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Newsletter Summary

November 2009

INTERIM BULLETIN

IN THIS EDITION:

The Purpose of Contacts

A Mission Statement forSales Contracting: CloseContracts Quicker! BobHenry, Landon Consulting

The Learning Journey ofContract and Commercial

Management Professionals,

Paul Mallory, VP Training &Development, IACCM

NEMESIS OFCONVENTIONAL (reacti ve)

CONTRACTING --ransformation to Pro-active

contracting model,N. Balanchandar,Manager-Contract Administration &

Management, Technip IndiaLimited

And This Month's Mos t

Popular Blog

The Purpose Of Contracts

I was at a conference recently and there was a presentation on quality by designThe presenter was rightly pointing out that design processes must seek to eliminthe potential for faults and problems - that is the way to reduce costs and increascompetitiveness.

This got me thinking because contracts are a product, in the same way asmarketing materials, installation handbooks, procedural guides, training manualsand many other business outputs. But when it came to describing 'quality' in thecontext of a contract, I found myself struggling. And I realized a key part of the

problem is that we do not even have consensus about the purpose of a contractif we have differing views of this, we can never establish the criteria that make thcontract 'fit for purpose'. And without this understanding, there can be fewmeasurements of quality.

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This should concern us. As contracts experts and professionals, surely we shoulhave a consistent view of the characteristics and qualities that make a contract'good'. I am sure there would be some areas of broad agreement - for example, guess we all think it should be legible, understandable and accessible. Yet evenhere, the standards vary. Some consider small print to be quite alright; some calsimple expression and language, while others continue to prefer 'legally accepta

terminology; and most agree with the notion of electronic repositories, but thendisagree strongly over who should be allowed access.

These are just the simple issues. Opinions diverge much further when we start toask more fundamental questions over the role of contracts. For example, is a 'gocontract one in which the balance of risk has been transferred to the other party?Or one that proves watertight in court? Alternatively, might a good contract be onthat achieves balance between the parties and encourages open dialogue andcollaborative behaviors?

These points may appear esoteric, but they are not. They go to the heart of the

contract's purpose and influence not just how it is expressed or presented, butmuch more fundamentally to determine what outcomes it should be influencing. sense, this is at the core of the disagreement between those who say 'the contrashould just go in the drawer' versus those who believe it is a living, breathingexpression of commitments and obligations requiring day-to-day oversight andmanagement.

So as we design and develop our contracts, how should we build in quality in ordto eliminate faults and problems? How many 'faults and problems' are in factcreated or influenced by the choices we make in our contracts? Academicresearch is starting to reveal far more than we previously thought. Increasingly w

find that contract terms and structures have significant impact on the behavior ofthe parties, the extent to which they influence collaboration, innovation, cost-cutt.....

Since the purpose of almost all contracts is to support the parties in generatingmutual economic value, you might think that there would be some indicators arotheir effectiveness in achieving this. But there are not. Anecdotally, we believe ththings like clarity of requirements and change procedures probably impact theoutcome of any transaction - but we are not really sure and we have nodocumented control process. In fact, even my statement that contracts exist tosupport economic value is most likely contentious.

I have written about this topic in my blog. As we continue down a path of globalbusiness, where communication and understanding is key to successful tradingrelationships, it is time for us to visit this question of the contract's role and purpoand to establish universal standards of quality and performance. Please contributo the discussion.

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To facilitate input, I have also written a brief blog article where you can add yourcomments (and see those of others). It is athttp://tcummins.wordpress.com/2009/11/18/the-purpose-of-a-contract/

Tim Cummins, CEO, IACCM

A Mission Statement for Sales Contracting: Close Contracts Quicker

How many of us in Contract Management (CM) have asked how we can becomestrategically positioned? And how often has the response been that the Contractgroup needs to add more value? In order to earn a seat at the table we need tostep back to understand the reality of what adding value means in ourorganization. When I was first named VP-Contracts at a large telecom company asked the CEO for a short meeting to understand what he expected from me in tnew role. His response was its simple; make me money-no meeting needed.

asked the same question of many of the Sales and Business Division leaders; nosurprisingly, Sales wanted contracts closed on a more timely basis while theowners of the P&L were also concerned about product commitments and theprofitability of the project.

