from me.

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