We are often requested to explain our opposition to
procurement contractors and their corporate clients policies and procedures so
we produce the following explanation.
Our explanation is simple and is based on our experience. “It is not profitable
to serve high-risk clients at their facilities if they require us to assume
extraordinary financial risks”.
This explanation continues with the following detailed account of facts that
formed our decision to avoid extraordinary risks that are assumed with a pen and
a signature.
A Procurement Contractor's subscription is a snare of contractors for high-risk corporate clients.
HEADS UP! procurement contractors provide an essential business service by identifying high-risk work sites of corporations that often operate against public policy.
Requiring a subscription upfront serves as a strategic maneuver to lock contractors into terms that favor the client. This approach can create a binding commitment before all the specifics of the core elements of the sale are thoroughly discussed and negotiated. If a prospective client insists on a subscription first, it indicates potential hidden costs, stringent conditions, and a high-risk environment. This tactic could lead to less favorable conditions for the contractors involved. Such is the situation contractors face when working with high-risk corporate clients. The environment is undoubtedly challenging and requires contractors to be particularly vigilant. Accepting difficult terms, meeting rigorous demands, and navigating volatile market conditions creates a complex web for contractors.
The first step will be a significant investment of $36,000 to $96,000 per year to qualify as a spot market service provider candidate. You will be required to provide a Primary and Non-Contributory endorsement on a Certificate of Insurance for specific Commercial General Liability (CGL) insurance coverage, usually exceeding $12 million in limits with specific endorsements. Additionally, you must render business documents that a lawyer needs to promptly collect the maximum CGL insurance benefits.
The second step involves agreeing to the client's contract terms and conditions. High-risk clients typically demand a broad form of indemnification with unlimited claim triggers and limits. At this stage, the client may manipulate you into a one-sided contract agreement, where you will assume financial responsibility for extraordinary shifts of risks that the client cannot control, mitigate, or insure. You may also be required to surrender your insurance coverage's benefits. You also will be required to assume an extraordinary amounts of financial responsibility for the negligence of the Client's agents. NOTE: It will be difficult to impossible to do business with a Client’s contracting officer who will have knowledge and authority to negotiate their one-sided contract.
The third step you will be invited to participate in a reverse auction. Further on, if you were successful in the reversed auction your contractual indemnification obligations and claim triggers will be expanded with sign-in sheets, purchase orders, and other documents the Client issues conducting business.
STOP, THINK and INVESTIGATE! Carefully weigh and consider the prospective client, recalculate your overall business break-even analysis including a loss allowance, and consider conducting business as an LLC corporation with a quick exit plan to survive a huge loss when it happens. A total loss of your business assets is not an uncommon allowance due to assumed extraordinary shifts of risks with a higher-than-expected probability of loss. When we talk about extraordinary risks, we delve into probabilities, often relying on probabilistic modeling. Corporate clients typically add a significant safety factor to this rational math to ensure a greater margin, which in turn inflicts excessive stress and pressure on contractors. This can lead to strained relationships, ultimately affecting the quality and success of the projects. Why do you think procurement contractors' clients prioritize money above all else?
Profit is a difficult issue when serving high-volume, low-margin, high-risk clients and corporations that shift extraordinary risks. These clients constitute a small percentage of the USA economy and are often not worth the pain and suffering that comes with the deals they propose. Beware of corporate procurement strategies that contradict public policies, and educate yourself on the shifting of extraordinary risks under the Express Negligence Doctrine. The Express Negligence Doctrine is a legal principle that requires any indemnity clause in a contract to explicitly state that one party will be indemnified for its own negligence. This doctrine is particularly relevant in high-risk industries like construction and energy, where contracts often include indemnity clauses to shift extraordinary risks. Such a provision, which is intended to comply with the “express negligence doctrine” could read as follows and will be presented in bold print.
Sample #1:
INDEMNIFICATION FOR STRICT LIABILITY OR INDEMNITEE NEGLIGENCE
THE INDEMNIFICATION PROVISIONS IN THIS ARTICLE SHALL BE ENFORCEABLE REGARDLESS OF WHETHER THE LIABILITY IS BASED ON PAST, PRESENT OR FUTURE ACTS, CLAIMS OR LEGAL REQUIREMENTS (INCLUDING ANY PAST, PRESENT OR FUTURE BULK SALES LAW, ENVIRONMENTAL LAW, FRAUDULENT TRANSFER ACT, OCCUPATIONAL SAFETY AND HEALTH LAW, OR PRODUCTS LIABILITY, SECURITIES OR OTHER LEGAL REQUIREMENT), AND REGARDLESS OF WHETHER ANY PERSON (INCLUDING THE PERSON FROM WHOM INDEMNIFICATION IS SOUGHT) ALLEGES OR PROVES THE SOLE, CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE OF THE PERSON SEEKING INDEMNIFICATION, OR THE SOLE OR CONCURRENT STRICT LIABILITY IMPOSED ON THE PERSON SEEKING INDEMNIFICATION.