So, my challenge was to determine how I could meet the needs of the CEO, Saland Business Division leaders (and other stakeholders-Legal, Finance,Engineering, etc.). The first step was to create a mission statement for the CMTeam which was to close contracts on a timely basis while at the same time carfor the interests of the company. In order to achieve our mission we had to idenprocess improvements that could reduce the contract cycle time, while not givin

away the store. As a side note, the skeptics often times interpreted the missionstatement as sacrificing the companys interest in return for closing contracts in ashorter period of time. The challenge is to strike the right balance between contracycle time and business risks.

As a side note, prior to my Contract role, I spent my entire career in Sales andMarketing, and I often said that it took longer to negotiate the contract then makithe sale. These delays are costly; the contracting team (sales, CM, engineeringbusiness development, legal, finance, etc) can spend hours on conference calls,meetings, etc., discussing the same issues repeatedly. The CM group was vieweas a black hole that lacked a sense of urgency. Often times our dysfunctional

processes left us with a dissatisfied customer. In fact, I recall a case where thecustomer had enough and awarded the business to our competitor. This is a hicost of poor quality.

As contracting professionals we must consider timely closure as a critical elemeof quality contracting. So, now the question is how do we meet thatchallenge. Lets first understand that contracting is a business process which staat the time a bid is submitted and ends when the product/project is finally acceptby the Customer. Before we can make improvements we have to document thecurrent contracting process. Looking at this from a quality improvement standpo

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forces us to identify specific steps toward meeting our goal; which is CustomerSatisfaction (both internal and external). Finally, in order to implement processimprovements CM must find ways to take a leadership position. The mission canbe met if we wait to get involved until its time for a contract to be written. We muget involved early and not wait to be asked to join the party. This will require ththe leader of the group sell the new and improved role of CM to the keystakeholders. Now, its time to demonstrate your value. If you are successful youwill become an integral part of the team on future deals.

Shown below are just a few examples of how CM can add value to the process aeduce cycle time.r

Process Step 1-Bid Submission

Become part of the bid team and add value by helping to design the business tewith the final contract in mind. Caring for issues such as these up-front will save lot of time at the back-end.

Examples:oAcceptance and Payment Termso Revenue Recognitiono Contract Terms and Conditionso Inclusion of a clearly written Product Specification and/or SOW as the

basis for the bid. The bid spec/SOW must be subject to a formal changcontrol process.

o Customer and Supplier incentives for exceeding their contractualobligations coupled with consequences for not meeting them.

o Opportunities for Collaborationo Pricing model which is clearly written so there is no confusion later.

Process Step 2-Contract Negotiation

Prior to Negotiation

o For complex contracts it is critical to prepare for the negotiation with theCustomer or you will be at a major disadvantage. This is an opportunity fothe Contract Manager to take a leadership role by forming the negotiatingteam, and scheduling sessions to prepare for the negotiation. The team istypically composed of representatives from Sales, CM, and someone fromthe group which has P&L responsibility (business development, marketmanager, etc). How often have you been presented a contract for review approvals that had already been negotiated by Sales without theinvolvement of the other stakeholders? Pulling together a team up-front

helps to avoid this type of situation.o Describe the desired negotiation outcomes based on input from the key

internal stakeholders (finance, legal, executive, engineering, etc.). This alsenables the team to understand what flexibility they have during thenegotiation to satisfy the Customers needs.

During the actual negotiation:oAgree with the Customer on a timetable for closing the contract. The timeta

combined with a daily review of open/closed issues is very useful in keepithe teams focused and avoiding an open ended negotiation. How manytimes have you worked on a contract that drags out over a period of week

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or months? Agreeing on a timetable forces decisions to be made soonerrather than later.

o Understanding each others desired outcome up-front is very helpful inreaching a timely and balanced agreement. Too often the parties hold thecards too close to the vest and as a result talk past each other.

o Maintain an issues register which is not only useful for time management, bis also the vehicle for documenting agreements at the end of each day.

oArrange for the key decision makers (both Supplier and Customer) to beavailable by phone during the entire negotiation process to make real-timedecisions, and to handle issues which are escalated for executivediscussions. Much too often not having access to the key players will pusout closure to the next week, month, etc. Timely decisions are needed bythem.

oAt the conclusion of the negotiation both parties should agree upon andproduce a draft for final review and approval. Producing the final draft whistill being face-to-face accelerates the process, and prevents amisunderstanding as to the agreements that were made during thenegotiation.

