Every contract and business relationship is unique; no agreement is perfect, and there is no standard, one-size-fits-all governance framework, especially with regard to more technical or complex relationships.
That’s where Element 10, Special Concerns and External Requirements, fits as the final major piece of the four implementing steps of Vested’s Rule #5, which creates a sound governance structure based on insight, not oversight.
Element 10 allows the parties to address all of those “special” requirements that are unique to their situation and business model, and include them in their Vested Agreement. Think of it as the customized, “special-handling” element.
For instance, in information technology deals, data security concerns may necessitate special governance provisions vastly different than what you would have in a manufacturing agreement. And a manufacturing agreement would likely address special safety regulations for workers (e.g. the need to be OSHA compliant in the United States) while an IT outsourcing deal in India would skip this requirement.
The basic message of Element 10 is that the parties need to pay attention to all the legislative and regulatory issues that are unique to their Vested Agreement in order to help make it work smoothly over its term. Spend the time at this point to document and bundle these factors into one group, and address the special concerns, considerations and external requirements that are unique to your agreement. Where special aspects require more detailed governance, such as technical specifications, operating manuals, and procedures, pull them out into their own individual element. Thus, your particular Vested Agreement may actually consist of more than 10 Elements, depending on the special considerations that arise. The concept is like fine-tuning an engine and putting in just the right amount of gas for the journey.
Here’s a list of some common items that might be included in your Element 10 considerations:
Security. How will the parties manage specific security concerns (e.g., in remote or developing locations for a contracting manufacturing agreement or services delivered at international border control points)?
Hazardous materials. How will the parties manage chemical and hazardous materials with special handling, packaging, security, and transportation challenges and when specific local government regulations could become an integral part of the governance framework?
Intellectual property. Particularly important in a transformational relationship, this covers how the parties will handle background, emerging, and current intellectual property, ownership, and rights of use.
Special tax issues. International and cross-continental deals may have special tax provisions and laws that require expert guidance.
Import and export and transportation. How do the parties deal with transfer of goods and services across national and international boundaries, insurance and transport modes?
Information management. Be aware of any special data management considerations, security of data, location of servers, and other matters pertinent to information security.
Law and jurisdiction. Agreements across international boundaries with parties in different countries require careful consideration as laws and jurisdictions may vary.
Care of documents. Keep all the relevant safety records and validated insurance certificates, training records, and other such documents that validate the capability of the parties to deliver the work safely with the agreement and propose an annual review so that in the future anyone picking up the agreement file has everything they need.
Local labor law. Accommodate special ratios, local hiring and diversity laws that pertain to the hiring of local people at the asset or work level.
Ethics and compliance issues. Do the parties support Fair Trade or other similar causes related to sustainable operations, clean working conditions, environmental safety and compliance, and ensure joint social and corporate responsibility?
Publicity and marketing. Coordinate public relations activities and promotional marketing messages around the Vested Agreement.
External regulatory issues. Do special local laws and regulations exist in various work locations?
Special safety issues. Most important, how will the parties ensure continuous safe and reliable service, comply with specific regulations and any special local practices pertaining to the particular location or operating environment?
As you can see, Element 10 can entail a wide variety of issues, from the simple to the complex. These should be clearly vetted and dealt with by the parties from the get-go, and included at the master services agreement and Vested Agreement levels.
Element 10 is discussed in chapter 7 of The Vested Outsourcing Manual. Also, Vested’s free self-assessment is a useful online tool to help benchmark how well you are applying Vested’s Rule #5. The 10 Elements assessment report will help identify the structural flaws that may be holding you back from achieving collaborative and transformational success through an effective governance framework.