I enjoyed celebrating Easter this past Sunday.<\/p>\n
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Even though my kids are now 13 and 15, we still have a tradition of doing an Easter egg hunt on Easter morning. \u00a0It\u2019s fun, like having wee little kids again, if even for just a few minutes.<\/p>\n
Strangely enough, thinking about this year\u2019s Easter egg hunt got me thinking about procurement. \u00a0Specifically, an aspect of procurement that has the feel of\u00a0an Easter egg hunt.<\/p>\n
What can it possibly be?<\/p>\n
It\u2019s finding those few words in complex contracts that massively shift risk and\/or cost to one party to the contract.<\/p>\n
I\u2019ve encountered many situations in my professional life where the way that a few words are used in a contract could have had hundreds of thousands of dollars in negative implications for my side if I wasn\u2019t careful.\u00a0 These words often seem innocent.\u00a0 And like Easter eggs in a field of tall grass, they can be tough to find in a 20+ page contract.<\/p>\n
But you have to hunt for them.<\/p>\n
One example that comes to mind was from when I was in the airline industry, buying outsourced maintenance services for aircraft components.\u00a0 We were working on a fixed-price contract with a repair supplier.\u00a0 The repair supplier wanted to repair these components for a fixed price unless there was \u201cSevere Damage,\u201d in which case they could charge us over and above the fixed price.\u00a0 In principle, this is a very easy and fair concept to agree to.<\/p>\n
But what seems too easy to be true usually is.<\/p>\n
We needed to get work done on these aircraft components ASAP, so we signed a bare-bones letter of intent and began having the supplier perform repairs while we were working on the language for the long-term agreement.\u00a0 During this period, we uncovered a very disturbing difference in what each party considered to be \u201cSevere Damage.\u201d<\/p>\n
In our eyes, we felt that Severe Damage was damage that occurred due to something happening that\u2019s outside of the component\u2019s normal operation. \u00a0An example would be a catering truck running into the airplane (which\u00a0happens more than most people would believe).\u00a0 The supplier felt that Severe Damage should be anything that is not specifically stated in the repair specification.\u00a0 In particular, when the latches on this component required replacement (a common and frequent requirement), the supplier considered it Severe Damage because the specification wasn\u2019t explicitly clear that latch replacement was included.<\/p>\n
To make a long story short, things got very heated over differing definitions.\u00a0 This was a multi-month sourcing project and a multi-million dollar contract.\u00a0 We felt that we needed a very detailed definition of \u201cSevere Damage\u201d to protect ourselves.\u00a0 The supplier wouldn\u2019t agree with our definition of those two words.\u00a0 Ultimately, we told them \u201cthanks, but no thanks\u201d and found another supplier.<\/p>\n
We were lucky that we found those two unclearly defined words before the contract was signed.<\/p>\n
But, since then, I\u2019ve treated contract writing like an Easter egg hunt.\u00a0 I look for those seemingly innocuous words and how they could be interpreted in the worst case situation.\u00a0 I\u2019ve saved myself lots of heartache by finding them.<\/p>\n
So, I challenge you:\u00a0 Are you doing an Easter egg hunt for tricky words with every procurement contract you write or review?<\/p>\n
Finding that contractual Easter egg before it\u2019s too late may be one of the most heroic things you can do as a procurement professional.<\/p>\n","protected":false},"excerpt":{"rendered":"
I enjoyed celebrating Easter this past Sunday. Don\u2019t miss updates […]<\/p>\n","protected":false},"author":12,"featured_media":4081,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-3570","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-procurement"],"yoast_head":"\n