How can I achieve a long-term effective contract with my vendor, while maintaining a good working relationship?

Achieving contractual success in a volatile marketplace like healthcare requires the vision to continually shape and guide the negotiation process.  In lock step, one needs to be able to foster and keep a positive vendor / customer relationship, but still drive the desired outcomes. This needs to be done despite the obstacles that are in your way (high switching costs / restrictive contracts) and the obstacles that are placed in your way (vendor imposed conditions) after your goals and objectives are defined.

Most of our clients agree that complex agreements and relationships must be negotiated. This is a challenge that becomes exponentially more difficult when dealing with vendors in vertically integrated solutions, especially when you have high costs of switching and/or few options.  In these key areas the vendors will utilize their most skilled negotiators to maximize the long-term value of the contract from the beginning.  Most clients have good instincts and can sense when they’re in a situation where they are behind and the vendor has enhanced leverage. However, most clients will react incorrectly and quickly, projecting a higher degree of control than they actually have. But, this leads most clients in these situations to rely on poor negotiations tactics and they attempt to defuse tensions at nearly any cost.

In these cases the end result is compromised.  Both the customer and the vendor show increased resistance to the other side that makes drafting an acceptable agreement more difficult.   The key is to base these long-term relationships on mutual respect and trust, and ultimately draft an agreement that protects your organization’s exposure to future risks with the vendor.  Let’s face it; once you begin to read an agreement to assess your recourse, the relationship has already degraded dramatically.

Yes you can have a long term, effective and mutually beneficial contract with your vendor, all the while maintaining an excellent working relationship.