IN THIS ISSUE:

Contract negotiations are increasingly central to a law firm's strategic plan, particularly during an economic downturn. Contracts have both a short-term and long-term impact on cost containment and firm expansion. The importance of successful negotiations and the skills required to achieve favorable results have influenced some firms to hire contract consultants or appoint directors of procurement. Other firms believe each negotiation is better served by an existing level of expertise.

Online research and information resource contracts require content knowledge and a strategic plan for supporting practice areas. Contract consultants or procurement directors need to know how and why a source is used; its relevancy to a practice area; and how to identify elements of risk, including update schedules, indemnification clauses, and copyright restrictions with respect to dissemination, fair use, and privacy. Under these circumstances, a more valuable leader to head these negotiations would be the chief legal information officer or the library director.

Preparation

Firm Discussions. A key component in preparation is understanding your firm's strategic plan by participating in discussions with decision makers about global expansion, practice growth, technology initiatives, and financial objectives.

Sample Discussions:

1. Survey the practice group that most utilizes this source.
2. Review the prior contract terms, notes, and communications during those negotiations.
3. Communicate with finance about recovery rates and budget objectives.
4. Communicate with executive administration about global or office objectives.
5. If technology is relevant, communicate with the information technology department.
6. Understand your information center's suite of content. Is there duplication?

Set Objectives. Identify clear objectives. What are you trying to achieve and what are you willing to give up? Give yourself lead time—know when your contracts are up for renewal, or, if this is new content, make sure you have enough time to analyze value and survey the user base. Do not place yourself or your firm in the position of maneuvering around a drop-dead date. Start complicated, multiyear negotiations several months in advance of renewal dates. Take the lead in identifying when you want to begin negotiations and communicate your timetable to the vendor. Early negotiations (six months) can work in your favor to achieve your terms by allowing the vendor to put that contract on the books early.

Sample Objectives:

1. Convert site licenses to a firm-wide enterprise license.
2. Aim for desktop IP-authenticated access requiring little administrative work, such as keeping track of individual passwords and cancellations as users leave the firm.
3. Request monthly usage reports.
4. Strive to restrict content that isn't relevant to the practice.
5. Freeze increases the first year and limit growth overall to 4 percent for the remaining term.
6. Move to multiyear commitments.

Negotiation Team. Depending on the scope of the agreement, it may be appropriate to involve a team comprised of the director of procurement, director of finance/administration, or even a library partner. Classic strategies for negotiation teams are to fill the following roles:

• Leader: The person with the expertise and familiarity with what is negotiated
• Good Guy: The team member the vendor will likely respond to
• Hard-Liner: The person who takes a strong position and to whom the other members of the negotiation team defer
• Communicator: The person bringing the points of view together and moving them forward

It isn't necessary to have four team members; however, the team should resemble this classic strategy in some form. Team briefing meetings should take place in order to avoid sending conflicting messages during the negotiation itself.

Vendor Communications. Communicate with the vendor with respect to timing, data collection, reporting statistics, and peer analysis over the current contract terms. Communicate your expectations for renewal discussions. Having your vendor prepared to respond and sharing relevant data optimizes your timetable and limits frustrations associated with not having everyone on the same page. In many instances, content vendors are long-term partners in supporting information needs. Recognize that this is not a one-time negotiation. These relationships will likely continue for years, even if the players change.

Sample Vendor Communications:

1. Request a business review over the life of the current contract
2. Review historical terms over three to six years
3. Determine who will be on the renewal team for both vendor and client
4. Determine who will be the communicator and how communication and reports will be delivered (e.g., e-mail, PDF, print reports with tabs)
5. Clarify licensing terms reflecting the needs of your firm (e.g., intranet availability, restricted users, dissemination to outside groups)
6. Establish how meetings will take place (e.g., face-to-face, telephone, video conference, or a combination of all three)

Analysis

Analysis. Usage statistics can be applied to both print and electronic sources. Measuring print is hands-on: compile sign-out reports as well as interlibrary loan activity. Electronic sources leave a trail of use activity. Library directors should capitalize on usage reports as persuasive tools for negotiating content value. These reports provide evidence of who is using what, how often, and for how long. Use monitoring applications—such as Onelog, LookUp Precision, or Research Monitor—are ideal for developing your own business analysis. LexisNexis and Westlaw® provide usage data through PowerInvoice and QuickView®. Both programs generate reports specific to user, client/matter, office, and much more. Have your vendor account team code users by practice and position. This will enable you to review details affecting those practices and user groups. Require annual business reviews. This review should compare current usage to historical data by office, practice, content, cost, discount, and variance from your special pricing year over year. Analyze usage trends graphically to determine if usage correlates to changes in business activity.

