It is safe to say that most commercial contracts have some form of obligations defined for your organization, the other organization, and/or for all organizations involved. The level of complexity, frequency, ownership and demonstrable success with these obligations will vary as widely as the performance related to the obligation. So, as a contract professional, you have a range of choices, from feigning complete ignorance to adopting a highly sophisticated obligation management strategy. Regardless of your choice, the decisions that you make will play a significant role in your contract risk portfolio.
In discussions of the ROI of a contract management system, the distinction is often made between efficiency and effectiveness. Getting more work done in less time, or at lower cost, is efficiency. When a contract management system reduces search time for contracts, allows standard language to be reviewed once instead of multiple times, and allows contract professionals to handle work that used to go to more skilled (and more costly) attorneys – that’s efficiency.
We recently returned from our sixth IACCM Americas Forum which took place in beautiful Phoenix, Arizona. The conference had a few hundred contract professionals from many of the largest organizations in the world, and as is the case with prior IACCM conferences, the knowledge exchange among the attendees was of incredible value. Coupled with the attendee networking, the conference of course had multiple tracks with numerous contract related sessions. While I speak with bias as we are fans of IACCM, the IACCM conferences are the best professional association conferences I have attended.
Post by Dermot Whittaker, Sales Support Manager, Corridor Company
In our last blog, Contract Economics 101 | Focusing the Right Human Resources on the Right Business Problem, we reviewed the different roles professionals play in creating and managing contracts. While you may have the good fortune to have a team of attorneys in your employ, it might not make smart economic sense to dedicate them to standard contract reviews. Rather, it is best to ensure that those who can most economically and efficiently address the various aspects of contract lifecycle management do so.
Picking up where we left off, our first area of analysis for purposes of our Contract Economics discussion includes focusing the right human resources on the right business problems. When considering this in the realm of contract management, there are a variety of areas which need to be considered. How are contracts created and who has the ability to request or provide contracts? Who negotiates these contracts and approves the language changes or the spend? Once the contract is finalized, who signs the contract, where is it stored, and who is responsible for managing the contract to ensure that the obligations – whether those that the company has made to its clients or that its vendors have made to it – are fulfilled? And, who has to support these activities, both from a process and business perspective, as well as a technical (if applicable) standpoint?
Contract economics. Piques your interest, doesn’t it? Though I’d like to take credit, the term is not my brainchild; I first heard it from our CEO and have been intrigued by the concept ever since. So when you think about contract economics, what comes to mind?
Contract managers and procurement professionals will discover much of interest in the New South Wales, Australia, Auditor-General's report on its recent performance audit, “Making the most of government purchasing power – telecommunications."
When contracting errors become public, contract professionals have an opportunity to learn how to avoid similar mistakes. A recent example: As reported in the Washington Post*, a United States Defense Department inspector general’s report found that a "major defense contractor 'did not properly charge labor rates' for a counter-narcoterrorism contract, and that the Army agency in charge of the contract did not ensure that the people performing the work had the necessary qualifications." Over $100 million in questionable costs were charged to the government, according to the report.
Unlike the famous adage in the Declaration of Independence – "…all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness" – all contracts are not created equal. Given that they are not equal, they do not have the same "rights," nor can they or should they be treated the same way – especially when considering a contract management software initiative.