Speaking of Risk . . .

April 2, 2018
Consulting Corner

Once a contract is signed, it seldom is looked at again... unless something goes wrong. If it does, what a contract says can be extremely important. In an ideal world, whatever it said would be fair and even-handed. But we don't live in that world. Ours is inhabited by people. We err, some by believing there is such a thing as a free lunch, and lawyers are best able to prepare it.

Contracts are business promises that are enforceable by law. Attorneys are needed to provide legal guidance (e.g., to ensure a contract's provisions are clear, complete and legally enforceable). However, a number of lawyers feel compelled to do more by urging a client to accept their business guidance (i.e., suggestions for terms and conditions that purportedly can be applied to significantly increase the clients' protection at no additional cost). Delighted by the prospect of something for nothing, and undeterred by the fact that lawyers are not known for their business acumen, all too many clients abandon their own good business sense and apply their lawyers'.

Unfortunately, "you get what you pay for" still holds true. The lawyers' one-sided provisions can sour consultants' attitudes, encourage the recommendation of high-cost "fail-safe" techniques and, in a number of cases, weaken the protections afforded by the consultants' insurance (because the lawyers are not as familiar with insurance as they should be).

Compounding the problem is the fact that many clients focus far more on fee than what it provides, and thus try to keep the scope of service as limited as possible. The more limited the scope, the greater the number of unknowns that will exist and/or the more assumptions that will have to be made. Of course, the more limited the scope, the looser the quality control.

Imagine what this scenario would be like in a football context. The team consists of a group of highly educated, committed, sincere individuals, ready to start play with dedication and enthusiasm. In comes the client--the coach--and he calls the team together for a pregame pep talk. "People," he says, "this is going to be a great game. Now, by virtue of the terms and conditions of our contract, I'm taking away your helmets and your pads. Given the scope we have agreed to, you cannot use many of your most successful plays. I expect you to win and, if you do not, you will have to pay me for the privilege of letting you into the game, and there's nothing you can do about it. Now go out there and play your hearts out for me."

Why are some owners so naïve they believe that no matter how poorly they treat their environmental consultants, the consultants will apply the same care, concern and consideration they would were they treated with respect, as the professionals they are?

Perhaps once in every 100 projects, if that, the contract comes into play because a problem occurs. When it does, you can expect that the party with the most to lose--often the one who has been forced to accept the most onerous conditions--will argue the hardest and longest that the contract does not really say what it seems to say, or that what actually appears to have happened never happened at all.

So what about the other 99 times when the contract does not matter? Surprise! It does matter, because the process of negotiating the contract's scope and conditions--contract formation--is the first step of an engagement. Thus, by arm-twisting their environmental professionals into accepting unfair and, often, unwise terms and conditions, clients damage an important relationship from the start. They convert those who should be their trusted professional advisors into somewhat resentful (if not adversarial) service providers who seek to avoid application of the contract's most onerous conditions by minimizing the risk of anything going wrong, no matter how much their clients have to pay. The real irony is that what the clients twist arms to get--the indemnities, unrealistic insurance requirements and unrealistic performance standards--are actually worth less than nothing, because they serve only to create more risk, not less.

Your clients need to know this. At least try to tell them.

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