Research and engineering firm Science Applications International Corp. this year avoided significant cancellation and attrition penalties through a standard contract addendum, a new policy and a more centralized approach to corporate meetings management, according the company's head of conference management. The company in 2005 aims to save at least $2 million through the new policy and already has avoided hundreds of thousands of dollars in penalties.
The new polices and procedures, launched in late 2003 and modified last year, are a direct result of massive attrition penalties that forced senior management to address strategic meetings management, adopt a new technology system and give new authority to the conference planning division, according to Lee Ann Adams Mikeman, director of conference and dining services for the San Diego, Calif.-based company.
In 2003, SAIC held a series of citywide conferences. The planners responsible for sourcing the events were experienced, Mikeman said. They estimated 10,000 to 12,000 attendees per conference and signed several large contracts on behalf of the company. However, problems appeared with the first of the three-conference series.
"Basically, the bottom dropped out with respect to one particular conference and they realized that they were going to have very poor attendance, probably half the attendees they estimated," Mikeman said.
SAIC faced huge attrition penalties with multiple hotels. "That, of course, got the attention of senior management," she said. Mikeman declined to specify the amount of attrition penalties paid by the company but said SAIC has an annual meetings spend of more than $70 million.
"It was really the catalyst for revising our policy, coming up with a mandated policy that everyone needed to adhere to for any of their meetings valued at $5,000 or more," she said.
Prior to 2003, SAIC had a meetings policy that required groups of 20 or more attendees to consult the central conferencing department, which is managed through the travel department, Mikeman said.
Although the conferencing department realized that attrition was a significant risk for the company, it was "flying under the radar" for most senior management, she said.
Under the new policy, a standard addendum is attached to every meeting-related request for proposals and all meetings contracts. The conference department in early 2004 drafted an initial addendum.
"Then we pulled in all of the corporate experts in legal, risk management, procurement and travel," she said. "Everyone reviewed the addendum from various perspectives. Now, we have a document that everyone across the board has agreed upon and we update it regularly."
The contract addendum includes reciprocal indemnification, a cancellation clause with a rebooking option and a force majeure and insurance clause.
The rebooking option has been the most helpful in reducing attrition penalties, Mikeman said. "That has helped us save well over $100,000 in just a couple of weeks."
The savings are in the form of a master credit that SAIC must re-use within a specified time period.
Although hotels have been less flexible on attrition penalties this year
(Meetings Today, March 21), Mikeman said hotels have responded favorably to the standard addendum.
"For the most part, we've been pretty successful because we are a large company, we have a central meeting department and processes and a policy that requires that this space be utilized first," she said. "The hotels will typically agree to our terms."
The conference department uses SAIC's preferred transient hotel vendor list for meetings. However, the department is working on its own list of preferred vendors, Mikeman said. "It's the top 25 cities where we do meeting and group business. We have a three-tier approach in each city where we have at least one luxury, one mid-level and one economy property."
SAIC last month began contacting potential preferred meeting hotel vendors, while the conference division determines the criteria for the list. Mikeman said the vendor list should be in place by the end of the year.
Also as part of the meetings management initiative, SAIC adopted technology from OnVantage Inc. that tracks event data and automatically attaches the addendum to each RFP. The system also has helped the company to leverage both meeting and transient spend with vendors, she said.
"We've been able to go in and look at all the meeting spend that is currently in there and see at what properties the company has spending money, and that has helped us develop that bidders' list," Mikeman said.
Although Mikeman said she originally planned to include both transient and meeting business in the same RFP, her hotel vendors requested that the two be kept separate.
Implementation of the policy is ongoing, Mikeman said, and an estimated $20 million in meetings spend currently passes through the technology system. "We still have a long way to go," she said. Adoption rates are rising steadily, she added.
Also under the new policy, contract-signing authority is relegated to approved procurement employees, she said. The conference department held several training sessions with the procurement department to explain the standard addendum and the reasons behind it.
"We trained on the best-case scenario, which is the addendum itself, and then we went into fall-back positions for each clause," Mikeman said. "That was a written document that was provided to everyone so they would know what to do if the hotel wouldn't go along with a clause."
The policy also specifies that meeting sponsors first must consider internal SAIC meeting space or available hotel space from previously cancelled SAIC events as meeting sites.
Available space is listed on the company intranet and through the OnVantage MeetingView system. Mikeman said she sends out periodic reminders on what space is available for meetings.
Although the policy is mandated for any event over $5,000, SAIC has not yet cracked down on bookings outside of policy, and prefers to take a flexible approach for the time being until employees are used to the new policy and compliance increases. SAIC also hosts and plans events under contract for other organizations and government departments that are handled separately from internal conferences.