A problem—that I see often—is that after contract execution, companies realize that they aren’t getting the full value of what they thought they were going to get. How do you prevent that from happening? Do you write the scope of work clause broadly, so it can flex?
Jeanette Nyden points out that the Covid lockdown impacted the US ports. 4-6 months after the recording of this episode, the supply chain will be impacted by the ports being closed and the shutting down of manufacturing in China. So if you have a long-term relationship with a vendor, you have to build a flex for that.
But she believes that there’s another answer that you can utilize: Collaboration.
Why collaboration is key
Ultimately, you have to work collaboratively with your suppliers—which isn’t something procurement likes to do. Jeanette advises that you select suppliers roughly on cost, culture, and capabilities. Then she would allow time to draft the scope of work together.
Once a supplier is confident they’ll get the award, it will be more open with the procurement team to point out things that are missed. Maybe you don’t have the final permits for a construction site and won’t have them when the contract is executed. New work would include everything you can’t anticipate being part of the permit.
If you don’t address that there might be changes, you’ll likely end up in a dispute. Procurement has the “I’m the boss” mentality. But as things get more complex, the supplier has to be your partner. And partners get a seat and a voice at the table.
Overcoming the fear that you’ll get hosed
If you give a vendor/supplier too much leeway dictating scope, will they have too much influence over timing, delivery, and payment? Many procurement people are afraid they’ll get hosed. The reality is that procurement can facilitate the production of scope but they aren’t experts in the work. They need experts to advise them.
But many companies have lost experts to attrition. Jeanette points out that In 2025, 75% of the US workforce will be Millennials because we’re going to lose qualified and talented individuals to retirement. Those individuals could figure out how to write a statement of work by being given a computer and time.
Many young people who have never crafted scope of work clauses. Through no fault of their own, time and a computer won’t solve it. They don’t know what it should look like. How do you deal with the fluidity you need?
That’s why collaboration is important. Without confidence that you know what you’re doing, you will get hosed. You have to be able to hold your own.
Jeanette has worked collaboratively with a supplier to develop scope of work multiple times. It can be done if you don’t know how to do the work but do know how to negotiate.
To learn more about this simple yet surprisingly complex clause in contracts, listen to episode #315 of the Negotiations Ninja podcast with special guest Jeanette Nyden.