Contract management systems should also be considered as a tool to improveefficiency and reduce cycle time. A good portion of our day is devoted to handlininquiries, approvals, gathering stakeholder input, locating contracts, modifyingcontract language approved by Legal, exchanging contract changes internally anwith the Customer, etc. If some of these functions can be automated it will give uthe time to focus on the more strategic aspects of our job.

In summary, its up to the Contract Management Team to earn the right to be astrategic player. The first step is to create a mission statement that will meet theneeds of your clients. Clearly, in todays competitive environment time to market critical, and closing the contract is in the critical path. The organization will also

value CM acting as a consolidator of the various stakeholders interests. Oftentimes their interests conflict and CM can act as a neutral party to facilitateagreement on an optimal business model.

For those of you that want to be a strategic player its time to take control of yoown destiny. Need I say that during these economic times functions (andindividuals) that are not adding value may be at risk. Before you take the plunge important to do a self assessment as to whether you have the skill set to succeedthis new role. If not, training and finding a good role model may be theanswer. Department heads may also want to consider engaging with a coach thahas been through this transformation in the past.

Good luck, and remember that quality contracting is more then managing thecompanys risks and business terms-it is also about timeliness and communicatia sense of urgency to close the business.

Bob Henry, Landon Consulting

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The Learning Journey of Contract and Commercial ManagementProfessionals

This article considers some of the factors in deciding how to improve learning witcontract management and commercial teams, buy-side and sell-side including:

Why do some companies outperform others?Education is not enough... (we have to DO something, as well as knowing)Models and steps towards behaviour changeImpact of cultureCollaborative learning, and some suggestions for how to achieve itConclusions

Some are better than others...Why do some corporations consistently outperform others? Why do somecorporations head the IACCM surveys of most admired companies for negotiatioand post-award contract management while others do not figure at all in the lists

After all, the contract management/commercial management role that we performfor our companies comprises a fairly generic list of activities that need to get donin pre-sales, post-sales and buy-side processes, not many companies will be dosomething especially unique and revolutionary, albeit that in different companiesthe tasks are split between different functional groups and organised in differentways (for example, in some companies sales support, bid management, pricing aestimating may be part of the Commercial function, in other companies they arepart of Sales or some other functional department).

Part of the reason that some companies outperform others in the area ofcommercial and contract management is their propensity to learn, to be a learnin

organisation.

What does that mean? Well, lets take the example of bidding for customercontracts in a competitive environment. Some companies will recognise, at seniolevel, that they spend a large sum of money each year bidding for new deals. Somay consider it valuable to think about how many deals are won, out of the totaldeals bid for. And some companies may even think it would be a good idea toimprove the ratio of wins to losses in competitive bidding. I say some, because itclear that not all companies think this way, or if they do, not all act on it.

So perhaps a learning organisation would gather win/loss data, analyse it, set

targets for improvement in their results over time, and take process improvemensteps to raise their hit rate. Do all companies do this? Does your company do it?

This is just one example of an area of the business that Contract and CommerciManagement can choose to play a key role in making improvements which addreal, tangible measurable value to the businesses we work for, for the benefit of shareholders, and with the side benefit of an increased role and respect for ourfunction in the business.

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Another example would be to look at the cycle time for concluding contractnegotiations in the company, and to ask what are the most common factors indelaying the winning of business, and the inflow of cash. Are our standard termssale fit for purpose in making us an easy company to do business with, or do weregularly negotiate the same issues, and give way on the same points time aftertime, to get the business. Does this dragging our feet approach to negotiationmeet the objectives of the business?

