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Contracts And Their Role In Value Creation

November 19, 2009

IACCM has today published an exciting and challenging report that highlights the role of contracts in delivering business value (or alternatively, the role that poor contracting plays in destroying value). The Executive Summary states:

“Sustained investment in contract and commercial management disciplines will occur only when it is possible to demonstrate that they create and deliver value. The necessary evidence is now available – our choice of contract terms has a direct and major influence on the financial results of the business. Economic value, innovation and cycle time improvements can be radically influenced by contracting strategies.

Benchmarks and research show that employing the right contract structure and terms is not simply about containing unpleasant risks; it is also – and predominantly – about achieving superior economic value from trading relationships. However, realizing this value depends on a shift in the way that contracting is managed and measured.

This report illustrates how contracts have become critical weapons in today’s highlycompetitive global economy. When properly structured and negotiated, they provide a framework for business and relationship management that significantly increases the probability of mutually successful outcomes for all parties, as well as containing the consequences of failure.

The report concludes that transition to ‘strategic contracting’ is achieved only through executive support, demanding new appreciation of the role of the contract and the resources associated with its creation and management.”

It is our hope that this report will be read not only by the community charged with oversight of contracts – Legal, Commercial, Sourcing and Contract Management – but that they will ensure it is more widely circulated an discussed with executive management. As we continue to wrestle with the cosequences of the economic downturn, it is time for leadership and change. We can drive better business results and ensure the security of our jobs and role. Get your copy of Contracts As A Source Of Value.

One Comment
  1. Sterling Whitehead permalink

    This is one of my favorite posts.

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