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business conditions can change in a major way, and fast. You need to make sure you are not locked into a long-term contract or deal with little or no flexibility to alter scope or completely withdraw over time. Here again, making sure that there is a shared risk model for operational costs when hiring demands change is one way to help ensure some of this protection.
BUILD YOUR CONTRACTS AND SUPPLIERS RELATIONSHIP ON FLEXIBILITY.
ALWAYS INSIST ON BAKING ADJUSTABLE VARIABLES IN YOUR CONTRACTS AND SUPPLIER RELATIONSHIPS.
NEGOTIATE HARD ON KEY POINTS SUCH AS COST,QUALITY AND RISK. NOT ONLY ON PRICE.
The use of "options" will allow some degree of flexibility. One may chose to exercise the option when the business environment require it. It could be in the form of additional service period, additional quantities or different scope of work. It can be stated clearly in the Form of Tender, which the tenderer have to comply with.
As stated in one of the earlier answer, the price adjustment formula can be structured as that the unit price varies accordingly to the total volume in a specific period. For eg if within the calender year, the volume exceeds X amount, the unit price will have to be reduced by a Y%. The cost different can be reconciled in the form of a credit note to be utilized against future invoices.
This is based on actual contract terms with a large aerospace MRO which I have administered personally before.
Escape and protection clauses are just time bounded safety nets intended when things go down or negative. Change and development on the other hand are forces far stronger that safety nets. So when the two come to a cross road, you can respect and sit-out the protection clause with focused eyes on the future.
In most of the standard forms of contract there is always a price adjustment formula, which protect both parties from long term risk. The use of this formula may also be used for short term contracts when some items in the contract or thier constituants are linked to the stock market prices.
In the extreme or unpridicable there is also a standard provision called the "Force Majeure" which provide protection for both parties in a reasonable balanced manner.
