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IACCM Americas Conference – Part II

March 9, 2011

Another of the major themes from the IACCM Americas conference was the challenge of uncertainty.

Many presentations touched on this topic and the demands it is placing on contracts and legal practitioners. In my opening presentation, I suggested that ‘the management of uncertainty’ is a key role for the contracting process, demanding a new and more flexible approach to contract terms and structures. This is reflected in the growing emphasis that negotiators place on change management, communications and other post-award governance principles. It also helps account for the lack of clarity over scope and goals (because these also become uncertain).

Dalip Raheja, CEO of the MPower Group, focused on the impact uncertainty has on skill requirements. For communities accustomed to dealing with relatively precise requirements and standards, the need for increased flexibility and more agile responses to rapidly changing conditions are challenging. They require much greater focus on collecting and analyzing business and market information. Dalip suggested that traditional strategic sourcing ‘is dead’, because organizations must discover more sustainable ways of achieving value. This will be through more balanced selection criteria, resulting in greater collaboration between trading partners so that they can drive greater innovation, and also adjust more readily when faced by uncertainty.

Tim Minahan, head of Marketing at Ariba, presented the results of a joint IACCM / Ariba study on the current state of sales contracting. These also reflect the growing challenge of managing customer requirements. The growth of uncertainty has made it increasingly difficult to define and manage contract scope and the research confirmed that companies with contract management software are coping much better than those without. Cycle times, communication and cooperation are all beneficiaries of automation.

Dan Mahlebashian, Chief Contracting Officer at General Motors, reflected on the challenges that GM confronted over the last 2 years and explained how the approach to procurement and supplier management has changed. He discussed the importance of increased collaboration as a way to handle unpredictable markets and ensure innovation. Achieving collaboration has required GM to rethink its approach to contracting – and in particular, to ensure a greater connection between front-end negotiation and post-award contract and relationship management.

Overall, the message was that uncertainty and change appear to be here to stay. They have made contracting far more important, both to ensure a common baseline and to enable the management of change. Organizations therefore need to invest in the tools, processes and skills for contract management – and existing practitioners must adjust their approach and focus on learning new ways.

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