I attended a round table event with several peers today to discuss contract language. Specifically, what is the right language to use; how can it be applied to achieve the desired outcome; and how stringent must one be relative to retaining the original contract language.
The consensus from the group, which included procurement practioners from the public and private sector, litigation and arbitration lawyers and a consultant (I wonder who that would be?) was as follows:
1. Complexity of contract language is deepening. As organizations and individuals develop an increasing aversion to risk in a society that is becoming more litigious, contract language is morphing into verbiage that is well beyond comprehendible and achievable. If you want an example, take a look at the five pages of terms and conditions that accompany a cell phone contract.
2. Efficiency in contract management is on the decline. The time required to review, interpret and negotiate the voluminous documents that accompany most contracts is reducing the efficiency of the contract award process. The resulting delays are hindering end users and customers alike. Delays in the completion of the Edinburgh Tramways in Scotland are a great example of this.
3. Increased complexity is reducing trust. In an age where supplier transparency and alignment are key differentiators for leading edge organizations, the increasing complexity of business contractual language and award criteria are driving a wedge between both parties. If you have recently signed mortgage documents, you can imagine the distress and distrust such enormous documents create between both parties.
The consensus from the team was to focus on the following three areas for improving the contract tendering and management process:
1. Clarity: Identify expectations at the outset of the tendering process.
2. Simplicity: Reduce complexity and apply common sense in developing, administering and managing contract language.
3. Transparency: Avoid hiding behind an ulterior motive and focus on being transparent in order to attain the desired value from the relationship.
Applying common sense in conjunction with these three tips will greatly enhance the contract management process. The starting point is a dialogue with Suppliers to identify weaknesses in the process, and to build support in enhancing the process.
© Shawn Casemore 2011. All rights reserved.