Contract Risk Services
Getting value for money from contracts and spend with third parties is an ongoing challenge for most organizations. This is increasingly true in today’s economic environment where reducing costs and conserving cash are the priority. Often the largest opportunity to quickly yield savings is to optimize the value in existing contracts. By having commercially efficient contracts; effectively managing those contracts throughout their operational life; and by minimizing waste in the businesses’ activities with suppliers, an organization can typically save between 5% to 15% of contract spend.
Opportunities exist in contractual arrangements because commercial inefficiencies and waste manifest themselves during the operational life of the contract. The value captured during the procurement pre-award phase is often lost over time due to:
- Ineffective contract management
- Commercially inefficient contracts
- Scope creep, delivery and quality failures
- Poor or perverse incentives
- Bad planning and demand management
- Ill-informed buying
- Miscommunication and rigidity in managing the relationship
On longer-term arrangements, there is also the risk that the contract has not evolved with the organization and now no longer delivers what the business needs. Understanding the difference between the reported expectation of value and the reality of value actually delivered provides leverage for rectification and cost recovery.
We identify where value is being lost and provide pragmatic advice and assistance in capturing value and achieving savings
We tailor and build the components of our offering, based on your circumstances and specific needs, to help deliver the outcomes you desire.
- Review the contracts’ commercial structure and compare this to leading practice. Recommend improvements in commercial schedules, SLAs, KPIs, charging mechanisms and value assurance levers.
- Assess the organization’s maturity as an optimized customer. Assess how contracts, spend and services are delivering value. Identify and reduce waste in these value delivery processes and in contracted activities.
- Compare existing contract governance processes and controls to leading practice. Develop a gap analysis and help implement a program for improvement and rectification.
- Identify and recover overbilling and/or underperformance against agreed contract terms.
- Training and skills transfer targeted at specific user needs: on contract governance, the commercial structure of contracts and optimizing value from suppliers. Coach and assist key staff in live negotiations.