LIVE ISSUE/CONTRACTS: Adland realises one contract is better than none. John Tylee reports on how a standard client-agency contract was established

In an industry that likes to think it has shed most of the remnants of its reckless and irresponsible past, the introduction of a model contract for agencies and clients seems like a long overdue rite of passage.

In an industry that likes to think it has shed most of the remnants

of its reckless and irresponsible past, the introduction of a model

contract for agencies and clients seems like a long overdue rite of

passage.



The fact that there has never been one before may well explain why one

astonishing legacy of advertising’s misspent youth remains. And, if a

set of agreed ground rules achieves nothing else, many believe it will

at least draw attention to the alarming 45 per cent of agency and client

relationships that, even today, are reckoned not to be secured by

contract.



Indeed, the chief executive of one major agency is willing to wager that

a rummage through the filing cabinets of Britain’s biggest 20 shops

would reveal that each has at least one client with which it has never

signed an agreement.



This isn’t necessarily the agency’s fault. Many clients still believe

that agencies have more to gain from a service agreement than they do

and that the absence of one leaves them more freedom to manoeuvre if the

relationship turns rocky.



But this can backfire badly. The head of a large UK agency group tells

of the procrastination of a well-known healthcare company when pressed

to sign a contract. For months the draft version bounced between various

departments. It was still unsigned when the agency, awarded conflicting

business as result of an international realignment, fired the

company.



’It then had the gall to tell us we should have signed a contract.’



The model contract unveiled by the Institute of Practitioners in

Advertising, the Incorporated Society of British Advertisers and the

Chartered Institute of Purchasing and Supply (Campaign, last week) is

significant if only for its symbolic value. ’It will be helpful in the

way that a 15 per cent commission system once was,’ Michael Baulk, the

Abbott Mead Vickers BBDO chief executive, suggests. ’Even though a 15

per cent rate is no longer mandatory, it’s still a useful reference

point.’



What’s more, it should play a part in highlighting what is still a

cavalier attitude among many agencies and clients to pinning down formal

agreements.



The reasons can often be traced back to the start of the relationship

where pragmatic considerations get forgotten in the euphoria. One agency

director explains: ’The champagne flows and the marketing director wants

the ads as soon as possible. The agency is so happy to get the business

that a contract seems of secondary importance.’



There are other reasons why neither party is keen to get down to the

nitty-gritty. IPA figures suggest 70 per cent of large agencies spend

more than 25 energy-sapping days a year negotiating client

contracts.



’It never used to be so bad,’ an agency new-business director

complains.



’Now, it’s not uncommon for negotiations to drag on for weeks. Clients

are far more interested in getting the price right than they are about

strategy or creative work.’



The changing attitude reflects the rising influence of those holding the

company purse strings. Tellingly, it was the 24,000-member CIPS,

representing purchasing managers, which caused alarm across the industry

and set the wheels in motion by suggesting its own form of standard

contract.



CIPS members are more used to dealing with widget-makers than

advertising suppliers. But although their proposals were damned as

’bearing no relationship with the real world’ by one senior trade body

executive, they set the tone for the hard-line approach adopted by the

client side.



’Agencies would have had no rights if CIPS had got its way and its

proposals on agency auditing were draconian,’ an industry negotiator

recalls. ’Even during our talks with CIPS and ISBA, we had to give more

ground on the audit clauses than we would have liked.’



Nobody believes the standard agreement will be a panacea - ’a

contractual pick ’n’ mix’, is one industry legal expert’s verdict on it

- but it is expected to result in less mutual suspicion and nervousness

about signing contracts. William Eccleshare, the Ammirati Puris Lintas

chairman, says: ’This initiative will at least highlight the importance

to clients and agencies of having contracts in place.’



In many areas, however, a model agreement will have little impact. Large

agencies have standard contracts of their own and most sophisticated

advertisers also have standard terms of business.



Tony Douglas, currently the Central Office of Information chief

executive who is soon to become chairman of FCB Europe, articulates the

common view of big clients. ’We’ll see if there’s anything to be learned

from the new standard contract but we have long experience of running

contracts which have been hammered out over time and with which we and

our agencies are happy.’



A standard contract is likely to be more valuable to smaller

agencies.



Phil Hesketh, a director of the 56th-ranked Advertising Principles in

Leeds, says: ’Agencies like us do lots of bits and pieces for maybe 50

grand a time. A standard contract covering these kind of projects would

be a great help.’



What the standard contract should be able to do is shorten the time

taken up with discussion of minutiae. But it can’t work miracles. The

blow-by-blow negotiations on hotly contested matters will go on. ’It

will get many of the ’pain in the arse’ items off the agenda,’ Barry

Cook, DMB&B’s managing director, says. ’But I’m not sure whether many

hours of discussions will be saved. There are just too many

imponderables.’



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