Why a Heads of Agreement is important in intergovernmental transactions

When a government entity transacts with another, the stakes are high. Intergovernmental transactions are often politically sensitive, highly visible, and subject to rigid timelines. Failure to clearly agree and document the key commercial terms from the outset could cause protracted negotiations, potential disputes and missed deadlines, which may then lead to political fallout.

A Heads of Agreement (HoA) is an effective tool to mitigate these risks. It is often a non-binding document that outlines the key terms and intentions of each party before entering a formal contract, setting a strong foundation for a smooth transaction or project.

Aligning commercial interests

When agencies begin transacting with another arm of government, they may assume their commercial interests align. However, differences in departmental objectives, funding cycles, governance frameworks, and risk appetite often show that each party's commercial interests and objectives are in fact,