What are the best ways to ensure that vendors meet their contractual obligations?

In large complex projects, defining which specific activities need to be completed in order for a specific milestone to be achieved is the key. Terms like “including but not limited to”, “to the best extent possible”, “to do whatever is necessary”, “etc.” should be avoided. Use of such terms makes the Contracts ambiguous, lopsided and is one of the main causes of disputes. With all due respect to the Legal minds and Contract Drafters, a (Technical) Scope of Work document must remain a Technical document. As far as possible, the goal should be to attain a clear representation in an illustrative diagram or flow-chart or matrix form, which is even comprehendible by a 5th grade student - should be targeted to be agreed between the parties.

Focus on “what does it take you to deliver as promised”. Align your KPI’s to this and create full transparency with timely reporting. Create a culture in which you focus on the “Greens”. Accept “Reds” and support the recovery

KPI's are too often poorly thought out, or are applied generically through some contract template. KPI's must be achievable, they are not a cash cow, and definitely not a stick to beat the vendor with. Agree the KPI's around the SLA's or the "deliverables" of the supplier's contract (or project), and they will be far more effective.

In addition to defining clear and measurable goals, it is helpful to define the consequences of not meeting the goals. Will not meeting the goals be sufficient to terminate the contract? Or will it be enough to withhold payment of invoices until the goals are met - encouraging a vendor to get their act together ASAP if they want to get paid!

Goal, KPIs, MBOs, whatever you call them are great and certainly something that you should have in a contractual obligation, especially one that involved #purchasedservices and this definitely ranks as one of the initial steps with suppliers, but the very first thing is to look at the relationship that you have with those vendors. Is it transactional only or are you being collaborative to solve a problem? We have so many areas in healthcare today that are ripe for continual improvement, and vendors can be true partners to help your organization, however this needs to be the baseline of any discussion with a supplier... tell them the pain points (those can become KPIs later), and ask them to help you solve.

Data collection is very important in such scenarios, apart from soft records there must be complete tracking done manually as well. On time reminders follow up and a proper communication is a must. Moreover a back up plan to be set in order to mitigate any risk arising. Contracts must be up to date and duly acknowledged by authorized depts. Terms & Conditions documented must be mutually agreed to avoid future contingencies. Most importantly numeric figures in the contract should be taken care very well, as at the end of the day (Money is what Money does).

The best way to ensure that problems don't linger is to assign a primary point of contact for both parties. Ensure that there are regularly scheduled meetings with metrics that are tracked by both parties. If either party sees anomalies, find the root cause and redirect activities before it lingers or creates a larger concern.

It's crucial to remember that feedback from vendors serves as a valuable source of learning and improvement for both parties involved. Additionally, providing vendors with the necessary tools, training, and guidelines is paramount to their success. Furthermore, collaboration of internal and vendor stakeholders is not just an opportunity for synergy, but also a wellspring of innovation. When all parties are engaged and feel like integral parts of the team, fresh perspectives emerge, and creative solutions to challenges are more likely to arise. This collaborative spirit not only leads to more effective problem-solving but also strengthens the overall partnership.

For large, long-term contracts, proper governance is key. Governance can be in form of bi-weekly check-ins between project resources and key stakeholders on a quarterly/ annual basis. KPIs/ SLAs should be discussed on annual but a more frequent communication & escalation channel should be in force to complement annual meetings.

I believe it's crucial to concentrate our efforts on establishing (Clear and Strategic Evaluation Guidelines). This entails formulating distinct and measurable criteria to objectively assess the vendor's adherence to contract stipulations. Concurrently, it's essential to encapsulate comprehensive contract drafting to avoid misunderstandings, consistent oversight for continuous progress tracking, fostering open dialogue to address concerns promptly and promoting a collaborative environment, and instituting structured protocols along with penalty provisions to manage potential non-compliance efficiently. This holistic approach will streamline vendor management and ensure a harmonious and productive partnership.

Use a CLM tool if the budget allows. It can automates obligation tracking, alert for deadlines, and centralize documentation providing a significant help for the periodic reviews and audits automating certain aspects. On a tight budget, a shared spreadsheet can suffice. List all contractual obligations, categorize them, identify responsible parties, and set reminders. Regardless of the tool, add also these practices: Governance: Include quarterly o recurring meetings in the contract for reviewing performance and addressing issues. Exception handling: Define procedures for breaches, including dispute resolution. Mix automated or manual tracking with governance meetings for a robust approach to ensure vendors meet contractual obligations.

Contract reviews should be a 2-way interaction between the vendor and the organisation they provide for. The vendor should be able to raise any concerns without fear, in the same way their customer will be raising their own issues etc. Unfortunately, too often the review process is wrongly used as a "let's beat the vendor" session. Some of the vendors problems may be caused by the customer; i.e., slow processing of orders, late payment of invoices, poor communication... the list goes on. Yes, there will be times when you have hard conversations with a vendor over performance, or other issues - but if the process is not constructive for both parties, then goodwill is eroded - sometimes beyond repair.

