The “But We Have a Contract” Dilemma

Guest post by our own Jim Wasson – Director, Business Development

When it comes to service-based contracts, it’s important to understand how the agreement impacts the client organization, rather than that of the actual service provider. Typically, service agreements are written in the spirit of protection for the provider, making the value to the customer sometimes questionable.

If a dry cleaner ruins one of your shirts, you find another dry cleaner. Against that backdrop, many service providers require a contract to make it more difficult for you to find another proverbial dry cleaner. Additionally, it allows the service provider to re-approach the customer if certain covenants of the agreement are not being met. Many times, terms like “mandatory minimums” can end up hurting the customer if the service provider isn’t realizing the full potential of the anticipated business. This can lead to price hikes, a shift in support levels, or termination of the agreement, leaving the customer high and dry.

Contracts can also cost real money. Most corporations retain outside legal council who are required to view all contracts. This process can lead to delays in execution and implementation, especially when contract verbiage needs to be modified or stricken, which is something the service provider almost never agrees to. Why? Because the service provider wrote the agreement in the spirit of protecting themselves. Of course, the legal team wants to protect the company, so the entire process can enter a cumbersome hamster wheel stage. Value Per Hour Worked should be strongly considered here as legal fees and employee time to stabilize the agreement can be exorbitant.

It’s always important to be mindful of contract “fine print,” as this is usually where ancillary and/or previously undisclosed fees and costs reside. Salespeople are notorious for selling just the basics when it comes to fees/costs and often neglect to detail any remaining cost components like account management, up-front costs, back-end dollars, and of course the dreaded hidden fees.

But these contract challenges simply don’t have to be. For example, at AmTrav we don’t use contracts. A simple one-page Letter of Agreement is all you’ll see from us with clearly defined costs, program objectives, and service commitments.

The simplicity of our agreements only reinforces the common thread of AmTrav’s mission statement of “Hassle Free Travel Management.”

By: Jim Wasson, Director, Business Development