“I let my lawyers take care of my contracts”

The title above is a frequently heard observation about contracts & lawyers. Usually, this goes together with statements like “we negotiate the contracts and then file them immediately” or “contracts are only useful in case of conflicts”.

Reach of a contract

Are those statements really the right thing to do? Are we talking about the whole of the contract or just (part of ) the T&Cs (terms and conditions)?

To make a contract in the project business (infra, construction, turn-key equipment, power & renewable, oil & gas), the agreement on price + time + performance should be captured. The T&C’s are therefore “only” an important but supportive part.

Components of a contract

In my opinion (not based on theory but rather on decades of experience), the most important building blocks of a contract are as follows:

  1. A clear scope of works with clear roles & responsibilities to understand what is “in” and what is “out” and “who does what”. Vagueness will unavoidably lead to conflict. Lawyers usually don’t take an active role in defining the scope of works and accept it as a given. The Design / Engineering department plays the central role. The performances and warranties are essential KPIs of the quality of the project and this is reflected in the performance guarantees and defects liability period & conditions.
  2. An unambiguous agreement on the time frame(s): who does what “when”; this includes both Employer and Contractor milestones; with delay LDs in case a party doesn’t fulfill its engagements. Other than the proper formulation of the concept for delay liquidated damages, lawyers do not interfere with the programme, the critical path, the intermediate milestones and completion dates. The Schedulers are the masters of the game.
  3. Of course, the price, which depends on the scope of works, the quality requirements and the agreed time for completion. It is established by the Commercial Manager. Often, the contract price is the result of extensive price negotiations.
  4. The project execution processes establish how to get paid, how to obtain variation orders and extensions of time, what are the notice periods and the times to respond, act or correct. This is the realm of Project Managers, Contract Managers and Quantity Surveyors.
  5. The risk allocation: Contractor’s risk, Employer’s risk and risk transferred to third parties (including authorities, back-to-back subcontractors and insurers). An area for Logistics & Sourcing, Insurance Experts and also Commercial & Contract Mgrs.
  6. Explanations of what happens if and when things go wrong: suspension, termination, indemnities, limits of liability , dispute resolution etc. This is the area where where contracts & Lawyers come together. Lawyers are excellent at defining and defending these points. But also standard contracts (FIDIC, NEC, World Bank etc) cover these subject and can be adopted without significant modifications.
  7. The proper structuring of the contract for tax purposes: onshore/offshore split, transfer of ownership, who is the importer, VAT, import taxes etc. A subject to be dealt with by the Commercial Manager together with Tax Experts.

Commercial & Contract Manager

The coordinating person for all of the above aspects is the Commercial & Contract Manager (wording used in a broad sense as done by the IACCM). Before the contract award, this role is mostly fulfilled by Sales & Tendering Managers who then transfer the project and the coordination role to the Project Manager / Director and the Contract Manager during the project execution stage.

Internal Legal Advisers, with a good appetite for diverse subjects, can take care of several of above subjects. External Legal Counsel usually focuses on “subject 6” above.

In order to find win-win solutions for projects, “subject 6” should not draw too much energy from the parties. As mentioned above, standard contracts (FIDIC, NEC, World Bank templates etc) can provide adequate wording for these T&Cs.

Contracts & Lawyers – Conclusions

In the old-school view, “contracts” are entirely handled by lawyers. The reality is quite different. It is however still the case for some ancient laws (law n° 71-1130 of 31 December 1971 in France seems to reserve contract advice to lawyers and other legal professionals) or outdated practices (where projects were executed based on habit rather than contract).

A too narrow view about contracts makes people believe that they are something separate from the reality of the project and can be handled in an isolated way. For me, this is a recipe for failure.

Let us realize the full reach of a contract and the central role developed by the commercial & contract managers. At the same time, we will all appreciate the great knowledge and rigor of lawyers when it comes to the “sixth subject” above.