Education is not enough

Knowing the right answer is not enough by itself. How many times have you beea meeting where everybody agrees what needs to change, agrees that the chanis desirable, agrees that the change is such a no brainer that it almost insults ouintelligence to even question it, yet everybody then goes away from the meetingand nothing changes?

A great example of this for me would be the learning point that preparation fornegotiation is absolutely crucial to the outcome, both in terms of having the team

and negotiation strategy and tactics well thought out as well as aligning thecompany internally (the internal negotiation) so that everybody is clear on thedesired outcome, walk-away points, negotiation margins and latitude and so on.Obvious, everybody knows it. Hmm, how many DO it?

So an intellectual appreciation of a best practice is not enough. Education will givus that intellectual appreciation, but will not necessarily affect the businessoutcome, because we often fail to practice and apply these principles in the realworld, and to measure their effectiveness in terms of outcomes. How many trainicourses have you or your teams been on, where some new knowledge was gainbut you cant quite put your finger on what changed as a result?

Behaviour Change

Making process changes to improve effectiveness and efficiency is often part of answer.

Almost always part of the answer is achieving behaviour change. How do we getpeople to think and act differently, to improve business results? After all, we arecreatures of habit, we often act and react on autopilot, we each have a certainworldview that we bring to work with us, and getting our teams (and ourselves) tothink and act differently can be quite challenging.

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I came across a useful model recently, which includes 7 steps to behaviour chan

Equally useful, here is the reverse view, the 7 stages of behavioural inertia, whichelps to explain why behaviour change can be so difficult to achieve:

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So, in order to achieve behaviour change, we need to help our teams to:1. Become aware of the need for change2. Decide that participating in and supporting the change is desirable3. Become knowledgeable about how to change4. Get the ability to implement new skills, behaviours, knowledge and

perhaps attitude5. Feel reinforced to keep the change in place into the future

Impact of culture

Culture is, simply, the way we do things around here. In a quality-conscious,continuous improvement company culture, change will be expected, encouraged(demanded, even), measured and rewarded, as a way of improving companyperformance to meet business goals.

In many companies, lip service is paid to these ideals (they are, after all, no

brainers), but little real systematic attention is paid to them. As we can see from behaviour change model above, if our teams operate in a culture of short-termismwhere all that matters is the sales result for the next month or quarter, or landingthe one big deal that will make up for all the many deals we regularly lose, often the same reasons time after time, then the awareness of the need for any chang(and executive support for it) will be low, as will reinforcement of the individuals wattempt such systematic changes.

In short, the job of leaders in Commercial and Contract Management (and leadecan emerge at any level of the hierarchy!) is to identify the need for change,champion it to the executive management, get buy-in, and then set the culture fo

the team in our function, which is one of constant striving for improvement.

As someone expressed it to me recently, just when we think we are nearing thepeak of the mountain, we discover a further peak just over the top! Welcome to tworld of the pursuit of excellence!. The companies who top those most admiredsurveys, and certainly the companies who are market leading and achieving thoshigher win rates and shorter cycle times are almost certainly those who adopt thculture and attitude.

Collaborative Learning

We can (and many do) decide to adopt a hero culture, where a small and selectband of individuals (the A-team) know how to win deals, shorten negotiation timget great results in negotiation, then effectively manage and maximise value fromcontracts post-award. In this culture, the few grow their careers by knowing thesecret formula for success, ensuring that their internal rivals for promotion do notknow as much, and using this power to secure career advancement and salaryimprovements. They do this by achieving better business results in their businesunit/group than their peers in other units. Of course, over time, their satisfaction iwatching other business units perform less successfully than their own, gives wato anger as their personal rewards and career progression are thwarted by the

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failure of their employer to keep pace with the faster, more innovative competitioA short-sighted approach.

It will be obvious from the above that interaction between team members is key tachieving the kind of improvements which will keep our company ahead of thecompetition. As companies source and sell more and more globally, we need tounderstand the perspectives and culture differences which exist in our global teainternally, as well as with our trading partners externally. How do we learn how to

make these improvements, how do we share this knowledge, how do wecommunicate with people who are based remotely? (And believe me, another tecan be based remotely when they sit a few feet away, across a corridor, with asound-dampening barrier between them and you, I have seen this first hand!).

