The contracts are “almost” in place and the funding is “almost” approved. The vendor asks if they can “work a couple of hours towards the project ” until the contracts are “finalized”. What should you do? A few hours won’t be that bad, right?
Wrong. Immediately turn down the vendor’s offer to work at-risk.
When at-risk work comes into play, it’s tempting to bite into that apple. But, let me tell you from experience, that apple is a poisonous one. If the contract falls apart or the funding disappears, you may be on the hook to pay the vendor for the at-risk work they performed.
On the other side of that coin, I’ve seen project managers engage in the practice of asking vendors to work at-risk while the “contracts are being worked out”. This is a practice that I don’t agree with, as it puts the vendor in a very difficult position.
In the end, buyers and sellers have to work together towards a common goal. Don’t put yourself or your vendors in a bad position that you’ll regret later on.
Termination for Convenience is a slippery slope in vendor management. Without it, you’re doomed to terminate only for breach. With it, you can end a dismal vendor relationship without a lawsuit. Termination for Convenience, fact or fiction?
Fact: Vendors will attempt to eliminate Termination for Convenience in your contracts every time. It’s your job to ensure that it stays in the contract. Okay, the ability to terminate the contract and any related Statements of Work within two days may be a bit harsh, but you should have a back fence position on it. I’ve gone as far as 120 days in order to ensure that Termination for Convenience stays in the contract. Remember, without termination for convenience you can only terminate for breach, which is a serious offense and is rare in most cases. Usually, Termination for Convenience is exercised when a vendor isn’t performing or holding up their end of the bargain. It is a safeguard for you and your company. Now, a vendor may come back and ask for the Termination for Convenience clause to be mutual. This is tough, and must be fully thought through. Is this a platform that would cause a major business disruption if the vendor felt like terminating one day? If so, think long and hard about allowing Termination for Convenience to be mutual.
Fiction: Vendors will tell you that Termination for Convenience affects their revenue recognition. Revenue recognition is not your responsibility, so don’t let a vendor talk you out of Termination for Convenience because they’ve laid this one on you. You’re the client, you’re paying for their services and if they don’t stand behind their product or services enough to give you some sort of Termination for Convenience clause in your contract, rethink the relationship with the potential vendor and be prepared to walk away.