Table of Contents:
- Pipeline Planning and Strategic Contracting
- Strategic Contracting for Profitable Growth and Partnership
- What Does Strategic Contracting Look Like in Practice?
- A Case Study in Strategic Negotiation
- Build Trust, Reduce Risk, and Save Money
- Key Takeaways
- About The Author, Bernita Tardieu
Pipeline planning is essential to grow your business. Most small business GovCons focus on revenue attainment without placing substantial (enough) energy on the terms of the contracts underlying said growth. Depending on your GovCon’s, 1, 3 and 5+ year plan, the type of contracts you compete for, win and operate under are as important as the revenue they bring your organization. Strategic contracting is key!
Strategic Contracting for Profitable Growth and Partnership
Strategic contracting impacts prime contracting and subcontracting efforts. More importantly, strategic subcontracting is a win-win for both parties fostering trust and partnership for a shared objective instead of a more adversarial perspective where partnership becomes a battle. While evaluating your 1,3 and 5+ year plans, evaluate the types of organizations you would like to work closely with to achieve your business objectives. Then comes the contract that weaves its way through the strategic plan to create the intended outcome – profitable revenue.
What Does Strategic Contracting Look Like in Practice?
While most contracts professionals focus on negotiating indemnification, limitation of liability (“LOL”) and choice of law clauses, strategic contracting focuses on price adjustment, changes, schedule, force majeure and other clauses. Instead of focusing heavily on the dissolution of the business relationship (i.e., indemnification and LOL), strategic contracting focuses on ensuring there are substantial contract parameters in place to work in partnership through problems and unforeseen circumstances.
The potential dissolution clauses are still reviewed, but the perspective is different. In short, if you are hung up on dissolution clauses without a path forward, evaluate whether you are working with the right prime, subcontractor or vendor.
A Case Study in Strategic Negotiation
For example, a large business subcontractor was adamant about one way – to its benefit of course – indemnification and LOL clauses. The small business prime was extremely frustrated because it was searching for a mutually beneficial relationship and saw the large business as unreasonable.
At this moment, the small business prime should take a step back and determine if the large business is an organization focused on partnership or will the large business eventually become an adversary. The small business prime did just that and had a big picture conversation with the decision makers at the large business. The parties were able to complete negotiations with mutuality and partnership as the focus. Yes, terms and conditions matter, but they should be drafted to support the end goals for both parties.
Build Trust, Reduce Risk, and Save Money
Overall, when contracts are entered into underneath a shared objective, it results in a business trust between the GovCon and customer and the GovCon and subcontractor or vendor. A shared objective works to mitigate business risk due to a greater understanding between the parties. It also results in potential cost savings (e.g., less markup from vendor/subcontractor). It can also change the focus of negotiations.
- Pipeline Planning and Strategic Contracting: Pipeline planning is crucial for business growth. Strategic contracting is key to this process, as the type of contracts a business competes for, wins, and operates under can significantly impact growth.
- Strategic Contracting for Profitable Growth and Partnership: Strategic contracting can foster trust and partnership, leading to a win-win situation for both parties. It’s essential to evaluate potential partners based on your business objectives and strategic plan.
- Practical Aspects of Strategic Contracting: Strategic contracting focuses on price adjustment, changes, schedule, force majeure, and other clauses, rather than just dissolution clauses. This approach ensures substantial contract parameters are in place to work through problems and unforeseen circumstances.
- Case Study in Strategic Negotiation: The example of a large business subcontractor and a small business prime illustrates the importance of strategic negotiation. It’s crucial to identify whether a potential partner is focused on partnership or could become an adversary.
- Building Trust, Reducing Risk, and Saving Money: Contracts entered into with a shared objective can build business trust, mitigate risk, and result in potential cost savings. Shared objectives can also change the focus of negotiations.
- Identifying Precarious Situations: An important part of strategic contracting is recognizing when you’re in a precarious situation and may need to partner with a non-preferred organization. This topic will be covered in a future article.
(Another important part of strategic contracting is identifying when you are in a precarious situation and have to partner with a non-preferred organization, but I will leave that for another article! 😉)
If you would like to learn more about the strategic contracting and procurement services offered by BOOST, please contact us.
About The Author, Bernita Tardieu
Bernita Washington Tardieu is a seasoned legal and contracts professional with extensive experience leading strategic contracting activities with the USG, international governments, and domestic and international commercial companies. In addition to compliant full life cycle contract and procurement management, she has in depth experience with joint venture creation and management, mergers and acquisition due diligence and integration, licensing and IP protection agreements, and reseller and distributor partnerships.