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Supply Arrangements: What are they and why should they matter to IT contractors?

Morley Surcon By Morley Surcon,
Vice-President, Western Canada at Eagle

Supply Arrangements: What are they and why should they matter to IT contractors?Within the staffing industry there are a dozen or more business models employed by various employment agencies.  There are the smaller staffing agencies who focus their marketing efforts on smaller companies, on very specialized niches, with a handful of very strong relationships they might have, or a combination of these.  There are the huge international recruitment agencies that tend to focus on companies with international operations and may be generalists in the sense that they support multiple lines, from casual labour to general staffing positions to professional positions to technical positions, in an attempt to serve companies that want a single vendor to handle all of their contingent workforce needs.  Between these two extremes, there are the Regional and National staffing agencies that often service or specialize in only one or two different types of hiring needs, but often limit these to provide the level of expertise/focus that means so much to their clients.  Then there are mixtures and blends of the above.

The one thing that most recruitment agencies have in common is that they work to put formalized Supply Arrangements in place with the clients that they service.  A supply arrangement is simply an agreement that defines the relationship between the agency and the company that they serve/support.  Typical to most supply arrangements are the following:

  • Term of Agreement (date range within which the agreement will be valid)
  • Definitions (define the terms used in the agreement)
  • Commercial Terms (concerning insurance, rates, timesheets and invoicing)
  • Performance (defines the service the agency will be providing)
  • Termination (terms under which the agreement might be concluded)
  • Confidential Information (how to manage and keep safe important company data)
  • Indemnity and Limitation of Liability (keeping each party “safe” and legally separate from each other)
  • Signatures/Sign-Offs/Dates/Etc.

If these look familiar, they should!  They are the very same components that incorporated contractors find in any sub-agreement that they would sign with a staffing agency. After all, we jointly enter into a company-to-company relationship, so the terms should include the same content.  In fact, a good number of the terms that a contractor finds in their sub-agreement with their staffing agency are actually “flow-down” terms from the agency’s own supply arrangements with the end client.  That is often the reason why agencies cannot be very flexible with the terms — they have committed contractually to work with their clients in certain ways and must, legally, have their sub-contractors comply to the same terms.

Despite a lot of similarities in the terms between supply arrangements, it is extremely rare that any two supply agreements would be exactly the same.  Employment agencies are required to be chameleons, adapting perfectly to the business requirements of each of their clients.  The best agencies have detailed processes to ensure their compliance across many different agreements. For example, Eagle has tools and processes dedicated to this and is part of our ISO 9001:2008 quality framework.  That big stack of paperwork that we present to contractors at the beginning of each assignment is part of that process.  In this way, we ensure that both Eagle and our sub-contractors stay “on-side” of our supply agreement Terms & Conditions.

So, why should this matter to independent contractors?  Well, that’s a question with many answers. Here are just a few of the reasons why contractors should want to work with agencies that A) create good supply arrangements with their clients and B) have strong mechanisms in place to ensure adherence to the terms (both on their side and by their sub-contractor partners):

  • Legitimacy – Having an official supply agreement in place signifies a deep level of commitment between staffing agencies and their clients. It suggests that the company is committed to using the agency and that there will be a certain level of exclusivity.  If a technology contractor is working with a recruiter that has a supply arrangement in place, you can be confident that the recruitment agency has the right to represent you and that there will be some standardization in place to manage the hiring process.
  • Access to the Best Companies/Jobs – The best staffing agencies have the best relationships. Often there is a barrier to entry for agencies who do not have supply arrangements in place with companies.  By partnering with staffing agencies with many supply arrangements, it means that you will have access to suitable roles that come available at these companies.
  • Confidence in Staffing Agency Rates – Supply arrangements often define what levels of profit are associated with the services provided (also defined), so recruiters are working off a prescribed methodology for setting their rates. Companies agree to pay staffing agencies “X” for their services should they identify, qualify and place top resources into their open roles. For contract work, that means that independent contractors set their rates “Y” and the client is charged “X+Y” (or “X x Y” if “X” is a %).
  • Risk Mitigation – Working for a recruitment agency with a supply arrangement in place ensures that the “rules of engagement” have been set out. Working with recruitment agency who has strong compliance mechanisms in place means that the recruiter will set you up for success and ensure that you are protected against potential missteps.  Be aware of the 2 to 3 page Sub-Agreement contract!  Eagle’s sub-agreements are typically 8 pages at a minimum, but depending on the flow-down terms and requirements, it could add up to 20+ pages for your review.  Ultimately, this all protects you from risk.

Eagle has numerous supply arrangements in place with many of Canada’s largest companies across multiple industry sectors and across all levels of government.  We are national leaders in Oil & Gas, Energy, Telecommunication, Education, Health Care as well as having 3 of Canada’s 5 big banks as our clients.  Our Supply Arrangements with our clients are often 80+ pages long and our sub-agreements to our sub-contractor partners are often 10+ pages long. Although more work to put in place, this is a good thing.  Through this process we ensure our contractors’ success and, in doing so, our own as well.

Next time you’re interviewing recruiters to decide on your preferred staffing agency, remember to ask how many supply arrangements they have. A response to that simple question will speak volumes in terms of their legitimacy, access to opportunities, rates and risk mitigation.