Waiting for that contract to come back from legal?

Imagine if you could skip the process, all those sticky terms and conditions, and just confirm the on-site details with your supplier. It’s possible with a master services agreement. Yes, you and the supplier must go through the back-and-forth slog once, but then each time you work together, you use a much simpler document—a statement of work.

“An MSA drives efficiency and consistency,” says Chris Lee, CEO, ACCESS Destination Services, who had three MSAs on his desk for review at press time. “You negotiate once.”

Diane Goodman, CMP, owner of Goodman Speakers Bureau, has MSAs with five corporate clients. “Many companies already have them in place for major hotels,” she says. “In the past few years it has filtered to speakers bureaus, destination management companies, and other vendors.”

When Do You Need an MSA?

Creating an MSA “depends on need,” says Tim McKenna, sourcing specialist at ING U.S., and the company’s master of master services agreements. At ING, there is a need when the spend is over a certain dollar amount, thereby dictating a certain risk level to the company, or if there is a lot of activity with a single supplier.

“I watch for patterns,” McKenna explains. For example, if he notices a lot of contracts coming across his desk from the same nationwide supplier, he will contact that company and send along the ING contract. “Then we go back and forth until everybody is happy,” he says. “There are always tweaks. They’re not deal-breakers; it’s just a question of identifying the language that will cover both parties’ business needs.”

Besides the time savings realized through the use of MSAs, planners may also avoid situations where they’ve done a lot of work with a supplier on program details only to find an obstacle in the contract phase. “What used to happen is that we would send a speaker contract, legal wouldn’t like something, and they would spend months holding it up, which puts everything in jeopardy,” Goodman says. “An MSA streamlines the process because then you are in their system.” MSAs are usually in force for two or three years and can be renewed in one-year increments.

What’s Included in an MSA?
Not that it is an easy process. Getting an MSA finalized can take as long as four months. Terms that are agreed upon may include payment details (deposit requirements and the payment schedule), liability, force majeure, attrition, and confidentiality.

Working things out is “a learning process on both sides,” says Goodman. For example, speakers often have strict rules about photos and video, while companies like to have free rein on recording their events. Goodman has to explain that speakers need to protect their proprietary content. “In every case we have been able to work through the terms,” she says. “It is time-consuming and tedious, but it helps procurement see all the variables in our side of the business.”

“We have many MSAs in place,” says Meghan McSkimming, executive manager, national accounts, Kuoni Destination Management. One common point of negotiation, she notes, is acceptance of credit cards. Many companies prefer paying by credit card because of the ease of reporting and the ability to accrue points, but many DMCs prefer not to accept credit cards because they have to absorb the 3 percent to 4 percent fee. “Either a DMC won’t take [cards] or will have to price its services accordingly,” McSkimming says, adding that some companies are finding new technology systems, such as Ariba, that allow direct electronic payments, with no checks or credit cards involved.

When is an MSA the Right Choice?
Consider master services agreements with suppliers you use regularly, such as:
  • Hotels
  • Destination management companies
  • Speakers bureaus
  • Production companies
  • Audiovisual companies

Natural Step
Chris Lee of ACCESS sees MSAs as the next piece of an evolution that began decades ago with the first meeting management consolidation projects in companies. “Meeting planners began to track spending, and then to leverage it,” he says. Then they saw that using a single vendor rather than a dozen could give them “better terms and better pricing—and they didn’t have to educate a different vendor each time about their programs and the company.”

Concurrent with those trends, he notes, was the consolidation of suppliers, particularly DMCs, which made developing MSAs easy. “Instead of 25 different suppliers across the country, and going through legal 25 times, accounting 25 times, procurement 25 times, you’re doing all the risk-vetting and insurance-vetting once. To me, an MSA is a way to say, ‘If we’re partners, why negotiate every time?’ It’s a natural step in the evolution of our industry.”

And on the client side, companies are consolidating their legal departments, he says, noting that just a few years ago he often ended up having to rewrite and re-sign the same contract for a different planner in a different region, even if it was the same end-user company.

But it’s not just nationwide companies that can work with you on MSAs. McKenna notes that he recently worked with a company with franchisees that was able to solicit input and get buy-in from those individual businesses.

Another alternative for working with independent DMCs is to use the standard contract created by the Association of Destination Management Executives International. You can download the document at the ADMEI Web site.