Gartner Research

Use a Well-Constructed Price Protection Clause to Reduce Technology Contract Costs

Published: 10 November 2015

ID: G00280126

Analyst(s): Christopher Dixon, Jo Ann Rosenberger, Rob Schafer

Summary

Even the most well-negotiated technology contracts often lack robust price protection during and after the contract's initial term. Technology procurement best practices help professionals negotiate and enforce strong price protection clauses to minimize the risk of unbudgeted price increases.

Table Of Contents
  • Key Challenges

Introduction

Analysis

  • Negotiate a Strong, Specific Price Protection Clause With Clear, Quantifiable Language for the Initial Term as Well as Any Future Terms
    • Gartner's Price Adjustment Models
  • Establish and Execute Collaborative Processes With Internal Stakeholders, Such as Budget Holders and Accounts Payable, to Monitor and Enforce the Negotiated Terms of the Price Protection Clause
  • Appendix 1: Calculation Details for Figure 1
    • Price Cap Cost Differential: 3% Versus 5%; Initial Maintenance and Support Annual Cost: $500,000 (See Figures 2 Through 5)
  • Appendix 2: Common Indexes and How to Apply the CPI
    • Types of CPIs

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