Having procurement contracts in place for the supply of goods and services is important, and companies should ensure they capture the agreed commercials and only sign up to risk profiles the company can accept. Oganisations should also ensure there is proper governance in place for the signing of contracts, to ensure only authorised representatives can commit the company to spend funds and to be exposed to a level of risk.
However, organisations can create unnecessary bottlenecks in the contract approval and signing process, which can erode considerable value for the company. Legal teams are often engaged too often in low risk procurement contracts, and can be unaware of the financials at stake by taking such a firm stance on contract terms and conditions. Customers can forego considerable savings, and Tenderers can lose significant revenues from lost tenders by imposing unrealistic risk profiles and have internal approval bottlenecks.
To reduce bottlenecks in the signing process, and to ensure the organisation is not signing up to unacceptable risk, organisations need to streamline this process or continue to forego value. Streamlining the process can be achieved by refreshing contract terms and conditions to ensure they are not unrealistic; classifying contract clauses into ‘non-negotiable’, and ‘negotiable’, and providing alternative clauses if there is push back form the other party. This provides procurement teams with guidelines to negotiate terms & conditions, which speeds up the process, resulting in the deal being signed quicker.