How to Safeguard Your Project’s Success at the Contract Stage
Many projects face challenges that could have been avoided with more careful attention to the contract stage. Ironically, project managers are often brought in once the contract is already signed, missing the opportunity to shape the groundwork for success. The terms and conditions agreed upon early in the project are critical in determining whether it will run smoothly or face disruptions down the line. Below, I’ll outline key areas in contracts that are often overlooked and provide practical advice on how to protect your project from common pitfalls.
1. Clarifying Deliverables
One of the most common issues in contracts is the vagueness around deliverables. If the contract isn’t explicit about what is being delivered, when, and by whom, confusion can arise. Misunderstandings can occur when there is a mismatch between what the vendor assumes they’re delivering and what you expect. To prevent this, ensure that deliverables are clearly defined, including what is included in the price and what is not. Clear definitions will minimize the risk of disputes and ensure that both parties are aligned on expectations.
2. Defining Support Terms
Support clauses are often unclear, leading to misunderstandings about what is included and what comes at an additional cost. It’s common for contracts to offer a set number of “free” support hours, but the terms for these hours are often poorly defined. Who controls the clock? What constitutes “support”? Can support be used for internal discussions that don’t directly benefit you? To avoid this, ensure that the terms of support are explicit, including how time is tracked, what counts as support, and how you can manage and control those hours effectively.
3. Project Management Clarity
In many cases, vendors expect you to handle the project management, and sometimes they don’t even manage their own internal resources effectively. It’s critical to clarify whether the vendor will be managing their own team, your team, or both. Ask for specifics on what their project management entails—are they simply managing internal meetings you’re not part of? Make sure you’re clear on what constitutes project management, the hours allocated to it, and how the associated costs will be handled. This will help you avoid unexpected charges and ensure that project management activities are both necessary and transparent.
4. Training and Knowledge Transfer
A common practice is the “train the trainer” approach, where a few individuals are trained on the system or product, and they are then responsible for training the rest of the team. While this approach can work, it’s important to ensure that the trainers are fully equipped to teach others. If the initial training is flawed, it will result in gaps in knowledge across your organization, leading to additional training costs. Make sure you understand the scope of training, how well it will prepare your trainers, and what support will be available should issues arise.
5. Pilot or Trial Phases
You may be told that a product is “ready to go” with only minimal configuration, but it’s essential to test any product or system before deploying it with live data or customers. A trial or pilot phase will help ensure that the product meets your requirements and works as promised. Set clear success criteria for the pilot phase, and ensure that the contract specifies what happens if the product doesn’t meet these criteria. Having these terms written into the contract will protect you from discovering critical issues too late.
6. Deployment Support
Many vendors claim that their products are easy to implement, but the reality is often different. During the deployment phase, you’ll want to know that support will be available should something go wrong—especially when dealing with live data or customer information. Make sure the contract specifies what kind of support you’ll receive during deployment, and clarify the associated costs. If issues arise, you need to know that you can get timely assistance to minimize disruptions to your operations.
7. Payment Milestones and Controls
It’s crucial to retain control over payments throughout the project. Payments should be tied to the successful completion of milestones, and no significant sums of money should be released before the agreed-upon criteria are met. Avoid paying for products or services that have not been delivered or have not met the success criteria. This not only ensures that you’re getting what you paid for but also incentivizes the vendor to meet deadlines and deliverables on time.
8. Change Management Clauses
Projects are rarely static, and changes are inevitable. Without clear change management procedures, small alterations can lead to large, unforeseen costs or delays. Ensure that the contract includes a robust change management clause, outlining how any changes to scope, timelines, or costs will be agreed upon and documented. This provides a framework for handling changes efficiently and ensures that both parties are clear on the process for managing them.
9. Termination and Exit Clauses
It’s essential to define the conditions under which the contract can be terminated, either by you or the vendor. If the project doesn’t go as planned, or if the vendor fails to meet their obligations, the contract should provide a clear path for exit. Specify any penalties for early termination, as well as the return of intellectual property, data, or other assets. A well-defined termination clause ensures that you’re protected if the project goes off track and helps avoid unnecessary costs or legal disputes.
10. Intellectual Property Rights (IPR)
The ownership of intellectual property (IP) created during the project should be clearly defined in the contract. This is especially important if you’re developing custom software, designs, or processes. The contract should specify who owns the IP and how it can be used in the future. If licensing is involved, make sure the terms are clear and that you’re aware of any restrictions on the use of the IP after the project is complete.
11. Performance Benchmarks and KPIs
To evaluate the success of a project, you need clear, measurable performance benchmarks or KPIs. These should be outlined in the contract and linked to milestones. KPIs could include delivery times, product quality, system uptime, and customer satisfaction, among other factors. Clear performance criteria ensure that you can measure progress and hold the vendor accountable if the project falls short of expectations.
12. Service Level Agreements (SLAs)
Along with support clauses, include specific Service Level Agreements (SLAs) in the contract. SLAs define the expected level of service and performance, such as response times for issues, resolution times, and uptime guarantees. These terms provide a clear framework for expectations and ensure that both parties are aligned on what constitutes acceptable service.
13. Risk Allocation and Liability
Contract clauses should allocate responsibility for potential risks, such as data loss, security breaches, or service outages. The contract should specify who assumes responsibility in the event of an issue and clarify the limits of liability. It’s also important to define what constitutes force majeure (e.g., natural disasters or other unforeseen events) and how these will affect the timeline or performance.
14. Force Majeure
A force majeure clause is critical for protecting both parties in the event of unexpected situations that prevent the fulfillment of obligations. These could include natural disasters, political unrest, or other significant disruptions. Clearly outline what events qualify as force majeure, how they affect timelines and deliverables, and what recourse is available to either party in such situations.
15. Dispute Resolution Mechanisms
Despite best efforts, disputes may arise during a project. Including a dispute resolution clause in the contract can prevent costly legal battles. The clause should outline the process for resolving disagreements, whether through mediation, arbitration, or litigation, and specify the jurisdiction and governing laws.
16. Confidentiality and Non-Disclosure Agreements (NDAs)
If sensitive information is shared during the project, confidentiality and non-disclosure agreements (NDAs) should be included in the contract. These clauses ensure that confidential information, such as proprietary data or trade secrets, is protected during and after the project. Ensure that the scope and duration of the confidentiality obligations are clear and enforceable.
17. Vendor Risk Management
Finally, assess the financial health and operational stability of your vendor. A contract should outline the vendor’s obligations regarding financial stability and ensure that they have the resources to complete the project successfully. Additionally, consider including provisions that require periodic reporting on the vendor’s financial standing to ensure they can meet their commitments.
Conclusion
The contract stage is foundational to the success of your project. By addressing these key areas—clarifying deliverables, defining support, setting clear project management expectations, and outlining payment terms—you set the project up for success and mitigate potential risks. Don’t wait until problems arise—be proactive in ensuring your contract protects your interests and aligns both parties on clear expectations and responsibilities. A well-drafted contract not only minimizes risks but also lays the groundwork for a successful partnership and a smooth project delivery.