This blog has many publications related to tenders & contracts for the project businesses. We can, for example, recommend the following one: Contract negotiation team, setting-up a balanced team

Talking about contract management, what are the latest evolutions and how can AfiTaC support?

In this post, we are talking with Jan Bouckaert about the evolution in contract management and the role AfiTaC can play in this.

What is evolving for contract management in the broad sense?

Jan: Some of the latest evolutions in contract management are as follows:

  • People are talking about new technologies establishing contractual relationships based on artificial intelligence. Often, proper reading of the contracts made by humans would already be a good start, wouldn’t it ?
  • Business relations are ever more international with inherent risks: fiscal exposure, disputes, integrity issues etc.
  • Even Small and Medium sized Enterprises are obliged to develop their contract management.
  • Negotiations are tough, even though win-win solutions should remain the objective.
  • Companies reduce their internal resources, reducing fixed costs but bringing overload, lack of expertise etc.

Out of curiosity, what does AfiTaC stands for?

Jan: AfiTaC is the abbreviation of “Advice for international Tenders and Contracts”. We are passionate about contracts. An important part of what we do is promoting Contract Management to a broader public than Lawyers and Contract Managers/Administrators. Our blog and exchanges on LinkedIn reflect this. For specialists, we challenge the status-quo based on real-live situations and arguments; for people building up their knowledge, we provide valuable learning bricks.

What can AfiTaC do to accompany the change?

Jan: Apart from our blog available in 4 languages (English, French, Portuguese and Dutch), which is quite unique, we also propose customized/adapted services. AfiTaC offers complementary support to leverage your teams at a far more attractive cost than external legal services and covering a broader scope – from contractual to commercial subjects, covering topics ranging from contract wording, to insurance, financial & tax issues etc. We do this based on 20+ years of experience.

Concretely speaking, how would we work with AfiTaC?

Jan: We will set-up a collaborative platform (cloud-based storage on servers in France, protecting your data) enabling flexible interaction: you can upload your questions and retrieve the answers. This will allow better tracking and sharing than a traditional e-mail solution. However, if you prefer a more traditional way, we can adapt. Of course, confidentiality, loyalty and professionalism are our guiding principles.

Can you tell us a bit more about the services you provide?

Jan: We will give you some examples of how we can create value for you:

Contract Hotline:

Based on a monthly fee, your team can contact us for commercial and contractual issues and receive a reply within 24 hours. The monthly fee will be adjusted, after prior agreement, based on the actual usage of the hotline in the preceding month: no bad surprises for you, visibility upfront and you only pay as per the value we create for you.

Negotiation Coaching:

In B2B relationships, surprisingly, the possibility to create or destroy value during negotiations is still largely underestimated. Often, the commercial staff receives the company’s wish list (must have’s, golden rules etc) but is lacking the arguments to defend their case and, even more, the skills to negotiate. Our coaching can make your team stronger and more effective in finding win-win solutions with your business partners.

Risk Management:

We can audit your contracts, provide a structured approached for risk management, set-up a contract risk scoring system and organize or participate in your risk boards.

Training:

Together, we can establish your team’s needs and build an appropriate training: commercial awareness, contract standards, negotiation practice, international business, contract management etc.

Integrity:

We can set-up a positive environment for this important, but often scary, subject so that your teams can make sure they remain proud of the healthy business environment in which you operate. This contains three steps: (i) establishing an adapted integrity policy and statement, (ii) providing training based on real-life examples and (iii) facilitate an alert mechanism to be used if the team fears that certain practices put their proudness at risk. This will be adapted to SME’s: compact and straightforward, not so sophisticated as in large companies who have dedicated resources for this.

Mediation and Arbitration:

While our goal is to avoid disputes to escalate by anticipation (with all the above services), we also support dispute resolution in a fast, cost effective and balanced way.

Can we test these services to see if they are useful for us?

