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Lean Contracting Notable By Its Absence

July 11, 2010

Eliminating waste is about cutting out any action that does not bring value to the customer.

That is a principle that lies at the heart of any ‘lean’ process and it is one that is far too rarely applied in the field of contract and commercial management.

Waste includes not only redundant activities, but also those which cause avoidable delays or rework. Such activities tend to have a ripple effect in terms of overall business performance and cost.

Obvious examples in contracting arise in areas such as:

  • clothing products or services with market-driven terms and conditions.
  • re-using past experience from relevant bid and proposal activity.
  • updating standard terms and conditions  to reflect market experiences and shifts in competitive conditions.
  • streamlining review and approval procedures.
  • examining contract hand-over and communication methods from pre-awrd to post-award.
  • learning from performance claims or disputes to ensure sources are identified and eliminated. 

Each of these examples demands collaboration between user groups and a readiness to look at the portfolio of contracts and negotiations, to identify common occurrences, rather than insisting each situation is unique.

While ‘lean’ will always result in standards, these will never be rigid or unchanging. The standards represent today’s best ideas and methods and require systems that provide on-going data capture to support continuous improvement in the face of changing circumstances. 

The reason I am so confident that many organizations lack efficiency in their commercial operations is that in general they do not even have data about their performance – and without that, the chances of change are low. Indeed, it is more than 2 years since IACCM produced a short on-line module on ‘lean contracting’ – and the level of interest it aroused has been negligible.

And that, of course, is why few customers perceive ‘contracting’ as a customer-focused activity and why executives think of it as a necessary operational activity, rather than a source of real strategic value.

One Comment
  1. It seems like lean is gaining traction in the supply chain — order through delivery in the extended value stream, but that is probably confined to parts and products. I think you’re talking about all sorts of contracted services and expect you’re right about the minimal interest at present.

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