Part of the answer is by use of technology. IACCMs member search andmessaging forums enable communication of learning and sharing of knowledgeacross the world, and are found to be highly effective by members using them.

IACCMs corporate learning programs have been found to deliver collaborativelearning to commercial/contracts management teams, both buy side and sell side

through design, with the corporation, of a six months program of learning whichemphasises through a series of webcasts and ongoing communications those kethemes and strategies of the company that enable sharing of best practices in threal business environment of that organisation.

In our corporate learning programs, we require each course participant to post aminimum of 5 messages to the companys secure learning portal message boardto encourage a flow of knowledge sharing to begin. Many participants post manymore than the minimum number, as momentum picks up and their colleaguesaround the world share with them secrets of how to operate better. These postibring the best practices of the IACCM body of knowledge into the workplace, by

sharing examples of their application in the corporation. Challenges and barriersimplementing best practices are discussed, and cost savings/process improvemopportunities are identified, leading to value generation. And great ideas aregenerated in some surprising parts of the world, often by people who are not awthat their thinking ought to be constrained in the same way as it is in othercountries!

These programs provide a flexible learning environment for the participantsenabling them to manage their time, develop their intra-team communications,allow interactions on a global basis, provide sharing of ideas, increase motivationthe participants to make changes, encourage different perspectives and views,

establish a sense of learning community, help to create a more positive attitude tlearning, enhance self-management skills and develop skill building and practice

Another example of collaborative learning being promoted by IACCM is a newprogram we are launching in Q1 2010, for leaders/future leaders of function, tofacilitate culture exchange and cross-fertilisation between people from differentcompanies, industries and countries. Well be encouraging those programparticipants to examine the differences in the ways they think and work, to learnfrom one another and to find new ways to add value and raise standards in theperformance of their teams as a result.

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I recently visited Manchester Business School at the University of Manchester, Uto learn more about their MSC in Commercial Management. This course is evolvto provide leading edge Commercial Management education and is another optiofor participants to broaden both their Commercial expertise and their culturalinteraction with people from other countries and industries. IACCM endorses thiscourse of study. Some places are still available in MBSs next cohort, which startin the New Year. Additionally, MBS are looking to expand their suite of offerings include a post-graduate certificate and post-graduate diploma option, in addition

the full MSC.

(See http://www.mbs.ac.uk/specialist/commercial-management.aspx for moredetails).

Conclusions

There are reasons why some companies outperform others... success leavesclues! Our professional function can add real business value by improving the wcontracting is carried out

Learning new information is great, but wont of itself change the businessoutcomes of our companies, for that we need to practice and apply learning, in away that impacts bottom line performance

Our teams need help in achieving behaviour change which will deliver betterbusiness outcomes, including encouraging and reinforcing the attitude that leadssuggestion and implementation of improvements

The company and team culture needs to support the changes we are trying tomake (culture can be changed, culture is the way we do things around here... lestart doing them differently!)

Collaborative learning is highly successful in delivering change in the team anin business outcomes

For more information on any aspect of this article, or to make a comment orsuggestion, please contact: pmallory@iaccm.com

Paul Mallory, VP Training & Development,IACCM

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Nemesis of Conventional (Reactive) Contracting -- Transformation toPro-active contracting model

INTRODUCTION

Traditionally, researchers & consulting agencies have described contracts as thlife blood of an organisation. I would rather slightly depart from this custom andstate that contracts are the spinal cord of the organisation. I see Contracts as thframework of a relationship and their focus on managerial decision making in tsame way as the spinal cord which translates the neural signals from the brain(Management) to the rest of the body (other entities of business environment)and also contains neural circuits that can independently control numerous reflexe(Proactive).

Contracts form the documental yarn that converts in to fabric, while bindingPeople, Clients, Suppliers and Organisation into coherent working relationshipswherein goods & services may be exchanged in a mutually agreeable frameworkis worthwhile to recall that a recent study1reveals that the typical Fortune 500companies maintains 20,000 to 40,000 active contracts at any given time. With tbackground, it is imperative that the contracts be proactive rather than reactive

Before embarking on the nemesis of reactive Contracting, it will be appropriate define Contract and the core elements of Contract Life Cycle.