Jan: Yes, you can. Our principle is to facilitate, as much as possible, the access to our services. You can step in as low as you want and hopefully expand when you see the value we create together.

Contract Management & Music, Time Bar struggle for Muse

When a Contract Manager receives a new contract to follow, probably the first thing she/he should look at is this: Is there a time bar for claims? 

The answer to this question will dramatically change her/his behavior during the contract execution. Together with Muse and their song “Time is Running Out” (of which we have quoted the relevant lyrics here below), we will analyze the consequences of time bars. You can listen while you read by clicking on the below link to YouTube:

What is a Time Bar?

Unfortunately, it is a not a bar where your can spend as much time as you want. Many definitions are available all saying more or less the same. I randomly present you the one given by “The Law Dictionary” (https://thelawdictionary.org) : “Stoppage put on exercising a claim or judgment after a period that was established by a law or custom.”

Original justification of Time Bars

Time Bars were introduced decades ago because Contractors / Employers used to pile up potential claims “just in case” to only launch them at a later timing most convenient to their interests. Usually this coincided with the time they had the maximum bargaining power, for example because the project was already built (for avoidance of counter-claims, no more risk of suspension etc).

In accordance with good contracting practice, both parties should be more transparent and should be pushed to table any issues as soon as they are aware of them, as soon as practical. Time Bars became a usual practice … even though one could regret it between mature and reasonable contracting parties.

The consequences of not claiming within the Time Bar

You will be
The death of me
Yeah, you will be
The death of me

Bury it
I won’t let you bury it
I won’t let you smother it
I won’t let you murder it

When you are beyond that maximum period to formulate your claim, it will simply be barred, not accepted anymore, “buried” with the words of Muse. Anyone can understand that feeling of injustice when the facts objectively show that your claim is valid but the clock says that the time is over. The three last sentences of the above citation show this feeling of resistance, this frustration.

Contractor’s feelings and reactions

Most of the claims barred by this mechanism are Contractor’s claims, so let us see with Muse what reactions this will bring to the Contract Manager.

I think I’m drowning
Asphyxiated
I want to break the spell
That you’ve created

…I want to play the game
I want the friction

The Contractor will feel asphyxiated, under huge pressure to present its claims in time. The Contract Manager, in order to protect himself, will rather formulate too many claims than too little. She/he wants to play the game.

Our time is running out
And our time is running out
You can’t push it underground
We can’t stop it screaming out

And we end up with a “claim machine”: claims for anything. You never know it will be useful. Umbrella claims, we will always be able to attach something to this.

I wanted freedom
But I’m restricted
I tried to give you up
But I’m addicted

Now that you know I’m trapped
Sense of elation
You’ll never dream of breaking this fixation
You will squeeze the life out of me

These “just in case” claims generate a lot of work for both parties, the one formulating and the one reacting. The involved resources don’t add any value if the claims are not legitimate, not substantiated. Key project players are drawn away from the real pro-active project execution. And, the positive atmosphere of the project is spoiled: “what, another claim! That’s outrageous”, …

Time Bars in FIDIC contracts

FIDIC 99 has the Time Bar in sub-clause 20.1 of Red, Yellow and Silver Books with the following wording: “If the Contractor fails to give notice of a claim within such period of 28 days, the Time for Completion shall not be extended, the Contractor shall not be entitled to additional payment, and the Employer shall be discharged from all liability in connection with the claim.”

This clause clearly spells out the hard consequences. If you are late, you loose it all. Never mind how justified your claim is and how impacting the consequences are. This also applies for late claims related to Employer’s acts and Risks. On top of that, the Employer doesn’t have an equivalent Time Bar in its claims clause, sub-clause 2.5.

