If at all possible, try to figure out where your day-to-day point person sits on his company's totem pole. How many layers are on top of him, or next to him, or between him and "Yes" or "No?" Make absolutely sure that a verdict from him, at any stage in any process, represents the verdict of anyone whose consensus or approval he needs. It's very easy to get burned when your point person renders a decision, then you find out two weeks later that his boss's boss's boss just got back from a two-week business trip and is looking at everything for the first time.
Agency squeeze is usually the result of internal politics at the client firm. Either someone's throwing you under the bus to cover his/her ass, or the Big Boss is putting pressure on everyone (including the agency) to deliver additional work, outside of the SOW, for the sheer sake of applying pressure.
You are getting written agreements before investing any significant number of hours, aren't you?
You're going to run into one of two scenarios. First they agree to have a person with the authority to approve, but that person has to run around and gather internal approval before they sign off, and you're now stuck in the same situation you just have a designated "approver" but without veto power.
Second scenario. They just don't approve that language in the contract. We have lots of brilliant language like this in our boilerplate contracts, but most of the time it just comes back deleted. We can haggle back and forth on it a while but eventually if its a big enough deal, we're just not going to decline a large contract because their approval process sucks.
We generally get a pretty sizable chunk of our fee up front (25-50%) and before we first hit design reviews. If crap goes sour during design review we're already holding their money. Now we can still have done more work then they've paid for but at least some of that risk is mitigated while we settle the rest in the courts.
I should note that we're kind of young, but this has never yet happened to us.
Every step has at least 2 iterations.
Sounds great but whats an "iteration"? Is a design of a whole website? What if they want a few tweaks on the about page after the second iteration because that area wasn't fully fleshed out originally?
We also explain the client that anything that does not get revisions or comments from them is automatically approved
Never, ever will this language be approved by our larger clients. We can sometimes get "deemed acceptance" language by but its never "immediate" its usually like "if no feedback is provided in 15 days". The alternative is to have a "pause clause" in (if you don't get us feedback in 15 days we have the right to put your project on "pause" until we can get back to it)