CONTRACTper se

Gartner Research2defines contract as the sum of all transactions & interactiothat have taken place between the Parties, both before & after the award ofContract. For the purpose of our discussion, we can consider the contract to be set of documents governed & restricted by law, that clearly establish the bounda& extent of the executing Parties relationship & responsibilities along with the rig& responsibilities, of the entities involved.

In more than one occasion, I have observed Mr. Tim Cummins, CEO, IACCMreiterating the bottom line of contracting (adage):

IF YOU ARE NOT IN CONTROL OF YOUR CONTRACTS,YOU ARE NOT IN CONTROL OF THE BUSINESS.

Tim further states,

ORGANISATIONS THAT DO NOT MANAGE THEIR CONTRACTSEFFECTIVELY WILL BE AT A TREMENDOUS COMPETITIVE DISADVANTAG

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CONTRACT LIFE CYCLE

Contracts are living entities with a Birth, a Maturation period and in most caseTermination maybe a smooth close-out or an abortive exercise.

Contract life cycle consists of the following basic stages3:

authoring the contract using standard clause templates.

collaboration with legal, risk management cell, taxation, Audit,insurance & other groups internal to the organization, negotiation & collaborationwith Suppliers, Clients & other business partners.

specifying contract start date, completion date, capturing signaturfrom all entities involved and establishing a control repository of all contractual

information.

tracking & auditing of contract terms, pricing, discounts, quality levcompliance, change management & performance.

enforcing spending against budget, balancing orders, assigningresources for the optimal management of the most profitable projects & custome

Also term analysis of contract performance and attributes to determine future sabudgeting, sourcing and risk strategies including the exercise of Lessons Learnt.

PROACTIVE APPROACH

As addressed before, it is imperative that contracts be proactive rather thanreactive.

Proactive Contracting refers to the use of contracting processes that blend BestPractices in Contracting, Quality conformance, Risk mitigation practices with Practive / Preventive Law.

Thus the goals4of Proactive Contracting can be listed as below:

To promote successful performances & frame work of relationshipsTo identify & eliminate root causes of potential problems

To optimize risk & return andMinimize deterrent when problems arise

To manage conflict & prevent litigationTo minimize costs & losses where they are unavoidable

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PROACTIVE CONTRACTING MODEL

Often contracting is merely referred as a legal document and manyorganizations never formalize the management of their contracts during th

agreement period; Contracts are archived away in departmental fil ingcabinets never to be reviewed again unti l a problem arises5.

Contract dispute management is not just a walk in the park.

Contractual disputes are time consuming, expensive & unpleasant. They candestroy the Client-Contractor relationships painstakingly built-up over a period oftime. They can add substantially to the cost of the contract, as well as nullifyingsome or all of its benefits or advantages. They can also impact on the achievemof value for money. It is in every ones interest to work at avoiding disputes in thefirst pace.6

Traditionally, the steps in providing legal care resemble those of Medical care:diagnosis treatment referral, all steps that happen after a client or a patient ha problem. Care has been reactive.

You get sick, you seek treatment;You encounter a dispute, you turn to a lawyer7.

As core professionals, we have to lean away from this approach. Businessesbenefit from a proactive approach focusing on how to secure & sustainsuccess and help the team out of trouble.

One should clearly understand that businesses do not succeed by winning dispuor court cases, or by looking for parties to blame and claim damages from.Companies are not interested in damages or remedies; all they want issuccessful frame work of relationship and the expected level of performan

They seldom benefit from spending hours drafting and negotiating clauses dealinwith liabilities (readlimitation of liabilities) and remedies instead they benefitmuch more if those efforts are aimed at clauses that enhancecommunication, clarify liabilities & responsibilities, and help in securingsuccessful performance.

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The following table8 is presented just to highlight the differences of the conventioapproach as opposed to proactive approach to contracts & contracting.

