Outsourcing School—for wiser business

Outsourcing School is a new permanent feature of Nova. We want to help create smarter business and share the knowledge and experience we’ve accumulated over the years. Accordingly, we’ll be letting our experts explain and share their best recommendations and tricks of the trade. We’ll be describing and explaining the different building-blocks of an outsourcing business in each issue of Nova.

Outsourcing School lesson 1 - How do you write good contracts?

What should you bear in mind when you're writing service agreements that result in smooth partnerships? Erik Strümpel, Coor's General Counsel, has participated in several of Coor's major contract signings since 2004. In what follows, he shares his experiences.

Clarity

Unambiguous contracts are a precondition for an agreement that works well. Both parties must understand what's in an agreement, and if anything is complicated, it has to be described in depth. Agreements should be clear enough for people who aren't involved in the contract discussions to be able to understand the agreement. So it's important to put enough time aside to negotiate and formulate the actual agreement. Appointing a lawyer to help write a clear and consistent agreement usually saves a lot of time and money.

Satisfied parties

A successful outsourcing agreement is an agreement that both parties want to extend when the contract term is running out, and this is based on both parties being satisfied. One important factor for achieving this is the agreement being balanced and serving both parties' interests. Even if you cannot achieve absolute equality, it's important that neither party feels steamrollered or cheated. In all contract negotiations, the objective is for both parties to feel satisfied with the agreement.

Regulated cooperation during the contract term

Often, agreements on outsourcing FM services mean the parties entering a long-term partnership. Usually, such agreements include terms on flexibility, savings, development commitments for the supplier etc. For these conditions to be feasible, the customer and the supplier must cooperate. This cooperation must happen at an operational level for day-to-day operations, and at a more strategic level. Accordingly, the agreement should state how regularly the parties should meet, which people should participate at which meetings and the questions to be discussed at each meeting. If the parties can cooperate successfully, there are good prospects for the agreement to be successful—throughout the contract term.

Dos:

  • Set aside enough time to negotiate and write the agreement.
  • Write agreements so people who haven't written them can understand.
  • In the agreement, state that the parties should meet regularly to discuss delivery, etc.
  • The parties must co-operate for an outsourcing agreement to be successful.