Most law firms have entered into some form of flat-rate agreement with key content providers. Failing to factor in the annual price increases these vendors institute results in misguided analysis of your overall cost increases. For this reason, reviewing your contract terms three to five years back is vital in truly establishing your rate increases.

Another overlooked element in negotiations is excluded content. Excluded content is material the vendor offers based on its third-party license agreements. Often this content cannot be discounted at comparable levels or included in standard agreements, which means you are paying a premium to use it on the aggregator's database. If your firm has subscribed independently with these excluded content providers, negotiate blocked access or a warning screen that dissuades your user from accessing it away from its native platform.

Negotiation

Setting the Scene. Negotiations are as much about listening and dialogue as they are about the environment. Do not agree to negotiating contracts over lunch hosted by the vendor. This creates an uneven playing field and a non-businesslike setting. If negotiations take place in your office, assign the appropriate space, seating arrangements, and time allocation. Seat your Leader in the center of the table flanked by the Hard-Liner and Good Guy or Communicator. Be sure the content provider Leader is seated across from your Leader but no other equivalent team member is across from each other. These are general suggestions for small negotiation teams. Make sure the room is comfortable and lighting is not distracting. Eye contact is vital; it helps read the mood of the team. If you scheduled two hours, make sure you don't go much past that. Arrange for a support staffer to notify you to force a conclusion. If meetings are not face-to-face, make sure your negotiation team is in the same room or in a similar environment remotely. Do not let team members be on negotiation calls from their office. Phone distractions, e-mail, and a host of interruptions can derail discussions. Bring your notes and anything you feel will help you assess a proposal. Keep these notes private; do not share them with the vendor.

Responding to a Proposal. Avoid immediate reactions, favorable or otherwise. Silence while assessing an offer should not be considered uncomfortable. Seek clarification during your assessment and summarize sections of the proposal you understand. This allows time to reflect on any issue you think is uncertain as well as on points you are preparing to challenge. It is vital to understand the vendor's position and how the vendor arrived at the offer before challenges are made. If you are prepared to make a counteroffer immediately, decide if your counteroffer will influence other priorities during the negotiation.

Establishing a Position and Staying on Point. Negotiations really begin once each team has communicated its position. After receiving the vendor proposal, you may need to assess and debrief. Look for mutually agreed upon components of the agreement and consider those you may be willing to give up. Will a counterproposal solve differences or will both teams need to adjourn and evaluate their positions for a second phase? Don't allow negotiations to become emotional. Slow them down and reiterate points you all agree upon in order to move the negotiations forward.

Staying on Point

• Your primary objective should be constant and move the negotiations forward
• Emphasize agreed-upon points within the proposal
• Misunderstandings should be acknowledged and not carried over into the discussion
• Do not appear rigid
• Remember that successful outcomes allow everyone to win

Closing a Deal

A Good Deal. Once final offers have been explored, encourage closure by emphasizing the benefits of your offer, welcome constructive alternatives, reiterate that mutually acceptable outcomes are the goal, and at each stage try to move toward a deadline. After successfully negotiating the terms of your new agreement, confirm the terms in writing. This clarifies any ambiguous points, avoids confusion, and maintains the integrity of the relationship. Each team communicator should share this with their negotiation team. As the negotiation teams sign off, a binding written contract can be drawn up for legal review and a favorable agreement can be executed.

Careful planning and analysis will result in successful negotiations. Skilled negotiations lead to acceptable terms and agreements. During this economic downturn, it is imperative that firms look at the short- and long-term impact their contracts will have on their bottom line and client service. Vendors, like their customers, are dealing with a challenging economy and realize the need to be flexible. They would rather retain clients than insist on unreasonable terms and lose their business. This is a time for setting expectations, communicating clearly, and negotiating skillfully so that both parties can walk away from the table with winning results. A well-constructed contract will serve the firm in the long term. In the short term, it is indicative of how well a firm navigates the rough waters of this economic downturn.

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