Attr ibutes Conventional

approach

Proactive approach

Looks atmatters

After the event,Backward lookingEx post; reactive

Ahead of the deal,Forward lookingEx ante; Pro-active

SeesContracts as

Legal documents,Legal rules

Framework for relationships,Management tools

Core concerns Contracts validity,enforceability andinterpretation in adispute; contract /project failure, liabilitiesand remedies

Contracts usability andfunctionality; success in reachingparties goals, optimizing &managing risks, contingencyplanning/business continuityplanning

Discipline Predominantly law andcommercial

Multidisciplinary and working inteams project/matrix manageme

Servesprimarily theinterests of

Courts, research andacademia; litigators;public lawmakers

Contracting parties; people in saleprocurement, finance & projects,contracts professionals; privatelawmakers

Focus Law; legal decisionmaking; legal theory;legal precedent

Cross-professional collaboration;Managerial decision making;reaching business goals cost-effectively, risk management

Centre ofperspective

Judges; publicpolicymakers,Rules; past facts,Contract in dispute orlitigation,One contract at time,Dispute resolution,Curative, correctiveaction

Contracting parties; private actorsPeople, process, culture, futurefacts,Contract(ing) in organizations,Program/project management,Contract portfolio and process,Dispute prevention andmanagement,Proactive, preventive action

Central

themes

Conflict & dispute

resolution; what courtsor legislators or tribunalshave done or should do

Contracting skills and tools;

process, roles & responsibilities;good relationships, successfulperformance

Contracts do not exist in isolation and do not make things happen-- It isdriven by the People; It should be for the People. After negotiating & signing thecontract, the parties must follow their agreement. The contract documentationbecomes the blueprint for the project and for managing the relationship; it providthe boundaries within which the relationship has to be managed. Hence it isessential that Contracts should be made simple, effective & enforceable.

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The contract is not the goal; successful implementation is9. Successfulimplementation is what contracts are made for; contracts must transform intodesired performance.Here resides the role of the Contract professional.Contract reviews should be done ceremoniously ensur ing that all the actorare fully conversant with the Contract clauses.The way in which they areinvolved differ Company-wise, Industry-wise, Project-wise and type of contract-

wise. When managing the project they not only manage the Client (sell-side)contract but also a portfolio of contracts which need to effectively pass on toSuppliers & Sub-Contractors, the applicable terms and the associated risks of thmain contract. So Contract professionals need to capture the nuances of both seside and buy-side contracts, and managing the interfaces.

An experienced Contract professional can make a valuable contribution at thecontract planning stage by sharing his experience & knowledge from previousprojects & of his colleagues. Lessons Learnt exercise by Project Managerswould be a useful & effective tool.It should be noted that these Lessons learnshould not be limited to capturing technical issues as is being done in most of th

cases. It should also include contractual issues. The Contract professional can htailor the contract to the needs of the project, and protect the relationship betweeparties and ultimately protect the project.

On both sell-side and the buy-side, the roles of contract professional need to becoordinated with project managers, sales managers, finance managers, legalprofessionals and others. Some of their contract-related activities and the varyinextent of their authority can even cause conflict. It is often useful to map out whathe organisations current contracting process, roles & responsibilities, eliminate potential bottle-necks & try to arrive at a rejuvenated Contracting process. It maybecome apparent that no one really has ownership and is accountable for the

process, end-to-end. Each organization must make its own determination aswho is in-charge. What matters the most is that the process & the role ofindiv idual team members should be made clear to every one involved.

Thus a Pro-active approach combined with an understanding of the Contractingprocess is a key for a Project to succeed. Teamwork, communication and cleastated roles & responsib ilit ies give a good leverage for effective Contractmanagement.A well thought-out contract and the early involvement of the contrprofessional in the contracting process will set the stage for successful projectcompletion. All team members from the word go must commit to making it happ

CONCLUSION

As the adage goes along the same lines as war is too important to be left to thegenerals, it can be said that contracting is too important to be left to the contractprofessionals or lawyers. If the allocation of tasks is unclear, then everything isunclear, and problems will follow.

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Nevertheless, 10to create good quality contracts that serve both as businesstools and as legal tools, organizations need the skill s and strengths ofbusiness managers and proactive project & contract professionals. Theseskills & strengths must be integrated through collaboration & communication. Thcore of corporate contracting capabilities resides in companies ability to merge aoptimize their respective knowledge and skill sets.

