Who Wrote This Contract?


Who Wrote This Contract?

The issue addressed last month in this PT the Auditor column was tracking all the types of transactions in parking made possible by technology. While monthly, transient, valet and validation parking accounts – and multiple types of each – serve all kinds of customers, they also add degrees of complexity to the determination of whether you are making the revenue you should.
The flip side of the coin, of course, is the amount you are spending on expenses to run your facilities. Further, there is the issue of whether your outside contractor or operator is giving you the performance that you specified and for which you are paying.
Auditing operator performance implies that you have sufficient detail in your contract to be able to determine how well an operator is meeting the requirements.
Poor requirements = poor performance, almost always.
In my review of contracts, I really hate to find this type of clause:
“Contractor agrees to manage and operate the Facilities in a first-class manner with energy, fidelity and diligence, and in such a manner as to provide adequate services and as to produce the greatest income to Owner while in full compliance with all terms of this Contract.”
No matter how energetic and diligent the operator, there is no definition of a “first-class” manner of operating a parking facility. How can anyone determine if the operator is managing in a first-class manner? And what are the penalties if the company is not?
If you are the performance auditor for the owner, how do you enforce such a contract clause? Since “first-class” is not defined, it is in the eye of the beholder. You have no standards to enforce, regardless of what you find.
Here is another example of a bad contract clause:
“The Operator shall implement and maintain security practices and procedures similar to those employed by other garage operators in
   this city.”
 Well, does your operator know what other operators are doing for security
    procedures? Do you? And are their procedures adequate for your facility?
As an owner, with the responsibility and risk associated with that position, do you really want someone else’s definition of “security” to be the one used in your facility?
Will you be paying for more than you need if someone else defines how security will be managed? Or will you risk not having adequate security because you did not specify it yourself or obtain assistance to define what you need?
Security of all types, passive or active, is too important to be left to someone else for decisions.
One final bad example of a contract clause:
The Operator shall keep the Garage clean, neat, sanitary, orderly, and free of objectionable odors, and shall sweep any paved portions of the Garage regularly to remove dirt, garbage, rubbish and debris and calcium chloride, if any, and other refuse.
Well, that doesn’t seem to be too bad – except that there are no performance standards for keeping the garage clean. Is the operator going to sweep the garage once a week? Once a month? Once a year? How often is the trash going to be removed? Do windows need to be washed, or elevators cleaned and polished? How often should trash receptacles be emptied?
Your definition of “clean and neat” may be very different from that of your operator’s. How do you, as an owner, audit performance with regard to housekeeping under a clause like this? If you find that the garage is not being regularly cleaned, what is the basis for requesting better performance?
Using an old contract, copying someone else’s contract and changing the names, and letting procurement handle all the contract details are common ways to arrive at a parking agreement with inadequate performance standards.
Once you sign such an agreement, you have little chance to ask for and receive better performance than what is offered.
Similar to the process of auditing financial figures, an owner’s performance audit must have measurable standards to review and assess. Without these performance standards, you are left with only the tools of persuasion and appeal.

Barbara Chance, President and CEO of Chance Management Advisors, Inc. founded the firm in 1984 to “provide services to parking and transportation owners in the areas of planning, management, operations and finance.” A Past Member of the Women In Parking Board, she serves on the IPI Advisory Council. In 2011, Chance was honored as IPI’s Parking Professional of the Year. Contact her at barbara.chance@chancemanagement.com

Article contributed by the Parking PT team.
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