Now that I've gotten that off my chest, let's talk about your vendor. Assuming these denials aren't simply a business ploy, your instinct to help the supplier save face is a smart one. But I'm a psychiatrist, not a lawyer, so you don't want my advice on how to write an agreement. It wouldn't hurt, though, to talk to your attorneys about what you're trying to accomplish here. A lawyer I know says it can be provocative, for instance, to "pile it on" in a contract, repetitively enumerating all the ways a supplier could fail.
In the end, the face-to-face negotiations are where you stand to make the most progress, or mistakes. Without attacking the other party's integrity or pride, you should be honest about your view of past performance, making it clear that you're evaluating things in the context of a continuing relationship.
Start with, "We'd like to revisit the way each of us assesses performance." Then raise the question of whether the criteria have been explicit enough. Does the offshore location make it harder to communicate standards? Should a process be started to address that? (If you decide, mutually, to initiate on-site visits, make sure the person your company chooses for this is good with people.)
You might also try to create an incentive for the vendor to be more forthcoming about problems—by acknowledging, for instance, that in your industry the occasional error is unavoidable. If it's appropriate, mention that your company, too, has to make it up to customers when you don't meet standards. This might "normalize" mistakes for your supplier, offering a face-saving way to take responsibility—and to shoulder the costs of the errors. Kerry J. Sulkowicz, M.D., a psychoanalyst and founder of the Boswell Group, advises executives on psychological aspects of business. Send him questions at firstname.lastname@example.org