Vendor Contracts: Let's Talk About Force Majeure One More Time

We had talked about force majeure awhile back, and apparently it was interesting enough to catch the attention of one of my colleagues. Phil is a hard-charging product manager who works in the telecommunications space and he just sent me an email that was talking about another story where a vendor had to declare force majeure:

Jim,
Shortly after I read your posting on force majeure I saw an article that said that Royal Dutch Shell has just announced that they won't be able to meet a big piece of their Nigerian oil-export obligations for their customer for the next two months because of militant attacks on their facilities. The force majeure legally protects Shell from not meeting contractual obligations because of factors outside of its control. So much for gas prices going down anytime soon!

Phil
Senior Product Manager

During our last discussion, we spent some time making sure everyone understood what force majeure was. This time around, we should probably discuss what you need to do as a product manager if one of your vendors declares a force majeure!

This is just the tip of the business continuity planning iceberg. As product managers we are responsible for the success of our products no matter if they are just being rolled out or if they are already currently available . The wrong time to worry about the loss of a critical vendor is after something has happened. The right time is when you are introducing your product. There are three questions that you need to both ask and answer:

1. What Are All Of The Things That Could Possibly Happen: This requires a big blank sheet of paper and some serious brainstorming. Generally things fall into categories such as natural disasters, political unrest, pandemics, etc.
   
   
2. What Are The Things That Probably Might Happen: You can't plan for every possibility (your budget is not that big!). So instead you need to identify the top possibilities on your list of all things. How long your probable lists is depends on your budget and your available time.
   
   
3. Plan, Plan, Plan: You don't need separate plans for earthquakes, floods, fires, etc. Instead, you need just one plan with a few special case steps. Putting this together BEFORE you need it is the key to being a product manager who is always on top of things.
   

Once you have a plan, you might think that you are all done. As my friend Phil says "... a plan is just the start of the real work..." He's correct: a plan starts to go out-of-date once it's been created. You need to revisit it at least twice a year and make sure that that names, contact info, and actions are still valid.

So are you ready for one of your vendors to declare a force majeure? Post a comment and let me know if your firm insists that you have a plan for how you will deal with these types of disasters or if you are flying without a plan...


Tags: Shell, Privacy, vendor, business plan

Force Majeure: What Is It and Why Care?

While reading the Wall Street Journal last week, I happened upon a very small article that mentioned that Alcoa, the large metal processing company, had declared a force majeure on alumina (also known as aluminum oxide which is used in aluminum production)deliveries from its operation in Western Australia. This somewhat boring legal term caught my eye because I've worked on a number of contracts that had a "force majeure" clause; however, I never really understood how or when it could be used. Well now thanks to Alcoa I know.

In Alcoa's case, there was a file and an explosion at another company's gas-processing facility. It's going to take at least two months to repair the plant and restart the gas supply. It turns out that to process alumina and turn it into aluminum requires a lot of gas. This means that Alcoa is going to have to cut their output and therefore forced them to declare a force majeure.

What does all this talk of aluminum mean to you? If you live in Australia, it probably means that you should go buy beer and lawn chairs right NOW because prices will probably be going up. For all other product managers, this should serve as a reminder that if your product relies on another vendor, that force majeure portion of the contract is not just "contract boilerplate" -- it really can be put into action. You need to spend some time thinking about what you would do if the unthinkable happened -- force majeure was declared. A backup plan/vendor is always good to have. If that's not possible, then a good P.R. campaign and working out the next steps that you would need to take with the folks in the legal department would be good to do.