The tales and travails of bad outsourcing agreements are probably as legendary as the stories of legions of foreign workers taking away American jobs. Yet, we don’t hear much about the agreements that lead to engagements gone wrong, to service levels not met or in worst case, services not being provided. Of course, a good number (if not the majority) of outsourcing agreements and engagements are just what they should be, but there are a number of pitfalls that the less than savvy business owner may fall into, and here they are:

1. Do you know your outsourcing vendor? That is to say, who do they do work for? How long have they been doing this work? And can they accommodate your transaction volume today? One, two, three and five years from now? Your best bet is to select a vendor that is an expert in the work you’re looking to outsource. Your company does not want to be any vendor’s test case.

2. Under what legal jurisdiction does your outsourcing vendor reside? In the event of legal proceedings, what will be required – foreign counsel, proceedings in another legal system? Consider what that may cost, in terms of time, travel and dollars.

3. What are the terms of your agreement? That is to say, it doesn’t really matter what the price is, if that price comes at the expense of a multi-year agreement without sufficient termination rights or options. If services are consistently provided at levels that do not meet contractual service levels, your company should have the right to terminate that statement of work (at minimum), or the vendor, for cause.

4. Based upon the value of those services, the value of your company, and the applicable risk associated with an act of negligence or worse, does your agreement contain the appropriate levels of insurance coverage to mitigate said risk? For example, in the event of a PHI breach, what would be the estimated costs to counter such event?

What not to do in an outsourcing negotiation is also a lot of common sense. Know your vendor, know your company’s needs, and do your homework to know where you expect to be in one, two, three and five years from now. And, finally, important while negotiating, and of the utmost every day after: governance and communication – regardless of where or to what vendor you source your work, your company still owns the work, and thus your company must manage it.