Hello everyone and thank you for joining me today for our Third Party Thursday podcast. I’m Mike Campbell, CFO here at Venminder. Today we will discuss an element of budgeting for 2019. We’ll cover 5 vendor contract considerations when onboarding a new vendor or when determining whether to extend or renew a term with an existing vendor. This is very important to consider when budgeting for the upcoming year as this is a great time to negotiate key contract terms and pricing.
- When entering into a contractual relationship, make sure both your institution and the third party understand what each other’s responsibilities are. Sometimes it’s necessary to make changes to a contract’s language - and you should if you’re able to! Thoroughly review the agreement and include termination steps and language around what happens to your confidential information when the contract ends.
- While on the topic of terminating the contract, there are certain scenarios in which you’ll want to define the steps needed to quickly exit the contract, if necessary. For example, if there’s a contractual breach by the third party, such as a failure to live up to the SLA expectations or standards in the contract, or even a financial failure of the third party.
- If you are amending or renewing the relationship and you have the opportunity to modify the contract, think about the dates proposed in the agreement. Consider if the notification period if you choose not to renew the contract is adequate. The term of 180 days may be fine in some situations while only 30 days notice is much more suitable for other vendor relationships.
- I’d recommend looking for hidden costs within the contract. Are you contracting with a new Software as a Service (or SaaS) provider? If so, what do the training fees look like in the services agreement? Sometimes it may be all-inclusive while other times there may be a fee per each user trained.
- You may want to have a contract expert to review the contract before executing. Entering into a new contract can be a huge commitment, both from a cost and time standpoint. An attorney, paralegal, contract administrator or whomever the expert may be can be a huge benefit as they are able to review the elements of the contract to make sure it is accurate and enforceable.
When you really think about it, a well-written and well-defined contract is a win for all parties. It’s important that neither your institution or the vendor feels like they are stuck in a bad contract. If the relationship goes south, or quite simply you just don’t want to renew, then you should be able to easily exit the relationship.
I hope you found this podcast helpful. Again, I’m Mike Campbell at Venminder. If you haven’t already done so, please subscribe to our Third Party Thursday series.