7 Red Flags in Vendor Contract Reviews and Negotiations for School Leaders

Reviewing vendor contracts and negotiating their terms and conditions on behalf of your educational institution is a role that comes with weighty responsibilities, including minimizing your school’s financial and liability exposures. In addition to navigating the complexities of a contract, you may also be responsible for managing the vendor relationship throughout the process. Regardless of your level of experience or knowledge, if contract review falls under your responsibilities, it would be perfectly normal to feel overwhelmed by the process, as well as to have a certain level of anxiety whenever you begin negotiating with a vendor.

The AssuredPartners Education Practice Group and Risk Management team have collaborated with several regional attorneys to provide information that may help you confidently conduct robust contract reviews and negotiations. Together, we have identified seven common red flags to watch for, mainly concerning communication and contract terms.

Of course, nearly every contract you’re scrutinizing will still need to go to your school’s in-house or outside legal counsel for their expert review. However, by doing your due diligence, you may be able to spot these red flags, sometimes as early as the vendor vetting stage, and proactively address and resolve them yourself. This not only makes the attorney’s job less time-consuming and more efficient but also may help reduce your institution’s legal fees and contractual risk.

Some Common Communication and Contract Term Red Flags

1. Hidden changes: Before you reach a final agreement with a vendor, there will likely be several drafts exchanged, with changes tracked or redlined throughout. However, if you only focus on these revised areas of the contract, you may miss something the vendor deleted, added, or otherwise modified without notifying you. For this reason, it’s essential to compare any revised draft of the vendor contract to prior versions—even if it appears to have no changes. If you uncover revisions not communicated to you in advance and not redlined in the document, it’s important to speak up immediately and request an explanation of the revision and how it might impact the project. Even if the hidden change seems minor, like a formatting or grammatical correction, consider using the opportunity to remind the vendor to keep track of every type of edit at all times.

2. Vague or unclear answers: There is also typically a healthy back-and-forth of questions during the contract process. If the vendor’s responses are confusing or do not give you the level of detail your institution requires, don’t give up. Push back on the vendor for clearer, more accurate, and more definitive information. You want to explain that clarification is needed before you can make an informed decision and that you won’t be able to sign anything until you have a thorough understanding. In addition, if anything in the contract is poorly written or nonsensical, it could undermine the agreement or deem it unenforceable, so never sign a document that contains vague or ambiguous language.

3. Inconsistent communication: Usually, it benefits all parties involved in the contract negotiation to move the process along as quickly as possible. So, if the time between responses or contract revisions from the vendor is increasingly drawn out, this should grab your attention. To avoid any further delays or disruption, it is crucial to establish clear communication expectations and a reasonable time frame for replies. If your point of contact is constantly changing or if the vendor has assigned multiple people to answer your questions, make a request to have a dedicated point of contact, explaining how this will make communication more efficient and accurate, reduce the chance that critical details will fall through the cracks, and lead to stronger collaboration.

4. Pressure tactics: Unfortunately, some vendors may push so hard to get you to sign off on a contract quickly that it makes you uncomfortable. Of course, you never want to sign a contract under duress. If you’re feeling rushed or forced in any way, it is never wrong to push back and clearly communicate why you need additional time. In a best-case scenario, the vendor will agree to extend the deadline so you can thoroughly review the terms of the contract. However, if they refuse to budge, it’s important to ask why they require such a short turnaround time and immediately discuss the situation with your school’s legal counsel.

5. Terms that favor the vendor: It’s not uncommon for a vendor’s initial contract to include several terms of agreement that are one-sided—and, no surprise, those terms are generally in their favor. For example, the vendor may include a unilateral amendment clause that would allow them to change the agreement terms without having to negotiate with you, or there may be a termination clause that outlines circumstances under which the vendor can end the contract before it expires, for any reason and without penalty. Usually, there is no malicious intent behind these types of provisions. Instead, they are typically presented as a starting point and are a clear opportunity for you to negotiate with the vendor for more mutually beneficial terms.

6. Buried expenses: The total cost of a project, the vendor’s desired payment schedule, and the penalties for late payment are likely to be front and center in a contract. However, other equally important fiscal contract terms may take a concerted effort to uncover. For example, a contract may include a covert automatic renewal clause or language that allows the vendor to increase rates unilaterally. If you identify these types of financial terms in the contract, you’ll want to present them to your leadership and/or legal team for discussion. If the consensus is that you’re not comfortable with the language provided or the financial burden these potential costs could have on your institution in the future, you could recommend a revision of the terms and conditions to align with your school’s budget planning needs. Alternatively, you could ask for the clauses to be removed.

7. Unfavorable jurisdiction clauses: The vendor contract should include provisions that specify how and where any legal disputes will be resolved and which state’s laws will be used to govern those proceedings. It’s important to identify what forum and choice of law makes the most sense for your institution, as agreeing to anything else could complicate litigation, increase your school’s legal costs, and result in biased outcomes. For example, a vendor may present you with a jurisdiction clause that requires disputes to be overseen by a mediator or arbiter rather than via court proceedings or that certain types of cases be handled in locations thousands of miles from the state your school is in. Careful consideration of the implications of these types of provisions is crucial to ensure that the choice of venue, state law, and mode of dispute resolution does not put your institution at an immediate disadvantage.

At the end of the day, there’s always the chance a vendor is purposely trying to create confusion, make communication difficult, or hide contract revisions that might impact pricing, responsibilities, or liability. However, in most cases, these issues tend to stem from the vendor’s lack of knowledge or experience in collaborating with educational institutions. By immediately addressing these red flags head-on with a vendor, you are likely to lay the foundation for a long-term, mutually beneficial, and trusting partnership.

Final Considerations Before You Sign Off on a Vendor Contract

Whether you’ve just started researching or vetting transportation, security, technology, international travel, or another type of vendor, or you’re already reviewing and negotiating a contract, please consider contacting our team to serve as an additional experienced and knowledgeable resource. We collaborate with our clients in assessing vendor and subcontractor agreements, evaluating any provisions related to insurance requirements as well as hold harmless/indemnification clauses, and reviewing scope of work documents to understand the types of losses or harm that could arise from vendor activities and may require risk management or transfer.

The more occasions you have to collaborate with vendors, your leadership team, and your school’s legal counsel on contract reviews and negotiations, the more seamless and simpler the process should be. If, at any point during the contractual process, you feel like you’re in over your head, it’s not a shortcoming in the least to reach out for help. Depending on the situation, you may want to lean on an experienced colleague at your school or a peer institution, an industry expert, or, most importantly, your attorney.