Fortunately, the new clause 20 in FIDIC 17 deals with both Contractor’s and Employer’s claims in the same way. The time bar is now in sub-clause 20.2: “If the claiming Party fails to give a Notice of Claim within this period of 28 days, the claiming Party shall not be entitled to any additional payment, the Contract Price shall not be reduced (in the case of the Employer as the claiming Party), the Time for Completion (in the case of the Contractor as the claiming Party) or the DNP (in the case of the Employer as the claiming Party) shall not be extended, and the other Party shall be discharged from any liability in connection with the event or circumstance giving rise to the Claim.”

General recommendations about time bars

  • Do not set Time Bars too short; the minimum is 28 days. Setting it too short will inevitably lead to a “claim machine” environment where the parties start formulating a continuous stream of claims so that they can always find a way to argue that they started the claim in time. I would recommend time bars not to be below 90 days.
  • Make the clause symmetrical / bilateral, meaning that the same time bar and duration should apply to both parties. During negotiations, parties tend to become much more reasonable when they know the same provision will also apply to them.
  • Ideally, the entitlement to claim should only be reduced to the extend that the other party was unable to mitigate its losses due the claim being late. This will avoid barring of obvious entitlements that could not be mitigated anyway.

Let us stop with the stereotypes that Contractors are just claim machines and look for the reasons. The vicious circle of ever lower time bars is not going to help. The above post and the music of Muse allow us to rethink our ways of working in a positive atmosphere outside of the rush of day-to-day projects.

This post is part of our series illustrating important contract management subjects by music to make it more fun. You can click here to see other posts of that series.

Contract Management & Music, Delay LDs for Natalie Imbruglia

Contract Management, in general, and liquidated damages, in particular, are serious subjects. But, nothing better to learn about serious subjects than humour and fun. Therefore, we continue this series drawing ideas and concepts about contracts from music as we started with Satisfaction (The Rolling Stones).

I admit it is difficult to imagine what “Torn” from Natalie Imbruglia has to do with delay liquidated damages (delay LDs). But give me a minute and you will see. I’ll show it with extracts from the lyrics. If you want to listen while your read, here is the link to YouTube:

Projects normally start on good terms. The Employer selects the Contractor because he trusts him and expects him to do a good job, to finish in time respecting the quality & performance requirements.

I thought I saw a man [Contractor] brought to life
He was warm, he came around like
He was dignified

Unfortunately, often, at some point of time, things start to go wrong. The quality of the communication, or rather the lack of it, is almost always a good indicator of this decline:

Conversation has run dry
That’s what’s going on
Nothing’s fine

When constructive communication is not re-established and things continue to go wrong, the parties end up not delivering anymore. No more confidence, slower progress, project is late with huge potential losses for the Employer, Employer stops paying, Contractor starts complaining/claiming, ever slower progress… the vicious cycle.

I’m torn
I’m all out of faith

Illusion never changed
Into something real

You’re a little late
I’m already torn

Maybe in the emotional life of Natalie, there is no easy solution. But in construction/contracting business, there is one: Delay LDs. Delays in big infrastructure, construction, oil & gas, renewable or power projects are very foreseeable. No need for a fortune teller. Just anticipate on the issue.

So I guess the fortune teller’s right
I should have seen just what was there
And not some holy light

These liquidated damages are not a punishment, not a penalty, not something to scare the hell out of the Contractor but should be a genuine pré-estimate of the losses the Employer would face if the Contractor is late. Typical wording goes as follows: “The Parties hereby acknowledge and agree that the terms, conditions and amounts set forth for liquidated damages are reasonable and reflect a genuine estimation of the damages which shall be incurred by the Employer. The amounts of these payments are agreed upon and set forth by the Parties because of the difficulty of ascertaining on the date hereof the exact amounts of damages that the Employer will suffer as a result of the Contractor’s failure to meet the schedule under the provisions of Sub-Clause xx [Time for Completion].”

