Minor Works and Major Invoice Growth
A retailer signed a 3-year managed network contract worth $2.4 million. The contract includes 99.95% core network availability, service credits capped at 5% of monthly charges, an 8% annual CPI-based price adjustment, and a change process requiring written approval. In year two, the retailer opened 12 new stores; the supplier configured them under 'minor works' without change requests. The supplier's invoices rose 17% above the contract's run-rate, and the retailer has paid them. Availability reports show 99.97%, but store opening delays occurred because circuit delivery took 10-14 weeks. The contract renewal is in 7 months. The supplier claims the extra work is out of scope and refuses credits. The retailer's procurement lead wants to 'just renegotiate everything at renewal' and stop monthly reviews to save effort.
1. Identify the contract management failures in this situation and explain the risk they create.
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The retailer has allowed work to proceed outside the written change process: 12 store configurations were treated as minor works without change requests, so scope, price, and acceptance criteria were never agreed. It then paid invoices 17% above the run-rate without apparent validation, which weakens its position if it later disputes charges. Monthly performance reviews were apparently ineffective or being abandoned, so the supplier's 99.97% availability masked the real service failure: circuit delivery of 10-14 weeks delayed store openings. The availability metric measures the core network, not the outcome the business needs. The service credit cap of 5% may also be inadequate for repeated delays. Together these failures create cost leakage, weak evidence for credits, and a renewal negotiation based on the supplier's version of events. Stopping monthly reviews would make the position worse by removing the only regular evidence trail.
2. What should the retailer do before renewal, including how it should handle the disputed scope and credits?
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Before renewal, the retailer should reconstruct a change and invoice trail: list every store configuration, the written approvals or their absence, the invoices paid, and the delivery dates against promised dates. It should hold a contract performance review with the supplier, separate the availability metric from store-opening outcomes, and require root cause and corrective actions for the 10-14 week circuit delays. On the disputed scope, the retailer should not simply refuse payment or demand credits without evidence; because it accepted the benefit and paid, it may have weakened its formal position. It should seek a negotiated settlement covering unauthorized charges, service credits for delayed openings, and a scope catalogue for future stores. For renewal, it should set a clear baseline, require change control, add delivery lead-time KPIs, review the credit cap, and test the market or benchmark before agreeing price. Monthly reviews should continue, with finance and store operations present.