Proactive contracting of fers a new, practically focused approach that

deserves to be widely known. Its ramifications have wide implications & potenboth in business and training, and in the continual development of contractprofessionals. This learning should be promoted and its results should be sharedHere resides the collaboration of total commitment of the top Management oan organization and the professional association of educators andresearchers l ike IACCM.

Before we come to an end, once again quoting the recent words of Tim CumminIACCM (though meant under a different context),

Whatever we write in the Contract,

However diligent our Management is,It is our culture that will drive behavior.

Let us make PRO-ACTIVE contracting a part of our business culture.

References & Quotes:

1 Institute of Supply Management

2 Gartner Research, Oct03, Six keys to better Procurement ContractManagement

3 Alti Inc., Enterprise Contract Management An Overview

4 Helena Haapio & Linda Baines

5 Hummingbird, Contract Management a strategic asset

6 UK-OGC: Dispute Resolution Guidance 2002

7 Linda Baines

8

adapted from Haapio 2007a

9, 10, 11 Helena Haapio & Linda Baines

My sincere thanks to Mr.K.Shanker, MD, Technip India Limited and Mr. TimCummins, CEO, IACCM (International Association of Contract & CommercialManagement) who were instrumental in preparing this article.

N. BALACHANDAR,Manager-Contract Administration & Management, TechnipIndia Limited

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And This Month 's Most Popular Blog .....

Today I attended the 1st European Proactive Law Symposium, organized by theIACCM Proactive Think Tank in partnership with the ICN Business School inNancy, France.

Among a host of interesting topics and papers, there was a panel discussionfeaturing academics from several Law schools that addressed Proactive Contra

Management as an Evolving Academic Discipline. Based on wide agreement thcontract management is an important business discipline, in need of a commonlanguage and established techniques, the panel discussed whether contractmanagers should be lawyers and / or whether contract management should beincorporated into legal training.

There was agreement that lawyers would benefit from the inclusion of contractmanagement content in law school programs. It was felt that holistic case studieswould assist the development of wider skills. Todays programs are rule-based atesting is based on those rules. It is a deductive discipline and the belief is thatwisdom and judgment will come from on-the-job experience, observed Tom

Barton, a professor at California Western School of Law. He went on to explain tcase studies from the world of contract management could assist in developingwisdom and also teach lawyers in areas such as gathering and analyzinginformation, coordinating teamed resources, active listening skills and greaterbehavioral understanding.

There was wide consensus that contract management will increasingly be anattractive path for some lawyers, but that it is not necessary to be a lawyer. Indethe cross-disciplinary nature of contract management was emphasized as one ofthe reasons why it is so difficult to build academic programs for this community.However, all the academics present believe that it is important to develop contra

management as a discipline in its own right, as well as making it an element ofother programs for example in law, finance or marketing.

In responding to this enthusiasm from the academic community, I commented thwe must work together to build executive understanding of the importance of thisrole. While dedicated undergraduate and business school programs will bewelcomed, uptake will be limited unless students are confident that the disciplineoffers a career path. However, we already have initiatives under way with severauniversities and business schools to offer internationally applicable programs forthe contracts community.

We also discussed how content would be developed and I suggested that weshould utilize the existing, practitioner- developed body of knowledge that ismanaged through IACCM as a base, and then have academics build from thatsyllabus to include more refined techniques and methodologies that would bringgreater consistency and value to the contract managers output. One critical aspof this is that everyone involved in contracting must have improved understandinof the economic outcomes of decisions. Many contract issues are resolved byfunctional owners who have little understanding of the potential market impacts.

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Many decisions have interdependencies with other terms and conditions;contracting must become more holistic and disciplined so that it can offer increasvalue and innovation.

A synopsis of the papers delivered at the symposium is being collected and willprovide the content for a future special edition of Contracting Excellence. To

comment on this article, visit http://tcummins.wordpress.com/2009/10/14/should-lawyers-become-contract-managers/

Tim Cummins, CEO, IACCM

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