And now I don’t care
I have no luck
I don’t miss it all that much
There’s just so many things
That I can’t touch

No need to blame. Contractor can have bad luck on projects: a mistake in the design, a critical path item that was not fabricated to the right quality standards, something got damaged during installation. But Contractor will be fighting to avoid this knowing the consequences upfront. No better motivation for proper project & risk management than LDs. In all fairness, Employers should also avoid applying liquidated damages for events that are not under the control of the Contractors: Employer’s acts & omissions, force majeure events, delays by authorities etc.

Contractors must be sure that these delay LDs are exactly what they will pay and nothing else, that they are the sole and exclusive remedies for being late. Typical wording: “The payment of the liquidated damages for delay shall be the sole and exclusive remedy due to the Employer for the delay.”

The LD rates and caps should be reasonable. Contractor should not be losing all of the (small) profit they can make on a project just by being late a single day, a week or even a month. A typical order of magnitude is 2% of the contract amount for each month of delay and this capped to 10% of the contract amount, maximum 15%. Before reaching this cap, there should be no right to terminate the contract.

Last but not least, the fact of paying the delay LDs should not affect the continuation of the project execution. Typical wording: “The payment of the liquidated damages shall not relieve the Contractor from its obligations to complete the Works.”

Join the Construction/Contracting business, Natalie, and you won’t feel that bad if the someone is late! Proper delay LDs provisions protect both Employers and Contractors.

Top image: Liquidated Damages by Nick Youngson CC BY-SA 3.0 Alpha Stock Images

Contract Management & Music, “I can’t get no satisfaction” (The Rolling Stones)

Because Contract Management should also be fun, we are now launching a series of posts based on popular music. This is the first one but keep tuned to https://afitac.com if you want to read the others when they come out. Better to bookmark or to connect to the LinkedIn page by clicking on the icon on the right.

So, here we go and start with “Satisfaction” from the Rolling Stones. If you want to listen to it in parallel to reading this post, you will find your way to YouTube here:

Satisfaction in contracts

Often, we find the word satisfaction in contracts in those provisions where the “works have to performed to the satisfaction of the Employer / Engineer”. For Employers that makes perfect sense! They are paying the Contractor for the works and hope to be satisfied with the results.

What’s the problem with this?

Contractors are not in the business of selling satisfaction; there are other businesses for that ;-). What Contractors do sell is to execute the works in accordance with the contract.

What are we missing? Wouldn’t the Employer/Engineer automatically be satisfied if the works are performed in accordance with the contract?

Well, if humans were like robots and programmed as follows: [if works are in accordance with contract, then be satisfied], there would probably not be much of a problem. But human nature is different. Mick Jagger is clearly singing it. He can’t get no satisfaction. “Cause I try and I try and I try and I try I can’t get no, I can’t get no”. However white his shirts would be, he wouldn’t be satisfied because of some unrelated issue. He didn’t like the man that was promoting the detergent.

It is very difficult for a Contractor to get the Employer 100% satisfied. That’s like aiming for perfection. Reasonable contracts do good efforts to avoid this pursuit of perfection. A good example are the provisions related to substantial completion. Minor defects can be put on a punch list to be resolved after the taking-over.

How to fix it when you encounter satisfaction in contracts?

Simply replace wherever is stated “the works shall be performed to the satisfaction of the Employer/Engineer” with “the works shall be performed in accordance with the contract”. That’s an easy fix.

I see some Employers/Engineers wonder that this will put a heavy burden on preparing the contract. Yes, a contract should be well made with a clear scope of works and clear rights & obligations. Don’t forget that executing the works is even more complex than writing the contract and the Contractor should concentrate on that. Not on the pursuit of pure satisfaction of the Employer/Engineer that may be unrelated to the works. I hate to imagine the compliance problems to reach satisfaction in contracts.

Put the right people on preparing the contract, keep it simple and avoid ambiguity (often introduced by either party with the intention to benefit from it, later on, in case of conflict).

