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3 Factors That Influence Contract Renegotiation

By August 11, 2021No Comments

It should go without saying that lots of things are going to change during the lifetime of the typical contract. How do you know if you can just keep using the agreement as-is or if it needs to be amended/renegotiated?

Here are three questions that will help you determine whether your contract is due for renegotiation:

1.Does the burning platform still exist?

Start by considering why the contract was signed in the first place. Does your company still have the same need for the products/services that they did when you originally signed the contract? Maybe there’s an even greater need, or maybe the contract met an immediate need but things have since changed. Determining whether there is still a Burning Platform will indicate the longevity of the contract.

2. Did you find unexpected contractual / SLA gremlins? 

Does the contract encourage the right behaviors? Does it align with the needs of your company and the provider? When you first engaged with the provider, there may have been things in there that you didn’t realize the consequences of for the sake of day to day management. Some of those may have come back to bite you, skewing the contract in the provider’s favor. Is the contract fair, or are changes required to bring parity into the agreement?

3. Is the product/service still profitable for your provider? 

As buyers, we aren’t always particularly concerned about a provider’s margins. The reality is that there has to be an incentive for a provider to invest in your account. Is the provider enjoying the profits they anticipated as part of their original business case? Do you have unsustainably high expectations of them, or do you expect them to give you work free of charge? Maybe you have demanded price reductions without a commensurate change in the scope of the engagement. That changes the opinion the provider has, their likelihood to invest in you as a client, and how the will react to future requests. 

For more questions that will help you maximize the impact of your key supplier contracts, download this free workbook.

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