Vendor Contracts: 14 things to watch out for

One of the tricks to a successful contract and vendor relationship is the actual strength and flexibility of the contract between both parties. Aside from the typical ways we setup contracts and use industry standards, we also need to consider the key areas that we should be watching out for… or better yet… what are the "gotcha’s" that you need to be concerned about?


If I was explaining this to someone in a leadership role, I’d want to make sure the following list was incorporated into our discussion. Narrowing this down to 14 areas was tough, but here goes:

  1. Vendor Capacity – Do you know what the vendor has in place today, what is planned to support future deployments?
  2. Increase in Volume – Can vendor delivery scale to meet increased demand or services? For example, if you do increase the volume of work, have you pre-defined your expectations for pricing and delivery?
  3. Transition – Has the transition been defined with explicit deliverables for pre-transition, transition and post-transition.
  4. Current Staff – What will you do with the staff currently performing services? Will they become part of or integrate with vendor delivery? Who is driving continuity and knowledge transfer?
  5. Contract Changes – How will both parties deal with changes to the contract?
  6. Vendor or Client Default – If something happens, has the model for remediation been defined prior to the contract execution?
  7. 3rd Party Default – Has the model for remediation been defined if a supplier in the chain of delivery defaults or is not able to provide services?
  8. Proprietary or Confidential Content – How will the vendor maintain the confidentiality of content across the delivery model?
  9. Governance – Is there a complete governance framework in place for managing the execution of the contract for all parties - you, the vendor and any 3rd party suppliers?
  10. Contractual Structure – Has the contract been structured with the right tools to sustain and address prospective areas of risk?
  11. Data Privacy and Security – Has the combined team addressed privacy and security requirements in a proactive and continual manner that does not pose risks?
  12. Risk – Have you looked at each operational aspect of the contract and identified what actions would be necessary if the risk becomes a reality?
  13. Communication – Does the contract address both internal and external requirements, with a pre-defined approach for effective communication and change management?
  14. Lack of Investment or Commitment – Do you have the appropriate commitment for all parties to address oversight, contract commitment and the proper access to required tools? For example, what does your contract specify regarding 3rd party software access rights?

The items above are just a handful of key considerations. There are many more items to consider and take into account when delivering a strong and flexible contract between both parties.