If it is too much of a burden to correct the contract at the last minute or if there is resistance to change these words (“we have always written it”), you can still “program” the Employer’s Representative or Engineer like the robots we mentioned above. Put a definition around satisfaction. Something like: “wherever ‘to the satisfaction of the Employer/Engineer’ is stated in this contract, the Employer/Engineer is deemed to be satisfied if the works have been executed in accordance with the contract”.

Thank you, Mick, for helping people-working-on-contracts have fun when thinking about how contracts should be! Music helps us to relax. And that’s good for becoming reasonable and satisfied! More to come in future posts.

 

 

Contract Management: are contracts cast in stone?

Contracts cast in stone

I share with you a post (translated by AfiTaC from French) from Jean-Charles Savornin, a thought leader in France on contract management because I fully agree with him: 

Summer is an incredible time when we live differently from the rest of the year: on vacation, elsewhere, with a different climate …

This year, I watched Fort Boyard [a typical French television show opposing two teams on a variety of activities in a fortress]. One of the tests refers to the maxim DURA LEX SED LEX written on a lintel (here is the link with the contract management …)

The law is hard, but law.

This sentence, quite explicit, makes reference to the law. What about the contract then, which applies between the parties signing up to it? Is it also hard, but the contract?

Well, that’s the beauty of the contract. It is, as I often say, the reference of the relationship between the parties, the Bible of the project … with the difference that we can change the contract, not the Bible. So, the contract is more flexible and editable. It cannot be seen as “hard” or unfair. Remember that the contract was signed by the various parties, and that there is little, in the “usual” business at least, obligation to sign (no one puts a gun to your head).

So, let’s stop saying that the contract is hard, that it is unfair, that it is badly signed, that it should have been written differently. And let’s live by Jean-Jacques Rousseau’s sentence:

Obedience to a self-prescribed law, that’s freedom.

In terms of contract management, the contract represents this law that has been prescribed. But by “whom”? I can already imagine some persons opposing that they are not responsible for the contract signed. The “whom” refers to the entity for which you work and which you represent in your mission. Clearly, if your company has signed a contract, you are part of the “those” who have self-imposed this contract. And if you do not like it, you can take action; you can propose a modification of the contract or change jobs.

What freedom have we gained?

It is all that can be done in the framework of the contract and all that the other can do as well. “One” then has the freedom to do what is written and not to do what is not written. But “one” is especially free to propose a modification of the contract if something is no longer appropriate. And “the other” has the freedom to accept, or not. This the contract defines the playing field.

I use the word “playing” on purpose. A contract must be seen as a space of freedom in which your inventiveness can express itself to realize the opportunities. Because these opportunities will make your project a success, or not. These opportunities will allow you to move forward and offset the risks. There are risks … and there will be problems. Just as there are opportunities … and there will be good news. Besides, is the pre-award phase not called the [sales] opportunity phase in many companies? The contract is an opportunity for your organization. And you must accompany the execution of this opportunity to turn it into good news!

So, stop seeing the contract as a constraint, see it as a degree of freedom.

Personally, I’ve been working quite a lot on contract negotiations at pre-award stage. Later on, during execution stage, I was often surprised about the detached way the project team spoke about the contrat: “unfortunately, the contract says the following” as if it was cast in stone. I usually replied : “yes, while making the contract, we [- to emphasize the deal between persons and companies -] agreed on the following for this reason and have tried to write it down. It is not cast in stone. If now the circumstances have changed or you want to modify something, please do agree with the other party just like we agreed before”. 

You can find the original post on Jean-Charles Savornin’s blog at the following location (available in French only): http://www.contractence.fr/de-fort-boyard-a-jj-rousseau/

EPC Contracts: win-win negotiation opportunities during contract nego?

You have read books, articles, blogs on contract negotiation. Or, even better, you did a real negotiation training. All have praised the importance of win-win negotiation.

