Contracting Policies: Eliminate weakness in your contracting function
The Most Effective Drivers of Contracting Infrastructure Efficiency
15 minutes • 20 Jan 20
The number No.1 source of institutional contracting inefficiencies is the absence of a clearly defined organisation wide policy that defines the acceptable contracting parameters for that institution.
The Contracting Policy ("CP") is perhaps the simplest and most potent efficiency initiative that any IHL can instigate – it is easy to implement and drives verifiable efficiencies across the entire contracting process.
Given the criticality and visibility of contracting in any organisation, this is an area where IHLs can garner “big wins” and the support of the wider business as they transform their operations.
Sadly, the absence of a comprehensive CP is yet another classic case of the In-House Community being too busy to find the time to become less busy.
Fortunately, this no longer need be the case.
This article explores the massive inefficiencies caused by the lack of a CP, the benefits of getting your CP right and how quickly you can implement one to drive optimal contracting within your organisation.
Contracting is critical to all businesses. As a business enabling corporate instrument it can drive significant competitive advantages to businesses that do it well, whilst driving greater value recognition for the IHLs that make it work.
Contracting helps businesses secure new revenues, partners, products, markets, funds and IP whilst also supporting compliance activities.
If there was any doubt about this – you only have to consider the number of critical business processes that are impacted by contracting – See GLS Top 10 Work Horse Contracts
It is also the legal department’s most visible support function.
"Yet all too often corporate contracting occurs in a haphazard, uncoordinated, undisciplined manner that results in sluggish contract closure times, sub-optimally performing contracts and frequently, criticism of legal department support."
Yet, most organisations (in excess of 80%) do not have a single organization wide contracting policy to support their contracting function – instead they rely on a hotchpotch of informally maintained positions.
To overcome this, IHL’s must themselves take the responsibility for defining clear and succinct rules of engagement when contracting with third parties.
Before offering tips on the incredible efficiencies that a Contracting Policy can bring, lets quickly revisit the price IHLs pay for not putting in place self-authored Contracting Policy in place.
CONSEQUENCES OF UNDERLYING PROBLEM
By not defining your own organization wide contracting policy, you are likely to face any, if not all, of the following challenges:
Inconsistency - potential for your teams to take ad hoc and inconsistent position on the same issues
Orientation – no defined position means that the organsiation lacks a consistent basis for review
Legal Risk – legal risk profile inconsistencies as team members exercise discretion on legal risk issuesTool production – an inability to efficiently develop new tools to improve your contracting function
Leverage & Delegation – an inability to leverage up juniors and/or delegate contracting cycle roles
Training – an inability to engage in highly practical training with actual quality contracting assets
Inefficient queries – your legal team has to field often-repeated, avoidable, user queries
Improvement – an inability to benchmark performance and actively improve contracting performance
Coordination – your team is susceptible to “divide & conquer” as you lack a clear policy position
Legal Tech – an inability to properly utilize new legal technologies as these rely on the rules set out in your essential policy assets (which are not available)
Reputation – an inability to utilize efficient contracting to boost organization (and legal team) reputation
Costs – excessive legal consultant costs due to your inability to offer efficient legal position briefingsPerformance – your ad hoc approach to contracting results in sub-optimal contracting performance
Despondency – the internal client is regularly frustrated with the quality of IHL support
Legal Operations – are denied an coherent and transparent basis for assessing contracting function performance
"The bottom line is that an inability to access a consistent organization wide contracting position causes huge inefficiencies across every aspect of the contracting function – it effectively suffocates the prospects of efficiency."
BENEFITS OF THE CONTRACTING POLICY
Implementing your own contracting policy significantly eliminates and/or mitigates most of the above issues.
