Why sign an MSA if POs work fine?

Our industry is going through a major transition period. To keep up with all the changes we need to change the way we make contracts. The contracts must be smarter and leaner. But we have to admit that not a lot has changed over many years in terms of the way we bid, negotiate, prepare tenders, and draft contracts.?

One of the distinct characteristics of our industry is the everlasting, NON-STOP stream of purchase orders (POs). And, more often than not, stand-alone purchase orders. Each set of POs has its own terms and conditions attached to it.?

Guys, seriously…I keep thinking about why create these tons of POs, each with a set of T&C, for each service provided, if there is an efficient, less time consuming, and less costly solution: Master Service Agreement, or MSA.

Whether you are on the operator’s or the contractor’s side, the MSA will make your life easier. And here are 5 main reasons why:?

1) No more negotiations of terms and conditions

You negotiate terms and conditions with a particular client (or supplier) once, sign an MSA agreement and from that moment onward every service/supply will be executed under these terms and conditions.?

2) Smooth commercial process

Once MSA is signed your commercial process will no longer require lawyers, the finance department specialists, no other support functions for that matter, because you already pre-agreed your terms and conditions before with all these teams having participated.?

3) MSA is a great business development tool

Why? Because an MSA is an intention to cover all big and small potential jobs which can happen between the customer and the supplier. While negotiating the terms and conditions of an MSA you go through all the services that the customer may need and the supplier can deliver. It is a way to see the potential for future cooperation.?

?4) Streamlined PO placement process

A favorite topic of most employees: KPIs :) Yes, procurement professionals have them too. And their KPIs are about streamlining supply chain management processes and reducing procurement costs. And, yes, of course, MSA is a great tool to smarten up those processes because terms and conditions are already pre-agreed.?

5) MSA provisions help with tenders and future negotiations

How does it work? Let`s say you have an MSA with a particular client and want to bid on a different project that this client issues. You can go with a standard approach and offer the client exceptions to the T&C of this particular tender. But if you have a signed MSA in place, you can offer them certain clauses and contractual regimes agreed under this MSA together with your exceptions. My experience shows that it does streamline the negotiations immensely.???

These are only 5 out of many reasons why you should chase the idea of having an MSA for your services – doesn’t matter whether you are on a client`s or supplier`s side. MSA is one of the tools which helps both contractual parties to get benefits in time and money value.?

For more tips and tools that will help you improve your company`s contractual practices, check my “Smart Contracts Blog” or/and treat yourself with my online training “Understanding Contractual Terms and Conditions”.??