It’s easy to get excited about the purchase or acquisition of a good or service, especially when it can positively affect the way you do your day-to-day job, but contract management is a fine art that can’t be rushed and needs to be treated with tender, loving care, by all members of an organisation.
Contract Management has changed significantly over the past 20 years, but what hasn’t changed is its ability to add value to an organisations purchasing decision. A poor purchasing decision could make a huge difference to an organisations bottom line. Below is an example of one such decision and whilst this may be considered a low cost and low risk example of a contract that has gone awry, the terms illustrated can be extrapolated over larger more critical categories of spend.
When Events Coordinator, Sally booked a high profile entertainer to headline her upcoming community event, she bolted off the podium before her team could question her decision. The entertainer ticked all the right boxes and was a marketing dream; the fact that this entertainer was even available was a miracle, so she began promoting the event instantly, with the entertainer as the headline act. Unfortunately for Sally, she left the decision to book the entertainer a little too late and her poor planning meant she had very little time to question anything in the contract.
The day before the event, Sally had to make the difficult decision to cancel based on poor weather conditions and notified all personnel, suppliers and entertainers, including her headliner.
The very next day Sally received an invoice from the headliner’s management team for the full performance amount, even though the event did not happen and the entertainer hadn’t actually performed. Sally quickly grabbed the contract and read through it, realising that although there was a standard force majeure item written into the agreement, there was actually nothing relating to a wet weather contingency (a standard in outdoor event contracts); Sally was therefore liable to pay the full price. You see, in a contract, wording is everything.
Sally could be forgiven, considering the lateness of her booking, but her decision put her job in jeopardy and lost the organisation more money than it should have. Outdoor events are always risky, but having plans in place to minimise the loss of company dollars puts less stress on the buyer and the company fronting the cost. Had Sally taken the time to connect with her Contract Management team, forwarding the contract to them, or via her own Manager, or had taken the time to carefully look through the contract herself, this mess could have been avoided. In an alternate universe, Sally would have delayed the go ahead by a couple of days but avoided the risk and the sole responsibility for the impending weather problem. I’d like to say Sally won’t be making that decision again any time soon, but the truth is this type of decision making isn’t new; however, with the help of Academy of Procurement, Sally will be able to increase her confidence and appreciation of the role of the contract manager to make better informed decisions in the future.
Poor purchase decisions, even ones that come with sizeable contracts and even ones where organisations intentionally set conditions in place to avoid them, happen on a day-to-day basis and can become a company’s worst nightmare if not resolved. Sure, there are moments when a clerical error cannot be avoided, after all we are only human, but taking the time to consider your obligations and running through a number of channels can help minimise any financial risk. Contract Management isn’t a term used to scare you into compliance, it is a real life, highly valued, highly regarded skill respected across all industries. At the Academy of Procurement, we help all stakeholders involved in the process of buying, understand the lifecycle of a contract and their responsibilities to it. Our Contract Management training session lowers the likelihood of poor contract management causing risk, waste and/or loss for the organisation.
Academy of Procurement can also help your team develop strategies to help stakeholders within your organisation have better appreciation of their contract management teams. While they may sit separately from your department, the responsibility of contract management lies with everyone.
If you or a member of your team could benefit from the skills needed to minimise commercial and financial risk to your business, then book our Contract Management Essentials training session today! Our training sessions not only provide employees with highly valued skills across all industries but relevant insight into contract management and procurement that make the difference.
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