Tech
Negotiating MSAs, What to Look and Look Out For
Damon Ranieri | December 12, 2025
Footnotes
1 The Innovators' Circle, part of the AXA XL North American Construction Innovation and Sustainability services, is a knowledge network of innovation leaders from across the construction industry. The 185-plus-person peer group convenes to tackle emerging issues in construction technology. The members collaborate to elevate innovation. Sponsored by Jon Tellekamp, AXA XL's chief underwriting officer, head of Construction and Energy; led by Cheri Hanes, AXA XL's head of Construction Innovation and Sustainability; and Damon Ranieri, AXA XL's Construction Innovation and Sustainability partner. Client support was led by the cochairs, including a corporate director of innovation at large US contracting firm, a vice president of strategy and technology investment at a large US design and construction firm/managing director of the firm's CVC; Lucas Manos, director of IT Applications at Ryan Companies; and Karl Sorensen, director of Construction Technology and Innovation at Davis Construction.
2 Thanks to Karl Sorensen of Davis Construction for his assistance in developing this article.
A recent Innovators' Circle event, a roundtable of technology leaders from the largest and most innovative construction companies in North America and hosted by AXA XL Insurance, 1 took a deep dive into master service agreements (MSAs). This article discusses some of the best takeaways. 2
This model of contracting is nothing new. In fact, with the rise of more complex computing systems and associated consulting in the 1980s, these contracts have been "business as usual" for a while. An MSA could be described as a "framework agreement" or "umbrella contract" and is used to standardize terms across multiple transactions, reducing the need to renegotiate each time. When entering into an MSA with a technology provider, understanding the type of fee structures, an appropriate contract term length, and steering the negotiation your way by defining the levers to pull will put your firm in the best position to enjoy the return on investment of the solution.
Fee Structures
The group covered three common fee structures for MSA types, including annual construction volume (ACV), flat rate (also known as lump sum), and negotiated bundles.
ACV Pricing Model
The ACV pricing model is when the technology vendor requires the customer to allow auditing of revenue from previous years to use a percentage of that value as the MSA fee.
What's good about ACV?
When should you stay away from an ACV MSA? One of the most cited experiences was that once the price is calculated by the vendor based on the customer's revenue—even if the company experiences a down year, therefore, sending the revenue down—the MSA fee is never adjusted accordingly. The fees only go up if the annual audit shows that revenue for the customer has increased.
A thought experiment that a customer can work through with the vendor is answering this question: "Does this technology provide value throughout the lifespan of most of our projects?" For example, if a platform is used for managing activities that are typical for the preconstruction phase, arguing that this justifies an ACV MSA would not pass the test. If your firm has clear and accurate revenue goals, an ACV could be a good option.
ACV best practices. Work with the vendor to carve out revenue from work that does not apply to the primary function of the solution. For example, if your company has a construction unit and building operation and maintenance (O&M) unit, the revenue from the O&M team should not be included in the ACV calculation for construction project management software.
Flat Rate Pricing Model
The flat rate pricing model is most often calculated based on cost per unit, which is typically dollars per user and dollars per license.
What's good about flat rate?
Negotiating Bundles Pricing Model
What's good about negotiated bundles? In situations as described earlier for ACV contracts, where the use of the software does not benefit the full duration of a project, proposing a consumption-based model may prove more appropriate, such as negotiating a bundle of tokens for accessing the platform. This way, while the platform is being utilized, a fee is paid, but when the project phase—when the technology was useful—has passed, no more money is spent on the title.
Some may argue this introduces cost uncertainty, and if that is truly a concern, calculating a larger block of tokens and a predetermined "overage" rate may work the best. Not having individual users or projects tied to licensing is seen as advantageous by firms employing this model.
Levers to Pull
As with any negotiation, finding levers to pull to steer the deal in your favor is important. Below are highlights from our conversation.
Term Length
Regardless of the MSA type in question, the de facto term length standard is 3 years. This works for many, but there may be a reason to explore other options. For solutions that will involve a shift in corporate culture, developing/training in new work processes, or a high degree of integration/customization, a contract term of 5–7 years may be a better strategy. This leaves the technology piece of the implementation consistent, leaving resources focused on the other aspects that are necessary for success.
Cancellation and Renewals
When considering longer-term lengths, some may argue that the tech could pivot away from features most valuable to your firm in that time. To mitigate that risk, a "termination for convenience" clause could be added. This allows one party, usually the one paying for the work, to end the agreement at any time for any reason, even if the other party hasn't done anything wrong.
Escalation Caps
A natural concern with a longer-term contract is managing uncertainty during the latter years of the agreement. One solution is to negotiate price escalation caps that apply to the tail of the term, typically for the final 2 years. This is especially important for ACV agreements because a significant inflation event could raise the base revenue that the calculation is based on and the vendor may impose a corresponding price escalation on the use of the platform.
Maintenance Costs for Features Versus Enhancements
Negotiate on what the maintenance costs around features and/or enhancements will be. The first agenda item to talk through with your vendor is defining each of these terms. Features are the agreed-upon functionalities that are delivered as part of the initial scope. Enhancements, on the other hand, are improvements or additions that go beyond that scope.
Most vendors are happy to support enhancements, but for new features, they typically require a separate discussion around cost, timeline, and feasibility to ensure the original value proposition of the solution is met.
Conclusion
Negotiating MSAs for construction technology demands both strategic foresight and a clear understanding of your organization's unique needs. By carefully evaluating pricing models—whether ACV, flat rate, or negotiated bundles—leaders can align contractual terms with operational realities and long-term goals. Equally important is the attention given to levers such as contract duration, cancellation clauses, and escalation caps, which collectively safeguard value and flexibility. Leveraging these best practices empowers firms to secure solutions that not only meet immediate technological demands but also foster productive partnerships and sustainable innovation in an ever-evolving construction technology landscape.
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