In particular, by utilising an effective Contracting Policy you will experience:
Faster contracting – contracting moves more efficiently without the need for continual clarification
Team unity – all members of your contracting team have a common position to secure
Review quality - contract reviews become an objective matter of compliance with contract policy
Empowerment - your legal team and the internal client are empowered to do more for themselves
Cost efficiencies – if external counsel support is required, it is obtained as efficiently as possible
Risk profile – you increasingly engender a more consistent, and desirable organisational legal risk profile
Reduced escalation – legal can focus on genuinely counterparty issues, not standard positions
Benchmarking – you know have a basis for benchmark your overall approach to contracting
Team satisfaction – morale improves as team members are empowered to move matters forward
Leveraged performance –junior team members (and commercial personnel) can safely achieve more themselves
IHL Value recognition - IHL team is viewed as a business enabler rather than as a choke point.
Less Errors - reduced human error as IHLs need not rely on imperfect memory
Legal Tech – the essential legal policy positions to effectively enable legal tech becomes available
KPIs – objective and sensible KPIs that can be developed to defend your budget and demonstrate ROI
In short, the IHL team is better placed than ever to fulfill its essential mandate which is to (i) be a guardian of legal risks, and (ii) promote the commercial interests of the business.
The benefits of having a Contracting Policy are quite literally innumerable – but perhaps the most potent point to make is that without it your contracting function can never be truly optimized.
To demonstrate the criticality of a Contracting Policy to the optimal performance of a contracting function, the below diagram shows the powerful efficiency “ripple effect” of this essential legal dept. policy asset.
There is simply no part of the contracting process that is not improved through the use of a high quality Contracting Policy asset.
This makes it the perfect foundation stone of any contacting function transformation exercise.
Note that the CP is also an enabler of formidable legal tech tools (e.g. contract automation and A.I. review tools). So, if you have not developed your CP then you cannot optimize such tools.
SO, WHY DON’T YOU HAVE ONE?
Given that a CP is a powerful initiative that any team could itself implement – i.e. it is an easy "win" – why do so few IHLs have a single, defined, organisation-wide CP?
The most cited reasons for not having a Contracting Policy in place include:
- Time: self-authoring such a policy asset carries a significant internal time cost for already busy teams
- Herding cats: getting a legal team, let alone an entire organisation, onto the same page is not easy
- Reference Points: an inability to efficiently access reference points as to what should be included
- Reference Models: what should the policy look like?
- Doubt: concerns over whether getting agreement on a single position is possible
- Overlooked: the impact of policy on overall contracting function performance has been overlooked
- Complexity: certain IHLs misconceive that their contracting needs are too diverse and complicated to be captured in a single document
- Jurisdictions: the misconception that operating across borders means standard positions aren’t possible
- History: like most things in the legal industry – lawyers tend to embrace change glacially
- Fear: will it work?, no longer do any of the above reasons represent an obstacle to the efficient implementation of your organisations contracting policy.
GLS has done the hard work for you!
THE GLS SOLUTION
GLS has developed a world class, fully worked up, “off the shelf” policy asset, that IHLs can take, customise and use as the basis for their Contracting Policy – this is qualitative, quick and cost-effective lawyering.
GLS Contracting Policy™ develops an aligned view of your business's contracting policy - making better, faster, cheaper and safer contracting possible.
By way of guidance, a very "casual"/easy to accommodate project timeline for implementing GLS Contracting Policy™ would be 4 weeks – with only a handful of hours required from your in-house team.
GLS Contracting Policy™ releases powerful efficiencies into every stage of the commercial contracting process – from drafting, negotiation and closure to training and administration.
Prepared with the "user" in mind, GLS Contracting Policy™ is a tool that is as practical as it is functional, and which is easy to maintain.
GLS Contracting Policy™ delivers unprecedented legal resource optimisation and more efficient legal risk management – and most importantly, an inbuilt feedback mechanism ensures it is always improving.
The contracting function is a critical and highly visible role performed via IHLs. It presents a unique opportunity to deliver noticeable improvements to how your internal clients are served.
The Contracting Policy asset will, as a matter of fact, determine the quality of ALL of your contracting resource elements.
A continued disregard for the importance of a Contracting Policy to overall function performance will only fetter the the ability of your contracting function to perform at optimal levels.
The question now is simply – are you ready to implement a contracting policy of your own?
Simply purchase the GLS Contracting Policy™ (a range of options are available, with prices being as low as US$ 3,400) and start transforming your department TODAY.