There you find yourself in your next tough negotiation. All the discussions are on limits of liability, caps for liquidated damages, rights to terminate the contract etc. Subjects, where a bit more protection for one party, automatically means a bit less for the other party. You hesitate. Are those articles or training courses not realistic, not worth your time & money, just wishful thinking?

The answer is: Yes, they are OK; but you need to find some practical applications.

Win-win negotiations are really a powerful way to reach balanced contracts. But maybe the articles, books and training are a bit too theoretical for you to easily apply what you have learned in actual negotiations? You need to prepare for the negotiations, identify the needs – sometimes hidden – of your Client, rehearse the arguments, … Have you thought about some coaching to get going?

Stay tuned to this blog where we analyse some concrete case studies. You can also follow us on LinkedIn as “AfiTaC.com”.

Here you will find some links to relevant articles :

EPC Contract , win-win negotiation case study, early completion bonus
EPC Contract, win-win negotiation, LNTP on private investment project

For other articles on negotiation click here.

AfiTAC.com is the blog on commercial and contractual subjects for the Project Businesses (Construction, Infrastructure, Oil & Gas, Power & Renewable, Water Supply & Sanitation, etc). Its objective is to stimulate reflection, learning, convergence to balanced contracts and positive dispute resolution. You can subscribe to our newsletter by writing to “newsletter@afitac.com”. You can also connect to our LinkedIn page. Engagement with the readers is what keeps us going. So, don’t hesitate to exchange with us by commenting here below, liking our publication on LinkedIn and writing to us “advice@afitac.com”. 

Contract negotiation: after a long day of negotiation… 6 essential things to do

Intro

Negotiations often mean several consecutive days spent in a cold, air-conditioned, stereotype meeting rooms, many times without natural light, speaking and listening for hours, getting an overdose of coffee or diet coke, eating sandwiches in the meeting room to save time, … No doubt, we would all want to hear that, after a long day of negotiations, the best is to go out, eat some delicious food and have some beers in a bar because you deserved it. You did, but let us look at it a bit deeper to see if this is really the best approach.

Analogy

From time to time, I go with some friends to have a long weekend of cycling in the Alps. We are just amateurs, looking to improve ourselves and stay fit in spite of ageing. On such trips, what do we do in the evening knowing that a big tour is planned for the next day? Rather than celebrating the achievements of that day, we try to get some healthy food to have enough energy for the day after. We talk about our fresh achievements, difficulties and the challenges to come in order to be mentally prepared. We check our equipment. Last but not least, we get enough sleep. That overdose of food and drinks can wait, till the last day. And this we do just for fun…

So, what to do after negotiation ?

Contract negotiations can be as intensive as professional sports. Everyone expects a professional athlete to immediately turn the switch after a victory and think about recuperation and mental preparation for the next competition. Face it, you are well paid to be a professional negotiator and you believe you’re good at it. From my experience here are some things you should do, after the formal meetings, to make your negotiations a success:

1) Get enough sleep after negotiation

Many times, I’ve spent more than a week on consecutive negotiations with huge jet lag and hardly any sleep. After several days, fatigue made me loose my empathy, the ability to express my arguments in a positive way, to postpone a point when I could not conclude it. Sleeping is essential and you should do it whenever you can. Eating light and healthy, without too much alcoholic drinks, will help you get that sleep.

2) Debrief with you fellow negotiators

Each member of your negotiation team will have noticed different things during the day: body language, side comments, deal-breakers, negotiation margin etc. Spend some collective time to go through what each of you has learned about your counterparts: Who is resisting on what? Why? Can you give it and get something essential for your company in exchange? After a long day, your team members may want to turn the switch immediately (and go for drinks) but this is oh so important.

3) Give feedback to the management and the back-office after negotiation

Management and back-offices are naturally curious to know the progress of the negotiations, day-by-day. Even if you don’t have a lot of time, you must do the effort to keep them informed. It will keep the back-office teams motivated, the management engaged and brake your feeling of being “abandoned on the front-line”.

