Is a Contract Review Board a good idea?

Establishing a “Contract Review Board” like the one you describe is a method used by a significant number of large corporations, though it is not necessarily a ‘best practice’ approach. These review boards are part of a broader trend towards more rigorous contract review and management processes.

A WorldCC member recently asked whether establishing a Contract Review Board headed by the CPO is a ‘best practice’. The concept behind this idea appears to be ensuring negotiations are aligned with business objectives and risks are clearly understood and mitigated​​. In some organizations, the review board takes on a wider benchmarking role and looks periodically at relevant market trends and emerging commercial performance characteristics. We also observe that the highest performing WorldCC members increasingly seek our help in comparing performance metrics and practices both externally with competitors and internally across their own operations.

If these elements are taken together, creating a formal Review Board can result in gathering and reviewing structured data to evaluate the competitive impact of current contracting models and terms, as well as the effectiveness of contract management processes compared to industry standards or top performers​​.

However, while implementing a Contract Review Board that involves key stakeholders like the Chief Procurement Officer can improve outcomes, at a transactional level it also introduces delays.  To streamline operations while maintaining oversight, several alternative approaches might be considered:

1. Automated Review Systems

Using automated contract review systems equipped with AI is one way to identify high-risk terms and issues that need human intervention. These systems can be trained to recognize specific legal terms, financial implications, and compliance requirements that align with your internal policies. This approach ensures that only contracts needing further scrutiny reach the Contract Review Board.

2. Pre-approved Clause Libraries and fall-backs

Developing a play book that links to pre-approved alternative terms and controlled through a decision tree can also provide controls while reducing workload and delay. It limits review to  only those deviations which are outside the authority provided in the decision analysis.

3. Expanding Accountability

For major or complex acquisitions, you might consider increasing accountability for contract performance throughout the lifecycle of the contract, not just at the initial stages through to signature. This would likely include setting KPIs related to post-signature performance.

4. Up-skilling

Many organizations recognize that contracting is becoming more complicated and also more critical to business performance. They also recognize that this is not an area of traditional strength for their procurement teams. Initiatives such as review boards are not really a sustainable model for risk and opportunity management – there is a need for increased organizational competence. Market volatility and unpredictability are not going away so we must adjust to manage it better. Providing training and decision-support tools to the procurement team can empower them to make informed decisions without as much need for oversight.