Why Contracts Suck

Tuesday, November 24, 2009 by Tripp Babbitt

I had a hard time coming up with a title for this post, but I settled on "Why Contracts Suck" because it just . . . fit.  We run into them all the time no matter what they do, they follow us like bad body odor.  A stench that is handcuffed to our business or government.

So what is wrong with contracts?  Let’s name a few things:
  • They entrap the customer or sometimes the vendor.  Don’t we hate it when we sign a contract and the product or service just wasn’t as good as advertised?  I do and cell phone contracts are one of my least favorite.  It should be a crime to give that level of service and lock me in for two years.  But let’s not end there, we also have the government/private sector contracts that are even worse.  The longer the term of the contract, the more entrapping as circumstances are likely to change.
  • They contain SLAs.  Writing an SLA (service level agreement) is like chasing jello across the table.  It looks like you got one nailed and it slips through your fingers.  Usually SLAs are very inflexible and both sides are looking for an advantage instead of what works for the customer.  This is usually not the government in public sector contracts especially as they try to modernize entering the unknown and instead get a lesson that taxpayers pay for.
  • The time wasted in developing, negotiating and monitoring.  In private industry contract negotiations may take days, weeks or months depending on the size.  Government entities are notorious for lengthy times to put in force a contract.  Bids, BAFOs, negotiating games, etc. sometimes cost more than the contract itself.  These negotiations rarely involve people that are familiar with the work that will be effected assuring that waste will be locked in.  Further, contracts have to be monitored for compliance to the contract that adds additional costs.

A Better Way

I cannot dispute the need for contracts.  However, doing what is right in the eyes of the customer always costs less.  Our attitude should be one of doing what is right for the customer not a contractual one.  Those that pursue an advantage (vendor or customer) rather than pursuing a win-win contract stand to lose eventually (if not now).

The need for an understanding of what good service looks like and/or that the design and management of the work is our biggest opportunity for improvement should be foremost in the development and enforcement of any contract.  It is a better systems thinking way.

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com "Understanding Your Organization as a System" and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

Comments for Why Contracts Suck

Thursday, November 26, 2009 by Suresh:
Bryce..agree with you. As a Project Manager, when I work on DoUs or SoWs at the start of year, I;ve always noticed that certain clauses are dicey/vague and we know intuitively that this would be the trump card to handle the customer in such situations. Also I notice that the customer wants to start the work fast and rarely go into finer details of the SoW which sometimes might work to our advantage(only in the short run). The best thing is to go for a win-win and some smaller document like say Conditions to Customer Satisfaction & Conditions to Vendor satisfaction at project level which both parties might work to achieve towards in the projects. The larger SLAs and bigger T&Cs can be left for the senior levels at both ends to handle. For success, both the vendor and customer should be treated within the system whole and not as some aloof parties.

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