Approaching Renegotiation

13 Dec 2021

Setting the scene

Although it’s not a document anyone wants to be constantly referring to, the contract between Trustees and their administrator is crucial in governing the relationship. It is important that as a renewal approaches it isn’t just rolled over. It needs to be looked at afresh to make sure it still reflects what the Trustees need from the service, and the services actually being delivered.

Our client was approaching their contract renewal, and had gone through significant changes since originally outsourcing. The service hadn’t evolved in line with the changes to the scheme, and therefore they had some issues with the service. The administrator was acknowledging these and taking steps to remedy them. The causes were understood, although it was still a drain on our client’s time.

Our client wanted to know how to get the best from their administrator, and how the current contract could be developed to better support service governance and the relationship. We were appointed to use our experience of administration contracts and the administration market to identify what had gone wrong and why, how it might be fixed and how the contract could better reflect the Trustees’ needs.

Understanding your services

The core focus of the project was to get the perspectives of both parties on the services past, present and future. What had gone wrong? Why? What needed to change?

We spoke with the client for their take on the requirements, and we met openly with the administrator to hear their side of the story. Relationships are not one-sided and there are often things that clients do that make the life of the administrator harder than necessary. We also reviewed the existing contract against what we would expect from a modern administration agreement and in the context of what the client wanted from the service.

Following a series of conversations and a review of background documents, we were able to put together our thoughts and recommendations. We were able to give our client our views on the administrator, our suggestions for developing the contract and ideas on how best to approach the renegotiation.

The results

Although the client wasn’t necessarily considering a market review, it was a potential outcome. Undertaking a formal review of the contract and services does add some competitive tension to discussions with the administrator, and provides the extra incentive to meet the client halfway on some key issues.

This review was never a matter of cost for the client, and rightly so. It was far more important that they secure contractual terms that drive the right behaviours in the administrator, and reflect the services as they are today and accommodates what they may be in the future.

Having said that, our client was able to secure a healthy fee reduction alongside a revised team structure, a refreshed senior team supporting the account and a sea of change in key contractual terms.

But this wasn’t purely about the paper. The review has also helped the client and the administrator take practical steps to better address the historic issues, supported by the right contractual terms. This has all led to an improvement in the relationship rather than continuing friction or expensive and time-consuming market reviews.

Key Learnings

  • Contract renewals are an opportunity to review the contract, but it is important that the focus is not just on securing fee reductions. The contract needs to work for both parties.
  • Giving careful consideration to the services you have received, and the services you want to receive can help identify areas that may need changing in the contract.
  • Engaging openly with your administrator, whilst maintaining an element of competitive tension should increase the chances of securing the changes you are seeking.