Focus on contract management is delivering results
Its easy to write about the many areas where contract management could be improved. It is the failures that make the headlines. But sometimes it is important to reflect and recognize the success stories.
IACCM’s current series of in-depth studies on ‘the ten pitfalls of contract management’ offers exactly that opportunity. It is now 2 years since the initial work to identify the major causes of value leakage was undertaken. Many are familiar with the resulting infographic and the average 9.2% contract value erosion that occurs due to weaknesses in the contracting process.
Our current studies are examining each of the ten pitfalls in detail and they show encouraging signs of improvement. For example, the number one issue is lack of clarity over scope and goals. When we first explored that topic in 2013, there were significant disagreements between customer and supplier in 38% of contracts. This year, that number has dropped to 30%. Organizations are developing more sophisticated approaches, including improved contracting models, greater use of templates and checklists and investment in training operations teams. While there is still far to go, the scale of improvement is encouraging.
Subsequent studies have investigated timing of engagement of commercial resources and approaches to involving stakeholders. While both remain problematic, there is evidence that more sophisticated use of technology is leading to improvement. In some cases, this is due to streamlined procedures, in others it is through greater dissemination of knowledge leading to empowerment across the organization.
Each study is highlighting ‘best practices’ that reduce the value being eroded from historic weaknesses in contracting. Pitfall number 4 – protracted negotiations – is currently open for input (participate here) and reports on the other three are available to IACCM members on the website, http://www.IACCM.com.