Session 402- Contract Management: What is Realistic for My Department?
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1 Session 402- Contract Management: What is Realistic for My Department?
2 Why Worry About Contract Management Is it significant to the bottom line?
3 Audit Office condemns shortfall in commercial skills (The Times, November 2010)
4 Contract Management Overview ECONOMIC VALUE CONTRACTING PROCESS
5 What do you think the primary objectives of a contract / commercial management process are? Financial impact Risk mitigation / management Create competitive advantage Facilitate external relationships Improve business productivity CM / Legal Business Manage change Negotiation centre of excellence Balance business goals / customer needs
6 Only around 10% see their contracts and commercial practices as a potential source of competitive advantage, whereas more than 40% see them as a source of competitive disadvantage overly risk averse, impeding would-be deals. From The State of Contract Management April 2011
7 The Problem
8
9 "Our business must become more creative in order to deal with the uncertainty and volatility of today s market conditions Become better at managing risk Become better at eliminating bureaucracy Become better at forming and managing relationships (2010 IBM Global CEO Study)
10 Where We Spend Our Time The terms that are negotiated with greatest frequency Terms which would be more productive in supporting successful relationships Limitation of Liability Indemnification Price / Charge / Price Changes Intellectual Property Payment Liquidated Damages 7 Performance / Guarantees / Undertakings 8 Delivery / Acceptance 9 Applicable law / Jurisdiction 10 Confidential Information / Non disclosure Change Management Scope and Goals Responsibilities of the Parties Communications and Reporting Performance / Guarantees / Undertakings Limitation of Liability Delivery / Acceptance Dispute Resolution Service Levels and Warranties Price / Charge / Price Changes
11 Most Common Sources of Disputes During the post-award phase of contract performance which terms are the most frequent source of a claim or dispute? Delivery / Acceptance Price / Charge / Price Changes Change Management Invoices / Late Payment Performance / Guarantees / Undertakings Service Levels and Warranties Payment Responsibilities of the Parties Liquidated Damages Scope and Goals 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
12 What can you do to add value? Either own it or enable it Automation Empowerment Innovation and change Focus on probabilities
13 Assessing Your Company s Base Line Contract Management Needs WHAT WHY WHO
14 What Type of Contracts Does Your Organization Use? Contracts with your customers Are you a service provider? Contracts with your vendors Do you buy goods or services from others?
15 What Contracts are MOST Important to Your Company? Contract with Suppliers or Vendors Financial or Insurance Contracts Non-disclosure or Confidentiality Agreements Service Contracts with your Customers Contracts with Sub- Contractors Contracts for the Sale of your Goods or Services
16 How Do You Generate Contracts Today? Who performs the work? Legal Business Personnel No One
17 Are the Contracts Most Critical to Your Organization Simple or Complex?
18 Does Your Company Have Policies In Place For: Contract Reviews? Contract Approvals? Post-Contract Document Management? Who worries about the Contract after it is signed?
19 Contract Process - Examples Example 1 Received Contract Drafted Contract Signed Received Example 2 Contract Drafted Contract Circulated to Stakeholders for Approval Contract Finalized Contract Negotiated Contract Circulated Contract Signed Request for Contract Request for Contract
20 Can Your Contracts Group Deliver? Standardized Forms and Processes Service Level Commitments Integrated Contract Data Base Risk Management Tools Decision Trees Approval Hierarchies
21 Does Your Organization Have A Process In Place To Manage Risk In The Contracting Process?
22 Implementing a Contract Management Program Alternatives for Contract Management
23 Initial Steps In Evaluating Alternative Contract Management Solutions What are your goals? Process improvements, cost savings, cleaning house What resources do you have? Internal IT support Staff Funds
24 Initial Steps In Evaluating Alternative Contract Management Solutions (con t) Consider your team s strengths, weaknesses and experience Evaluate impact on existing processes List impacted groups Identify problems you want to address in order of importance and difficulty in addressing Obtain buy in from decision makers in impacted groups
25 Different Problems May Warrant Different Solutions Internally Developed Solutions: Storage SharePoint Networked Folder System Access to Forms and Policies Contract Portal on Company Intranet
26 Internally Developed Solutions (Con t) Customized Contract Database Home Grown Contract Management Software
27 Contract Management Software Numerous providers that offer a range of products, from simple cloud based off-the-shelf to highly complex, customized installations: Contract assembly / alternative clause / self-service options Version control Approval routing Reporting Storage
28 Contract Management Software (Con t) As complexity of the software increases, cost and effort to implement also increase: Consider what you want to accomplish Do you have team members who can project manage the implementation Do you have the support of your IT team Be realistic about working a large project into your normal job Consider hiring outside resources
29 Resources Evaluate the resources you have vis a vis current contract flow and future expansion Do you have the right mix of attorneys vs contract professionals If you have a high rate of standard contracts, consider outsourcing solutions, such as Pangea3
30 Doing More With Less
31 Step 1: GET ORGANIZED You cannot fix this problem until you accurately identify just how hosed you are. (a fellow Solo In- House Practitioner, 2008) Create groups and subgroups of documents. Determine approximate frequency of request and use. You have no time and no help, so identify which groups are tactical and which are strategic. Assuming your clients desire your strategic assistance, work on pushing the tactical off
32 Step 2: MARGINALIZE THE MARGINALIZABLE Tactical contracts are not worth your time. You do not have any. Ideas: Self-Service: A small investment in Adobe Professional and your time in template creation will yield self service forms. Certain forms may be filled out by the client and simply sent to you for review. Draft a contract process and advertise its existence. You are not a machine. People must follow the guidelines or be pushed back in the queue. Mutually set expectations, do not allow them to be unilaterally set by the client. This is a team not a Deli.
33 Step 3: Technology is your friend. You need to take advantage of your friends. As hard as it is to do it alone, it s even harder if you ignore the technological tools which exist to promote your efficiency. Paper is evil. Windows folders and Excel spreadsheets are NOT a solution. Technology begets technology: comb the web to find other people with your problems. Learn from each other. (ACC Small Law Department, for example) Collaboration tools are key to reducing your paralegal/administrative workload. They range from the free and semi-useful (but better than 0) to the paid and amazing.
34 Step 4: Get non-traditional help. Leverage a friendly, competent IT department (yes, they exist) to help you build a partial solution or a system on the cheap. Offshoring it s inexpensive and effective. Make the other side carry the load, but only occasionally. Sometimes the perceived power of the drafter is ONLY perception (and perhaps pride).
35 Step 5: Accept the Lessons. Every contract of significance has going-forward value for your small department. Think of the document as aggregated data as well as a completed work. Then, aggregate and use the data. The lessons are there for your internal clients (delays, inefficiencies, wins v. losses ) Do not be shy about your role as instructor (in this sense). Failure means repeating the same problems next time.
36 Thank You
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