Robert T. Yokl, President, SVAH Solutions
Don’t Use a Vendor’s Contract Unless it Conforms to Your Master Contract
I’m a big proponent of not using a vendor’s contract as my healthcare organization’s official purchased service contract since I have found that 100% of the vendor’s terms and conditions are in the contractor’s favor. However, I’m now seeing the trend from my clients of asking their vendors to sign their company’s Master Agreement which binds the contractor to the most favorable terms and conditions of the contracted party. I believe this tactic, if approved by your legal department, can save you time, money, and speed up the contract approval process for all involved parties.
Battle of the Forms
We all know that once a contract has been submitted to your legal department for review they will find something wrong with it, unless you have your vendor sign a Master Agreement (contract that takes precedence over any other legal documents) that was developed by your legal department. I have found that this tactic will clear the way to having your contracts quickly approved by your legal department without a hassle.
This way, you eliminate the battle of the form, since your legal documents take precedent over your vendor’s terms and conditions. For example, a Master Agreement I signed recently stated a one-year term by the client in their Master Agreement, whereas, my firm’s contract terms stated the contract was month-to-month until cancelled. Based on these facts, the client’s Master Agreement’s terms and conditions are in control.
Why Speed is Important
Every purchased service contract that is sent to your legal department for review has value (e.g., time, money, service, safety, etc.) that isn’t being provided to your organization during the legal review process, which can take 45 to 90 days. By speeding up your contracting process you can receive the benefits of the purchased service contract at an early date. Why lose these benefits because of time delays?
The primary goal of a Master Agreement is to standardize the legal review process for approvals of your purchased service contracts (or any other contract) without compromising your company’s standard terms and conditions. This best practice can save your legal department hundreds of hours a year, since they only deal with the exceptions and thereby allow your company to receive the benefits of the purchased service agreement much quicker.
The bottom line on this Master Agreement concept is to reduce the complexity and back and forth battle of the forms between your contractors and your organization since it can be costly, time consuming, and paralyzing. I just talked to a sales rep for a software company who told me that about one-third of his new software contracts are tied up in the battle of the forms between his company’s lawyers and his customer’s lawyers for months on end, which is causing him agita. Why continue this unproductive practice when a Master Agreement could solve 80% to 90% of your contracting terms and conditions issues for all involved parties?
*Note that this article isn’t meant in any way to be legal advice. If you like the premise or ideas shared in this article we recommend that you consult with your company’s legal officer for an authoritative legal opinion.