Sample #2:
TO THE
MAXIMUM EXTENT PERMITTED BY LAW AND IN ADDITION TO ANY OTHER INDEMNIFICATION
OBLIGATIONS CONTAINED IN THIS AGREEMENT, INDEPENDENT CONTRACTOR SHALL RELEASE,
DISCHARGE, RELINQUISH, DEFEND, INDEMNIFY AND HOLD HARMLESS INDEMNITEES, ITS
PARENT, SUBSIDIARIES, AND AFFILIATED CORPORATIONS AND BUSINESSES, AND EACH OF
THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS AND OTHER REPRESENTATIVES
(individually and collectively “INDEMNITEES”) FROM AND AGAINST ANY AND ALL
CLAIMS, RIGHTS OF RECOURSE, LIABILITIES, CAUSES OF ACTION, DAMAGES, LOSSES,
SUITS, PENALTIES, FINES, COSTS, FEES, AND OTHER EXPENSES (INCLUDING COURT COSTS,
REASONABLE CONSULTANT, EXPERT WITNESS AND ATTORNEYS’ FEES AND OTHER DEFENSE
EXPENSES), HEREAFTER COLLECTIVELY REFERRED TO AS “CLAIMS”, ARISING OUT OF,
RESULTING FROM OR IN ANY WAY CONNECTED WITH OR ALLEGED TO HAVE ARISEN OUT OF,
RESULT FROM OR BE IN ANY WAY CONNECTED WITH: (I) ANY SERVICES PROVIDED OR
ALLEGED TO HAVE BEEN PROVIDED BY INDEPENDENT CONTRACTOR OR ITS PERSONNEL; (II)
ANY ACT OR OMISSION OR ALLEGED ACT OR OMISSION OF INDEPENDENT CONTRACTOR OR ITS
PERSONNEL; AND/OR (III) ANY FAILURE OF INDEPENDENT CONTRACTOR OR ITS PERSONNEL
OR ALLEGED FAILURE OF INDEPENDENT CONTRACTOR OR ITS PERSONNEL TO COMPLY WITH
EACH AND EVERY WARRANTY, REPRESENTATION, OBLIGATION, OR OTHER TERM AND/OR
PROVISION OF THE CONTRACT DOCUMENTS, (IV) CLAIMS OR SUITS FOR ALLEGED
INFRINGEMENT OF ANY PATENT, COPYRIGHT, INDUSTRIAL DESIGN, OR TRADEMARK OF ANY
PARTY DIRECTLY OR INDIRECTLY RELATED TO
WORK PROVIDED.
IMPORTANT NOTIFICATIONS THAT YOU ARE OBILIGATED
TO MAKE:
The deals you make will affect corporate stock holders, lenders,
workmen, vendors, and sub-contractors. You are obligated to keep everyone
informed of their exposure to your extraordinary contract provisions of shifts of
risks or face compounded law suits
that will add injury to losses when things go wrong. Normally
risk allocation is shifted from the highest tier to the lowest tier
The following is a list of the most important notifications:
Financial Statement should include current "Contingent Liabilities"
A Document
Acknowledgement and Attestation by each person on the jobsite describing the
deposition of the work site "Commercial General Liability" and "Workers
Compensation" insurance benefits. And the "moral hazards of conducting
business that is against public policy".
SOME GOOD INFORMATION and ADVICE THAT IS USUALLY ENORED:
Always complete the core elements of a sale before investing cash into any opportunity and prospect.
Present your contract terms and conditions of service to a prospective client's for acceptance before pricing any work for the following reasons: (1) You need to confirm the sincerity of your prospective client before anything else. He has no concerns about wasting your time and getting valuable information along the way. NOTE: Pay close attention to a prospective client's request for a quotation. if he does not provide any planning documents to you for basing a quotation you should regard the fact with high concerns. (2) You need to confirm that the proposed project is funded and will definitely proceed. (3) You absolutely need a baselines of costing to base the pricing of your service.
Know what you need to operate a successful business and get it, or turn the deal down.
Deal with the Contracting Officer that has the knowledge and authority do business and don’t be afraid to request his corporate certificate of authority. You will need it later on.
Detail scopes of work, contract terms, conditions and billable procedures of your proposal because all contracts and arguments will be settled by specific performance of the contracting parties.
Read contracts carefully and especially the conspicuous CAPITAL BOLD PRINT. Federal and State Uniform Commercial Codes specify that extraordinary indemnification contract terms to be specified by conspicuous capital bold print. Additionally most State Anti Indemnity Statutes comply with the UCC Codes for enforceability.
All contracts have cost of compliance and you need to know that cost before you make a deal.
Signing a client corporate documents on-the-spot is a very important event and a reckless practice. Keep in mind that you probably would not be asked to sign a form or document unless someone thought it was important.
Anti-Indemnity Statutes probably will not protect you from the consequences of contractual obligations because "a deal is a deal in most States".
Do not surrender your insurance coverage benefits to any of your clients. You will become a slave to that client for the duration of the deal you made.
A written and signed document will supersede all oral discussions and promises. Get written orders for all work ordered on-the-spot and on-the-fly.
Follow the money (1) schedule payments by milestone events (2) don’t perform work without a on-time payment plan (3) get pre-payments for custom orders, mobilization, and for project site setup.
Do not assume financial responsibility for market price structures.
Do not conduct business against public policy. (1) You will not be able to roll encumbered paper with any lenders. (2) Contractual risks should never exceed the value of a sale. (3) You will be criticized and rejected by the important people that you conduct business with and depend on for support, financing and judgments.
Do not assume financial responsibility for the negligence of a person or entity that you have not commissioned to provide material and services. This is an idea is against public policy, expensive, unpredictable, and is special market insurance coverage or just an uninsurable risk covered by your company assets.
Mostly, factors (high-risk lenders) finance receivables from your high-risk clients rather than banks. A factor will buy your receivable for about 75% of its value under an extreme covenant, which will be added to the previous extreme covenants you had made with your client. Additionally, you should expect the factor to publicly notify the deal in a local legal filing of a security agreement.
All work sites have their own work constraints and Clients that conduct business against policies have some of the greatest work constraints in the world. Work site constraints are directly related to profit.
About 168 procurement contractors exist and are doing business in the USA. The following is a list of the most popular procurement contractors: ISNetworld, Avetta, BROWZ, Contractor Compliance, Multiplier, OnContract, Workday, SAP Ariba, Coupa, Deel, HSI Donesafe, Intelex Technologies and Tipalti.