Travel Management Contracts: Checklist for contracting a business travel agency
15th January 2015
Choosing the right business travel agency can be challenging, and there are many factors you need to consider when it comes to maximising the value of travel management services for your employees and your company. Just like in any other business relationship, keys for successful partnership with your newly appointed business travel management provider are having the right people on board to help you actively manage all aspects of the contract, transparency, understanding of each other’s culture and company objectives as well as setting the expectations and deliverables right between both parties. After having carried out a comprehensive tender process, you are now at the stage to award the travel management contract to your new preferred supplier. But hold on, before you go ahead, it may be worthwhile to carry out a last final check to make sure your supplier contract covers all aspects, including some key legal points. Here we share a simple checklist of key points every business travel management contract should include.
1. Definition of business travel services to be provided and the requirements to be met
At the heart of your business travel services contract are the services you want your new supplier to provide. Ensure your contract contains clear and specific descriptions of the services your new business travel agency is going to deliver. Your service description should at least include scope, type and quality of service and responsibilities. Although using your company’s standard service agreements may save you time, it is not the best option and unlikely to fulfil the requirements of a tailored travel management solution. Double check your agreement and ensure the contract fully covers what you expect your newly appointed business travel company to deliver. This way expectations and responsibilities are clear for you and the supplier, right from the start.
2. Definition of the agreed level of service
Although many companies take a substantial amount of time to discuss service levels during the tender process, they often end up including poorly constructed SLAs or even forget to include agreed SLA’s in the legal agreement! So, do not forget to incorporate SLA’s in your contract. But at the same time your SLA’s should clearly define the services and conditions of service availability, including quality standard, such as response times, responsibilities of both parties, cost vs. service trade-offs and escalation procedures. Also, incorporate things such as: how is service effectiveness tracked, reported and addressed, how disagreements related to service levels are handled, how both contract partners will review and revise the agreement? This way, you can prevent your travel management company from sneaking out from delivery.
3. Key Performance Indicators (KPIs)
How often you want your new travel management company to deliver Management Reporting (MI) ensuring its benchmarks are against your travel policy. Include realistic savings targets with the appropriate approach to measuring the realised negotiated savings enabling you to quantify the benefits obtained through travel procurement and policy compliance. (Read our 11 tips on improving business intelligence and performance measurement…)
4. Pricing and fee structure
It is an obvious one, but having included precise and clear definitions of negotiated prices and fee structure is a must for every travel management contract. Make sure your travel management contract includes pricing mechanisms and where appropriate, milestone payments, incentives/rewards, retentions, which you have discussed and agreed with your new business travel agent. If you have opted to sign a fixed-term contract, watch out for possible price variation mechanisms often hidden in the small prints to include clauses referring to Retail Price Index. Your newly appointed business travel company should commit to maintaining the agreed transaction fees for the entire contract period, especially if your contract is for more than 2 years. Also, is clear
5. Implementation plan for a smooth roll-out of your travel management programme
A well-thought-through plan for implementing the new service provider will help you to ensure the transition to your new business travel services supplier is a smooth one. So, carefully check before signing the contract that it includes an implementation plan covering the key impact the contracted service has on stakeholders including a list of transition tasks that need to be addressed, a list of any required key documents, an action plan outlining important milestones, i.e. key events in managing the contract as well as a list of key documents/ information required from your current supplier to ensure a smooth rollout of your new travel management programme.
6. Escalation and alternative dispute resolution procedures
Whilst you can take many practical steps in order to minimise the risk of a dispute arising in the first place, you should give some thought on how a dispute will be handled and managed should it arise between you and your appointed business travel agency. Including a dispute resolution clause with a detailed escalation procedure offers the opportunity for parties to resolve disputes at an early stage in a cooperative way, preserves on-going commercial relationships and saves you time and money.
7. Change of control procedures
Mergers and acquisitions occur quite often in the business travel industry. So, it is no surprise that you should prepare for that case if your preferred supplier is acquired by another business travel agent. This can have significant consequences for the quality, range, and cost of services you receive. By including ‘change of control procedures will strengthen your position for renegotiating contract terms, provide clarity and even enables you to terminate the contract in case your appointed business travel company is under new ownership.
8. Payment procedures
Make sure the agreed invoicing processes and procedures are clearly defined in your contract, including timescales, payment terms, and how the company will pay for services received from the business travel agent. Also, make sure the agreed interest rates for late payments are included in your travel management contract.
9. Agreed exit strategy
Check contract termination clauses carefully before you sign the travel management contract and have an exit strategy ready. This way it is easier for you to identify any risks and ensure continuity of services if something goes wrong or if the supplier fails to deliver. With an exit strategy ready at the outset of the relationship with your new travel management company, you ensure your needs will be incorporated into the contract, keep business and client disruption to a minimum, in case your supplier fails to deliver and you need to terminate the contract.
A good corporate travel management contract not only identifies clearly the obligations of the business travel services provider, but also forms the foundation for a sustainable, productive relationship built on communication and trust between clients and the business travel agency.
What are your top tips for contracting a travel management company?
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