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Contracting in the new Environment

Contracting in the new Environment. John Caldwell Washington, DC June 5, 2009. OVERVIEW. Basics--what Is Contracting? What’s So Different About Travel? Best Practices for Long Term Relationships Negotiating to “Yes” How Long? Pitfalls and Challenges Today. Dealing With Changes.

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Contracting in the new Environment

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  1. Contracting in the new Environment John Caldwell Washington, DC June 5, 2009

  2. OVERVIEW • Basics--what Is Contracting? • What’s So Different About Travel? • Best Practices for Long Term Relationships • Negotiating to “Yes” • How Long? • Pitfalls and Challenges Today. • Dealing With Changes. • Divorce or Counseling?

  3. Differences Between Contract and Handshake • Legal Object. • Consensual. • Supported by Exchange of Promises. • Must Be Specific, Not Speculative. • Terms Are Clear and Understandable • Beware of Side Letters • Cultural Resistance to “Paper” Agreements

  4. Contract Differences for Travel • Pervasive Uncertainties and Market Instability • Definitional Cans of Worms. “Transactions”, “Attrition” • Subjectives, “Satisfaction”, “Best Practices”, “Account Management”, “Consulting”. • So Many Differing Boilerplates. • Reluctance to Commit. • Its Tuesday, Let’s Rebid. • One Way Out Clauses. • Suspicion Rather Than Partnering. • Who’s Hiding Whose Money? • Open Books Are a Myth?

  5. Getting to Yes • Both Sides Need to Understand Each Other: • Suppliers • Reasonable RFPs. 100 Pages? • Adequate Profit. • Re Negotiate for Major Change. • Customer Listens and Is Accessible. • Buyers • Lowest Price, Highest Quality. • Commit but Not Too Much. • Accountability. • Pro Active Relationship Management.

  6. Special Industry Challenges • How Long to Contract? • Service Level Agreements? • How Much Delivery by the Customer? • Who Is in Charge of the Relationship? • Paying Back Incentives. • What Excuses Buyers From Performing Their Side? • Bad Economy Not the Answer. • Sub Contracting and Using Franchisees or JVs. • Mergers and Acquisitions. • Disclaimers and Damage Limits. • Who Owns the Information? How Is It Protected?

  7. Challenges (cont.) • Unambiguous Definitions • All the Area Airports or Just Specific Ones Like JFK? • Is a Transaction a “Void” or a “Refund” ? • Can You Drive a Truck Through “Material Change”? • Jurisdiction and Venue. • Meetings Attrition. • What Is the Measure of Liquidated Damages? • Boilerplate resell clauses in standard meetings contracts. • Attrition waivers this year.

  8. Pitfalls • Contracting Away Safety Protection? • Holding the Supplier or TMC Responsible for Everything That Could Happen? • Processing, Researching and Marketing Company Data. • Traveler Consents. • Automatic Term Roll Overs Without Notice or Review of the Deal. • Automatic Retroactive Fee Increases. • Putting the Final Contract in a Drawer or Saved in a Hidden File.

  9. PITFALLS • Relying on Outdated Volume Numbers. • “Exclusivity”. • Politics. • Business Reciprocity • Rushing the Decision. • One Week RFP Bidding. • Moving Without Stakeholders on Board. • No Feedback Until Its Too Late.

  10. MORE PITFALLS • Not Firing Customers or Refusing to Bid. • Failure to identify employee names and salaries in cost plus deals. • Decisions on All or Mostly Price. • Ignoring That Ticket Costs Are 10% or Less of Travel Expenses. • Suppliers Are Not Fungible.

  11. Final Pitfalls • Wasting Time for What You Know You Cannot Have. • Unrealistic or No Market Share. • Discounts Outside Reality. • Unworkable Penalties. • Non- Compete Clauses.

  12. Recommendations • Be Mindful If You Can of These Points: • Lawyers Involved Early at Time of RFPs. • Define Technical Terms. • Watch Out for the Parol Evidence Rule. • Dual Duties of Employer and TMC to Protect Travelers. • Stay Away From Evergreen Terms. • Avoid Overly Complex Slas. • Do Not Add Everything in the World to the Contract • Require Regular Review of Contract Results • Readjustments If Needed for the Partnership

  13. Final Thought • Web Based Site for Common Data for All Suppliers. • Avoid Pushing Button X Every Time an RFP Issues. • Most of Data Available As Non Sensitive but at Too Many Different Sites And/or Hand Outs, Etc. • Nothing on Price or Competitively Sensitive but Access but Be Restricted to Customers. • Updates Quarterly. • NBTA and ACTE Could Co Sponsor and Share the Expenses.

  14. THANKS FOR YOUR ATTENTION • I Enjoy Coming Here As a Midwestener • We Need Some of Your Friendliness and Openess in DC, Big Time • Hang On, Our Industry Is Coming Back and World Commerce Depends on it.

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