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Contracting Complexity

May 7, 2010

A majority of contracts and legal professionals believe that they face growing complexity. This view is confirmed in the most recent ‘European Legal Pulse Survey’ from Equaterra.

The survey focuses on outsourcing agreements and states:  

“When asked about contract complexity over the past few quarters (e.g., service levels, contract structure, pricing models, use of global sourcing, etc.), 52 percent of the survey respondents answered that the degree of complexity in contracting for outsourced services has increased (see Figure 3). When combined with the respondents who stated that complexity has remained static in recent years, the total is 96 percent. The results confirm a consensus that the contracting for outsourced services is not getting simpler through standardisation. A majority of respondents who believe that transactions have become more complex specified pricing and service level mechanics as the foundation for their conclusions. Managing and allocating risk was the second choice, with respondents pointing to transition/transformation and termination rights and fees as the areas driving complexity in contracting.”

These findings accord with the wider views expressed by the IACCM community. And they are not, of course, especially new. Indeed, there has yet to be a study that suggests people feel that contracting has become simpler. In large part, this is indicative of the fact that terms and conditions reflect the intricacies of trading relationships and the unending efforts of buyers and sellers to find new sources of advantage and success. As the Equaterra results indicate, the parties constantly seek fresh ways to allocate or manage risks, or to manage performance, or to apportion costs and rewards.  

There is nothing to suggest that complexity will reduce. Indeed, it is this continuous growth in complexity – and the need for its effective management – that drives the need for commercial and contracting expertise. Through our professionalism, it is our duty to manage this complexity in ways that make it simple and understandable for our colleagues and management. And of course, we must strive constantly to deliver simplification in today’s process and tools, so that we can successfully move forward with further innovations.

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