I agree that in addition to cadence meetings, at the very least, quarterly check ins or reviews (QBRs) should take place. Don’t do this once or twice a year… problems can’t be managed and the outcomes of solutions may not be visible to all if parties don’t take the time to check in. I think about employee performance and how we manage, or how we should manage it… having quarterly reviews and check ins gives time for behaviors and expectations to adjust and improve vs. an annual review which is only backwards looking and doesn’t allow for real time monitored growth.

Yes, all issues should be addressed. For issues on your side, early and transparent action might prevent it from becoming a dispute (however, this might depend on the level of trust - some contract parties might exploit too extensive transparency) and not least provide valuable learning for your own organization. And for issues on the side of the other party, even when you do not want to pursue it, a highlighted and discussed issue can be included in the goodwill log and brought to the table if needed later.

All issues should be sent in writing with clear explanation of the issue, and the expected timeframe for response. Too many verbal complaints (by either party) are not recorded, but it is important that they are for transparency. If the contract is written well, then the process for resolving issues should be clear for both parties. That said, if either party is having to resort to using the contract, then there is a much bigger problem.

Transparency cannot be stated enough… mistakes happen, face them head on and boldly and create solutions that assure they aren’t repeated. As the article states, don’t ignore or avoid things as the situations may be worse. Additionally taking these challenges head on reveals a willingness to work to make it better, solve the problem and uphold any contractual obligations and likely keep things away from arbitration or litigation.

Be transparent, factual and consistent. Don't forget that anything said orally that is not transcribed in writing (particularly in the minutes of meetings communicated to the other party) does not exist in litigation... and that anything you have written can be used in court if an amicable agreement is not reached.

You should try ever form of communication and engagement before escalating a matter into a formal dispute. The dispute route will always be there, but once it starts, it changes the dynamic irrevocably and there is no going back. Even if it involves more compromise, a negotiated settlement will almost always be a better outcome for all parties, especially from a time and cost perspective.

A big trend these days, especially in healthcare are “value-based” agreements, and often those may have rewards for outperforming on given KPIs and metrics. While you as a “buyer” push to get the most you can from your suppliers, understanding that a carrot may exist for them to drive higher performance can be a welcome approach when you enter negotiations around contract terms.

Be careful, however, not to fall into the trap of constantly encouraging your supplier when you're not satisfied with his performance, for fear that he won't perform his services and that you'll find yourself in a tricky situation... it's very difficult to defend that a supplier has been very bad throughout the performance of his services when he has multiple emails from you expressing your satisfaction.

As discussed above, if the parties keep the lines of communication open while the services are being performed, and if the parties measure the vendor's performance against KPIs or other metrics, then both parties can make adjustments going forward by signing addenda or amendments. The downside of multiple addenda and amendments is that they make it harder for both parties to understand their rights and responsibilities because you have to line up the documents. In some cases, if the parties have a larger number of changes they want to make to an agreement, then a good approach is to restate the contract, which essentially replaces the original contract document with a new document (often referred to as an amended and restated agreement).

The best way is to not call them a vendor and to not treat them as though they aren't important. Instead include them as a stakeholder. The people working for the "vendor" company, no matter what product or service they are providing, want to be valued and considered part of the broader team, not treated as though they are on the outside, or somehow "less than". Connect them to your team's purpose, goals and vision for success. Help them be successful. And take every opportunity to recognize their contributions and value to the team. When you do this, you'll set yourself apart. You'll become their preferred client and gain a competitive advantage.

Measure the performance of the relationship, not the supplier. Be brutally honest with yourself and transparent with them on how well you executed agreed success factors. If you fail to give them timely forecasts and advance release to produce, you can’t hold them accountable for any impacts to lead time.

If you're in a contractual relationship with any organization, the mutually agreed upon goal is to move the business forward to accomplish mutually agreed upon goals. It requires honestly, transparency, and accountability on both sides. Understanding each organization's expectations and points of view are critical in working through issues that may arise. Working collaboratively with a clear vision of what the end goal is makes a difference. Focusing on quality, taking time to do things correctly, and being honest about what is needed or what shortcomings may appear will keep everyone on track and rowing in the same direction.

The best way is to have a well defined goal, make sure it is attainable and communicate periodically to make sure that everything is in line with the aim...

There is no better guarantee of good performance from your vendor than a thorough counterparty review. Far more important than the words in the contract is the professionalism, behaviour and track record of the counterparty to that contract. Do your homework on who you are dealing with, check references and get comfortable with their ability to perform.