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Contract Management, Lawyers & A Story Of Change

October 26, 2009

At IACCM’s recent meeting in Boston, Colleen Gallagher of the Huron Consulting Group outlined eight reasons why contract management is becoming a ‘top of mind’ issue for many in-house law departments.

Colleen attended the Association of Corporate Counsel (ACC) conference, also held in Boston earlier in the week. Her comments – based on extensive conversation with delegates – confirmed that there is growing pressure on in-house groups to increase their efficiency. She observed widespread interest in actions that would help reduce costs and empower the organization.

“Law departments understand that they need to get better alignment of resources and to get them involved at the right time. At the moment, they appear more driven by the need for efficiency than they do by concerns over risk,” said Colleen.

As law groups study their workload, the amount of time spent on contracting is one area for urgent review. IACCM research has found that in many organizations, bid and contract support can account for more than 40% of the legal budget. The more sophisticated groups – according to Colleen – have recognized that a problem with bringing contract management under control is its distributed nature. It is ‘owned’ by many different functions with in the business and the overall budget for its support is therefore fragmented; indeed, few organizations have any consolidated understanding of the costs associated with the development and management of their contracts.

As the law department explores this area, there are eight topics that are increasingly on their agenda:

  1. Consistency of operations: the need for improved definition of workflows and better understanding of what is needed and what is agreed.
  2. Development of ‘self service’: the need for better standards and greater empowerment of negotiators.
  3. Understanding of contract value: the need to apply resources where they are making the greatest difference.
  4. Bundling of work: the need to better analyze where time and cost are being incurred; make more effective use of outsourcing.
  5. Defining end to end process: the need to recognize contract lifecycles (pre and post award) and to ensure approval activities involve the right people at the right time.
  6. Using technology: the need for greater use of technology to provide compliance oversight, especially post-award.
  7. Alignment with business objectives: the need for contract terms and related legal and contract metrics to reflect current business objectives.
  8. Addressing global requirements: the need support shifting business and market models with appropriate contract terms and structures, legal knowledge, language and regulatory variations.

“The key question for in-house lawyers is how to deliver value and enable good business”, concluded Colleen.

These  observations follow on from the interesting debate by academics that I reported last week (see ‘Should Lawyers Become Contract Managers?‘) and reflect the pressure on traditional business functions to become more integrated and collaborative in supporting business goals. As trading relationships become more complex and more outcome-focused, the contract and contracting process has assumed a new significance. Law departments must adjust – and in many cases, the most successful are leading that adjustment through the types of thinking and reengineering that Colleen’s list reflects.

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