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Contracts and agility: an oxymoron?

February 22, 2017

Agility – the ability to move quickly and easily – is not an attribute many would apply to contracts or the contracting process. For many, the need for a contract is seen as an impediment, a barrier to getting things done. Executives are among those who regularly call for simplification and speed.

These pressures create a real conundrum for any responsible contracts or legal professional. How do you align the demands for streamlined decisions with the need for due diligence, for protecting the interests of the business or client? A variety of techniques have been tried, with the most common being the use of standard templates and attempts to use power (or frustration) as a means to stifle or curtail debate.

But templates have their limits. Certainly they are not traditionally respectful of the counter-party’s needs or interests. As such, they carry hidden costs – perhaps a premium on price, or missed opportunities, or negative performance incentives. The conversations they stifle can often be of real value.

So today, there seems to be a trade off between agility and value – if you want it fast, you lose quality and eradicate judgment. You also guarantee contention when dealing with another powerful company or trying to handle a more complex transaction or relationship. In other words, one size does not fit all.

Does it have to be this way?

IACCM research suggests that much of the difficulty in contracting arises from the failure to think of it as a life-cycle process. It is instead a series of disconnected activities that feature as steps within other processes – for example, bidding, or sourcing, or sales or project management or finance or fulfilment ….. The terms come from a multitude of stakeholders, the¬†physical components¬†are similarly created in various places and brought together, often at the last minute, in a frenzy of document assembly. Attempts at streamlining are typically frustrated because the stages are in fact interdependent – so for example, if you digitize the form but leave the rest of the process untouched, you have actually introduced greater complexity.

Modern systems support new approaches. For example, a database of terms and term options, rather than fixed templates, can link to opportunity management systems upstream and to obligation extraction systems downstream. Such systems can be adaptive to different industry customers or jurisdictions and to different types of acquisition. The work by IACCM and its corporate members on ‘contract principles’ can streamline negotiation and cause a focus on value, rather than risk transfer. Terms and conditions can be designed to facilitate post-award efficiency, through more adaptive approaches to change management or issue resolution.

Contracts can and should lie at the heart of business value. The failure to develop a structured process has reduced their purpose and relevance – and in parallel threatens the perceived purpose or relevance of those who are charged with their production. There really isn’t an innate contradiction between the terms ‘agile’ and ‘contracts’; it’s a matter of choice and imagination.

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