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Legal & Procurement Working Together

October 15, 2013

Just 5 years ago, legal and procurement had little respect for each other – at least, according to an IACCM survey conducted at that time. Today, they express a growing sense of interdependence. What has changed and how will their relationship develop over the coming years?

In the Fall of 2013, IACCM assembled a group of leaders from Procurement and Legal, representing an array of large international corporations. Our purpose was to explore the growing interest shown by both functions in contract management and to test whether their approaches have synergies, or are creating conflict.

It quickly became evident that the antipathy between these functions is rapidly diminishing. Faced by a growing concern over supply risk and regulation, they are increasingly compelled to work together. But confidence is in short supply. As one Deputy General Counsel expressed it: “We have to be unreasonable in our terms and conditions because we have so little confidence in our internal processes”.

However, such a view is not sustainable and I am in process of writing a paper to examine how the relationship between Legal and Procurement is developing, especially with regard to the way they handle contract management. For it is contract management that lies at the heart of their historic stand-off and which today is bringing them together.

Your input and experiences will be welcomed!

  1. Great post. From a Procurement perspective, it’s about Legal giving us back fence positions on legal items such as IP, damages, etc. How far is Procurement allowed to negotiate and when does Legal need to be engaged?

  2. Amit Kapoor permalink

    Agree with “thevendorchronicles”‘ sentiments. Think the biggest uncertainty is around what the boundaries between Legal and Procurement functions are. I have worked for one company, where contracts management made the decisions, after Legal opinion was sought on an off-line basis. But the final decisions could have overriden what legal recommendations were, taking other factors such as operational priorities, client relations into account. High risk, but worked well.

  3. Based on many years of experience at a global operating bank my view is the following.
    I goes without saying that Legal and Procurement need to work closely together to serve the companies interest. In this economic climate there is no place for internal fights between departements.
    I believe it’s the role of Legal to set legal framework under which services are sourced. This with the objective limit the compagnies liabilities in case things go wrong. Within this framework Procerement plays its role to support the business to get the services they need.
    It’s the business however that is missing in this picture. Contractual arrangements are not entered into for the greater glory of the Legal or Procurement function. The contract is put in place to get the services the business needs. I advocate a strong focus on the quality of the service and the manageability of the agreements which is critical to the success of the deal, but most often not the radar of Legal and Procurement.

  4. This is a great topic to pursue. The relationship between legal and the purchasing group varies by company and industry. I have seen legal folks very hands off if they feel comfortable with the professional training the procurement folks have. I have also seen legal not let purchasing do anything with contracts because they did not feel they had any training in contract law. I think training will be a key factor in your findings

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