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How to get the best out of your contracts

Print publication

25/09/2013

Schools (meaning academies and those still under the LEA) and colleges might choose to appoint an expert third party contractor to provide a service, such as catering or grounds maintenance, for a fee, rather than it being provided in-house or by the Council’s services. This is known as outsourcing and it can be a tricky business.

When choosing to outsource, a school or college will normally first need to run a procurement exercise, where it advertises the contract and asks for bidders. See our article Advice for effective buying for your school [add link] for more detail about this. Once you have chosen your preferred bidder (contractor), they will often send you their standard terms and conditions which they provide to every potential customer and which are designed to cover all circumstances. General terms and conditions mean that the contractor does not need to separately negotiate with each school or college and can have systems in place to ensure it complies with its own terms and conditions, for example if it needs to send out invoices within 30 days of the end of a contract month, it will have a system in place to ensure that happens.

However, when you receive standard terms and conditions from a contractor, you might feel that they do not adequately or appropriately deal with your needs and that they are preferential to the contractor. You need to realise that you can negotiate with contractors and suppliers; after all, they want to win your business!

In particular, you should consider the following:

  • Scope of the Services – you need to ensure that the services delivered under the contract are the services that you want. Make sure that everything you expect the contractor to do is included in detail in the service specification. If additional services are included that you do not require, ask the contractor to remove these from the provision and reduce the price accordingly. Further, set out in the contract the quality of service you expect by including service level requirements and/or key performance indicators and make sure there are provisions giving you adequate remedies if such requirements/indicators are not met (e.g. a possible reduction in the contract price or right to terminate the contract)
  • Potential Risk – you must be aware of the potential liabilities you face under the contract. Each time the contract refers to you paying for something (e.g. insurance or utilities), being responsible for something (e.g. insuring equipment), something being at your risk (e.g. equipment), or you giving an indemnity to the contractor (e.g. in relation to costs it might incur), there is a potential liability. You should limit your liability by making sure it relates to direct losses only (as opposed to indirect losses which are unquantifiable) and you ought to consider capping your total liability at an appropriate level (e.g. this might be the contract sum)
  • Obligations on you – you need to understand your obligations under the contract and ensure you have procedures/processes in place which enable you to comply. Make sure that the obligations placed on you are reasonable and proportionate
  • Price – remember to negotiate and try to strike the best deal you can! Ask for discounts and make sure the price reflects the services you require. Watch out for hidden extras and check whether VAT is included (prices are usually ex. VAT so don’t get stung)
  • Exclusivity – be aware of exclusivity provisions. These will provide that only the contractor has the right to provide you with the relevant service and as such you can’t engage any other contractor. Standard terms and conditions are likely to include exclusivity provisions, but it is important to understand when they apply and what they cover and discuss this further with the contractor if necessary.

It is crucial to get good legal advice as soon as possible, to help the negotiations run smoothly and to make sure that you get the contract you need, as well as saving you money and minimising your risks. Walker Morris LLP’s Education team are here to help when you need us.