"Scope of work" clauses may not be complex, but they are often misunderstood in a contract. It's where I see the most mistakes and opportunities for future conflict. That's why Jeanette Nyden is back! In this episode of Negotiations Ninja we talk about how to negotiate scopes of work correctly, the common screw-ups that we see, AND what to do about them. Don't miss it!
Disclaimer: I am not a lawyer. This episode is for informational purposes only and does not constitute legal advice. Seek proper legal counsel if needed.
The first problem that Jeanette sees is that the scope of work in a contract isn't tied to the business objective. You need to be able to read the scope of work and figure out what the objective is. When Jeanette first started working on contracts, she'd always ask what business objective they were trying to solve. It should be abundantly clear.
In Jeanette's book, "The Contract Professionals Playbook," she provides a tool that helps professionals detail what the business objective is. You want suppliers to read the scope of work and easily say "yes" or "no." You also want to make sure that companies who aren't qualified self-select out. If they don't, it's a recipe for disaster.
Instead of beating up your supplier to achieve year-over-year cost savings, why not include really good acceptance criteria?
Lawyers put in template language that the customer has the right to accept work. It's up to the drafters of the scope of work to determine what the acceptance criteria are, who will accept it, and what "non-conforming" or "rejecting" means.
If you, as the customer, have properly developed the scope of work and the acceptance criteria are clear, you can hold the supplier accountable when something goes wrong. It becomes the supplier's cost to fix the good(s) or conform to service.
Many people don't understand conditional acceptance, so there aren't clear criteria for when you accept something is done to move on. You must take your time how to write acceptance criteria versus focusing on cost savings.
One of Lucille Ball's classic skits is when she's working at a chocolate factory. The assembly line is moving too fast, so she starts eating the chocolates. If you write the wrong KPIs or wrong statements of service level agreements, the machines might be working fast. But if the people can't keep up, you have a problem.
Think about call centers. If you call with a technical issue, your call may get answered quickly— but then you wait 45 minutes for a technician. The person answering the original call is just sorting. They're measured on their ability to pick up the phone—not solve the problem.
You have to look for disincentives, which are often in the scope of work. That's where companies have the power to make suppliers efficient. Map out the touch points. Do you want someone to answer the phone in the first minute? Sure, that's awesome. But you don't want the caller sitting on the phone for another 45 minutes. How do you address that? Those are the things that lead to return customers and where you build value.
Why is collaboration key when it comes to scope of work clauses? How do you build unknown unknowns into a contract? To enjoy the full scope of this conversation, listen to this episode of Negotiations Ninja!