A bad contract comes back to haunt the team

A tough negotiation over a software contract stretches over months, but the drama extends after the ink is dry

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My phone rang one day. It was my company's legal department, asking about a blasted contract I'd signed more than a year ago. I had since moved to a different division. But the day I had dreaded -- and predicted -- had come.

More than 12 months before, I'd been asked to lead a negotiating team for my company's services division. A bid team had tentatively won a contract to integrate a software package into a client's environment. The client had hired a tough negotiator to work with us to develop a contract.

As I got up to speed on the situation, I found we had jointly bid with a startup that had an inventory management system our client really liked. The contract was for using the startup's software and for our integration services to implement the software.

A long slog

It took us months to hammer out a deal -- a process that required our team to regularly travel to the customer's location. We were exhausted and wanted to wrap up the details.

Two areas of contention held up the process: Guarantees on system functionality and on system performance. I was careful to put the software provider on the spot for agreeing -- or not -- to those guarantees. I also structured the agreement so that the client would buy the software from the software company.

Finally, we were about done. It was nearing the end of the quarter, and business at my company wasn't good -- we needed this deal to work out. My bosses wanted it signed before we closed the books for the quarter. We were on target to do so, and I started to breathe easier -- then the client's negotiator called me.

New demands

The negotiator said he'd figured out that the startup was on the hook for the software package guarantees, and he wasn't standing for it. He wanted my company's "deep pockets" to stand by everything. He was unyielding. 

I made it clear that the contract had been structured that way from the beginning, and all parties had signed and agreed to it. I also pointed out the unreasonableness of this last-minute request. He had been in on the process and knew what had been happening. But he was adamant that the change be made.

I then told him that for us to guarantee the software performance we'd have to charge more money. He'd have to buy the software through us, and we'd have to mark it up significantly, since we were taking on additional risk. His response to that quite literally hurt my ear. We weren't getting anywhere, so agreed to talk later.

I hung up, went to lunch, and contemplated the options. My company was not doing well, and we badly needed a win. But I was worried about our company being financially responsible for the work of this startup. This software didn't have many installations, and I didn't know if it would really work.

Disagreement within the ranks

After lunch, I went to talk to my boss, who called in others relevant to the situation. I explained what was going on. The response surprised me: They asked what was the big deal.

I told them we couldn't add the software guarantees without charging for it, and in all likelihood, we'd put in extra hours to bail out the software vendor on customization and integration costs. I pleaded for at least a reasonable upcharge to cover likely costs in case we had to make good on the guarantees. Alternatively, I suggested we walk away.

They offered many observations about the situation and my approach, none of which were very complimentary. They wanted to close the deal -- immediately.

Yielding to pressure, I went against my better judgment and dropped the request for additional money. The contract was signed, and my company celebrated heartily. Everyone seemed happy and thought I was a hero -- but I didn't.

Time for a change

Though I was good at closing these deals, I realized I then faced the tougher task of living with them. Thus, I sought a different job. I was able to make the move, and a few weeks later, I was at a new position in a new division.

Which brings us back to the call I received that day: My greatest fears had come true. The software wasn't performing, and the client was asking my company to make good on the contract. Legal wanted to know how I could have agreed to the terms, while I tried to show (diplomatically) it was a larger management decision made by several parties. It was awkward, to say the least.

Evidently, my former boss had stepped into similar landmines before and shortly thereafter took a different position. We talked about it after some time had passed, and she seemed to have moved on from the situation. For me personally, there weren’t any long-term repercussions, except for the realization that it may be easier to face yourself in the mirror in the morning if you find a way to stick by what you feel is right.

Copyright © 2014 IDG Communications, Inc.

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