Ten Tips to Negotiate a Contract Break - Perhaps Barnet Councillors Should Read This
I saw this and thought Barnet Council might find it useful. My comments are in Red
Solicitor Robert Griffiths gives ten tips on negotiating your way out of troublesome contracts.
1. Read the contract thoroughly
Before you take any firm action, or start worrying about how to deal with a troublesome contract, the first thing you should do is read the contract thoroughly. By doing this you will make sure that you are properly prepared and appraised of the situation, and can be sure that you know your contractual position, all well in advance of contacting the other party.
If you are in any doubt as to the meaning or effect of any of the clauses in the contract, you should seek specialist advice from a solicitor as soon as possible.
I would recommend Barnet employ a red hot contract lawyer as soon as possible - not members of the "magic circle" but a lawyer that has a real appetite to dig deep into this contract.
2. Consider all of your options
Before you decide to take any firm action, take stock. Ask yourself whether you are certain that you want to bring the contract to an end, and whether this is the only course of action open to you. If you are reacting impulsively as a result of falling sales or rising overheads, or have found a more profitable or better-value deal elsewhere, you may be able to talk to your customer/supplier and work out a way forward that suits both parties.
In Barnet's case they have been in discussions with Capita for at least 10 months and over that period the problems only seem to be getting worse. It may be that some services don't come back in-house and are instead shared with another local authority but the experience of sharing legal services with Harrow has been expensive and problematic. There are a long list of councils that have brought contracted services back in-house and I would hope that officers have visited and talked to them to see how that process was managed.
3. Look at the termination clause
The contract may allow you to end the deal at any time, provided you give due notice. Before you do this, however, check whether you will have to make a penalty payment. Ideally, you will have agreed an exit clause with a minimal penalty. If not, the “fine” may be such that you are effectively locked into the contract. In these cases, it usually pays to be open with the other party and attempt to negotiate a better deal.
I FOI'd the termination clause and had to go all the way to the ICO to get Barnet to reveal it. You can read it here. It seems to me that the costs are not significant in comparison to what we are paying and the poor service we are receiving, although ideally we would not pay any penalty payments to Capita.
4. Look out for anniversaries or other key dates in the contract
These might enable you to leave the contract without penalty at certain times. Many contracts operate on a rolling yearly term, which is automatically renewed on the anniversary of the term and can usually be terminated without penalty at the anniversary. We missed opportunities to take advantage of the three year review but in less than 12 months the six year review is due at which time, if the contract has not been terminated, Barnet have the opportunity to change elements of the contract.
5. Cost your exit. What will you save by an early exit?
Don’t rush into serving notice or terminating the agreement until you have costed the implications of both leaving the contract and finding an alternative. I hope the alternative solutions are being costed right now. If they haven't been then Officers have not been doing their jobs properly. We also need to make sure that we don't keep referring back to the baseline costs of 2012/13. The world has moved on, technology has improved and services have changed. We need detailed and thorough costings which are realistic and evidenced.
6. Look for a breach
Go through the contract to check that both parties have complied with their obligations. If the other party has performed poorly or failed to meet its obligations, you might be able to terminate the contract for a breach on its part. There are so many occurrences which look like contract breach, the failure to provide reliable financial data, the failure to back up data for the library system, the failure of the pensions administration system, repeated payroll system failures, the failures to meet contractual commitments.
You may be able to do the same if you have been the victim of misrepresentation – that is, you signed the contract on the basis of a written or verbal statement that turned out to be misleading or untrue. So many issues seem to be being raised where the spirit of the contract seems to have been breached but the letter of the contract has been followed. Is that misrepresentation?
8. Once you know your position – contact the other party and begin negotiations
The best course is almost always to try to negotiate a mutually beneficial and cordial end to the relationship that leaves open the possibility of working together again the future. Hopefully that is what Barnet have been doing over the last 9 months - if it isn't then someone hasn't been doing their job.
9. Consider setting-off money you’re owed against what you owe
The law in this area is complex, but it may be possible to set sums off against each other where “the claim and cross claim are so closely connected that it would be manifestly unjust to enforce one without taking account of the other”. I'm not sure how this applies in Barnet's case but certainly worth investigating
10. Be flexible
The chances are the other party will be feeling the pinch, too, and won’t want to lose your custom. They may respond to your concerns by amending prices, increasing quality or changing service provisions, or agreeing to a temporary variation in the contract until sales pick up again.
Frankly I don't care if Capita are feeling the pinch because Barnet residents are feeling the pinch much more and supporting Capita shareholders should not be the first priority.