4) Launch those action points you took on you

You can’t answer everything immediately during negotiations. Specialist matters have certainly come up that require you to connect with the back-office. Also fresh validations may be required because you will have to agree something beyond your empowerment. If you did fulfil the previous point (continuous feed-back), you will be able to launch your action points quickly and get some advice or validation overnight. Being able to provide replies asap is one of the best ways to prove your company’s reactivity. It will push all parties to a complex negotiation to do the same and find solutions quickly.

5) Prepare yourself for the next session

Contract negotiations involve a huge amount of information. You can’t have all of it in your active memory. You should read, once more, the documents you will discuss the next day in order to refresh you memory, to establish the arguments you want to present in support of your case, to identify your fall-back positions.

6) Know when to stop formal meetings

Keep the actual negotiation time per day to a reasonable duration. To reach a deal, many people believe you have to negotiate to exhaustion. Spending 16 hours a day, or more, in a meeting room will be counterproductive for achieving a balanced agreement because you can’t do all the above actions. Fatigue and irritation will unavoidably come and reduce efficiency. Explain politely to your counterpart that you have to go and work on the action points you took on you and he or she will understand.

Conclusion

In conclusion we can say that, while it would be wonderful to enjoy life after a long day of negotiation, it is not to best way to be successful. Negotiation is a challenge that can be compared to professional sports. It requires anticipation, recuperation, communication and these things take a bit of your precious time. Including the sleep, the first five points above will easily take 10-12 hours. Maybe your fellow negotiators say “come on, lets have some drinks until the early hours”. My recommendation is to resist a bit and have those drinks at the end.

Click here for other articles on negotiation on this blog.

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Can you still use FIDIC 1987 in 2019?

Introduction

More than 30 years have past since the launch of FIDIC 1987, “yellow book” (Conditions of Contract for Electrical and Mechanical Works). In the meanwhile, the “Fédération Internationale des Ingénieurs-Conseils”, better know as FIDIC, has published newer versions: the well-known 1999 version and a fresh update at the end of 2017. These newer versions are not just updates but have a different structure and, to some extent, a different approach.

Current practice with FIDIC 1987

Certain public utilities have made specific particular conditions on the basis of FIDIC 1987 and continue using them. This is, for example, the case for contracts in Pakistan where PEC (Pakistan Engineering Council), a statutory body to regulate the engineering profession in Pakistan, has prepared a set-of mandatory conditions based on it. I’ve also seen Employers and Contractor mutually agree to use FIDIC 1987 conditions in direct negotiated contracts.

Reasons for considering FIDIC 1987

The FIDIC 1987 conditions are appreciated by Contractors for striking a good balance between Employer’s and Contractor’s rights and obligations. The advantage for Employers is that Contractors make less deviations. By doing so, they avoid painful and lengthy contract negotiations, potential delay in project implementation and unforeseen expenses (especially external legal counsel). Furthermore, the good balance creates a favorable environment to a contract execution with the necessary serenity. The independent Engineer has a good mandate to determine and avoid disputes.

Conclusion

So, yes, even though the naturally tendency is to work with the latest updates of the FIDIC conditions, it can still make good sense to use the 1987 versions. In terms of balance between Empoyer’s and Contractor’s rights and obligations, I would consider them at the same level as the current World Bank conditions for Plant.

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AfiTAC.com is the blog on commercial and contractual subjects for the Project Businesses (Construction, Infrastructure, Oil & Gas, Power & Renewable, Water Supply & Sanitation, etc). Its objective is to stimulate reflection, learning, convergence to balanced contracts and positive dispute resolution. You can subscribe to our newsletter by writing to “newsletter@afitac.com”. You can also connect to our LinkedIn page. Engagement with the readers is what keeps us going. So, don’t hesitate to exchange with us by commenting here below, liking our publication on LinkedIn and writing to us “advice@afitac.com”.