Streamlining Contracting Policy and Process

Webinar Q&A Session

Tuesday, June 29, 2010

 

During Tuesday’s webinar, Tim Cummins, CEO of IACCM, and John Busch, Director of Contract Management at Health Care Services Corporation, discussed practical use cases for making your contracting processes more effective and efficient through streamlining contract management policy and process.

 

If you missed the event, be sure to watch the replay!

The outstanding questions from the event are listed below with more to follow!

 

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Q: Please expand on "Strategic ownership of contracting competence" from slide 16.  FYI...I work on the sales end of the business.

 

A: We are seeing growing awareness from executive management that contracting is a key business discipline which must achieve greater balance between downside risk and upside opportunity. Establishing the right structures and relationships to enable flexibility for the business is critical when the economic conditions remain so volatile. Greater innovation and creativity in the way that contract terms are developed and managed is seen by management and academics as a core area of competitive advantage. The big problem: who ‘owns’ this competence? Who can they turn to who will actually drive improvement? The current ‘owners’ are generally associated with the current ‘problem’.

 

Answered by Tim Cummins, CEO, IACCM

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Q: How do you quantify the benefit of risk mitigation or avoidance?  I.e. - what's the value of unknown damages that did not occur...

A: As I highlighted on the webcast, I would suggest this is the wrong question. You can never really make sense of the value of avoidance, because you don’t know what you were avoiding! So think the opposite – what is the price associated with avoidance? And is it a price worth paying? These risk terms are like an insurance policy – you pay your supplier for having these terms; whether or not they would pay out is questionable. Have you tested how much you are paying for having this insurance? When you think of all the contracts you have in place, is the premium worthwhile?

 

Answered by Tim Cummins, CEO, IACCM

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Q: What does the panel feel are the risks of automation and how are they best addressed?

A: The big challenge is to gain wide stakeholder acceptance. Without this, your benefits will be limited. But overall, the issue is more ‘what do you risk by failing to automate?’ and the answer is competitiveness, ease of doing business, good business controls, revenue ….

 

Answered by Tim Cummins, CEO, IACCM

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Q: Managing and reporting on contracts requires a tremendous amount of data/information.  How do you ensure the quality of your contracts data?

A: You are right to raise this question. One thing is to make sure that your internal measurements do not result in distortions. But more broadly, this is a great question for your RFP to potential suppliers. They should tell you how, in the context of your business, their product and services will drive accuracy of data and reporting. You might also want to use networking sites – such as IACCM – to get input from others who have already implemented.

 

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Q: Is it common to have multiple templates depending on complexity and risk? As a best practice, is it best to have a template with multiple options (to address complexity) or is it preferred to have multiple templates? 

A: This depends somewhat on the nature and complexity of your business. In general, I prefer the idea of templates related to the type of acquisition (e.g. products, services, solutions, software) and then standard terms with fall-back options related to each template.

 

Answered by Tim Cummins, CEO, IACCM

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Q: Is it possible to get a standard template for all kinds of services? We buy security service, fleet car service, recruiting service. The terms and conditions are very different.


A: I wonder whether the terms are different because they need to be, or because of traditional authoring? I suspect the core contract could be very similar and that the main variations would appear in the Statement of Work / Service Level Agreement. You should develop a matrix with agreement type / term and condition title and then validate whether you can in fact use the same term (and term options) in each, or whether they really require differences. For example, why would definitions, termination, payment, liabilities, indemnities vary significantly between these agreements?

 

Answered by Tim Cummins, CEO, IACCM

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Q: What is a good strategy to develop a good relationship between the law department and procurement?

 

A: Our research has shown that there is often a poor relationship. Lawyers tend to show limited respect for Procurement and Procurement see lawyers as arrogant. But it is like any relationship problem – we need to work it out. If we cannot, it will limit our ability to provide value. So a good place to start is to think about the legal perspective. What worries them? What are some of their problems? How might you help fix those problems? For instance, most law groups have too much work and would welcome getting rid of some low value activities, especially if in return they were more involved in some of the high value areas. I’d be happy to discuss with you – and also with your law department!

 

Answered by Tim Cummins, CEO, IACCM

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Q: We have a variety of major projects, some using the client’s templates and others using our own (but with different flow downs from the prime contract).  Any recommendations on having common templates for these different situations?

 

A: This is of course a common challenge. In a project business, you will generally be forced to operate with variable terms driven by negotiation. So you may have to think more in terms of standard principles and practices, more than standard wording. Try to operate within boundaries of practice, especially for those terms that require underpinning process or resources.

 

Answered by Tim Cummins, CEO, IACCM

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Q: What tool sets (issue lists, risk wheels, models) do you give your contract negotiators?

 

A: We see a wide variety of ‘play books’ being developed. You may want to look at the results of our ‘most admired companies for negotiation’ study / interviews.

Answered by Tim Cummins, CEO, IACCM

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Q: How long is a reasonable time to expect to get Legal and business to buy-in on the concept of contract templates?

 

A: You must build a benefit case that is sensitive to different stakeholder interests. If you tackle this with a standard presentation you will likely fail. This is a marketing job. And it will require an executive sponsor. That sponsor must be sold the benefits first. Do you have someone who is a likely supporter?

 

Answered by Tim Cummins, CEO, IACCM

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Q: Can you outline what are Major legal terms you recommend included in a contract?

 

A: There are checklists available related to the terms you should include in different forms of contract. You can also see models on some of the websites, such as WhichDraft.com.

 

Answered by Tim Cummins, CEO, IACCM

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Stay tuned for more questions answered by the event panelists.