Contract management: time for a re-think

Published: 25 Nov 2014 Average Rating: 5 / 5 Print

Author: Tim Cummins

At an IACCM member meeting in the UK, I presented on the topic of 'Weaknesses in Contract Management', focusing on the incremental value opportunities that are realized if we focus on driving bottom-line benefits.

Research consistently shows that a major contribution to financial results can be achieved by a more holistic, process-based view of contract management. To achieve this, organizations must shift from viewing contracts as individual events and explore their performance as portfolios – for example, looking at individual relationship or contract types.

The incentive for doing this is based on the relatively high rate of under-performing contracts. IACCM research has shown that on average 35% of an organization's contracts fail to reach expected value by 10% or more and that a significant proportion of this value loss is avoidable.

David Hodges, Commercial Director at CGI, followed my presentation with a complementary session, “Do Projects Fail Because of Poor Contracting?” He started by defining the nature and potential degree of 'failure' as it relates to both customer and supplier. Following some web research – which focused largely on IT and technology services contracts – David came up with some even more dramatic numbers: CIO magazine, for example, estimates a failure rate of around 50% and other data revealed that “93% of contracts do not achieve what was envisaged”.

Based on his own investigations, David then explained what he had discovered as the primary causes of this value loss. His findings supported the IACCM research in pointing at issues of poor commercial discipline and judgment:

  • Definition and management of requirements
  • Availability or management of resources
  • Unrealistic or over-optimistic schedules
  • Weaknesses in planning

David made the point that while these are not traditionally seen as 'contract management' issues, investigation shows that in many ways they are. When it is recognized that they are repetitive problems, a high performing commercial team explores how they can be reduced or eliminated. He went on to explain his conclusions about the role of contract management (buy and sell) in driving improvements. These included greater engagement in requirement definition, ensuring the right contract model, improving governance and performance provisions and more active monitoring of change.

Both presentations are available in the library at www.iaccm.com.

Comment or read more of Tim's blog.


Related Discussions

Please sign in or register to post on this forum

Pretorius Consulting
2019-09-18 17:50:21

Pricing Article Changes

Does anyone actually price changes to the Articles of the contract? For example, changing the venue for arbitration (5% of the contract value) or the change order pro...
Replies: 3

Pretorius Consulting
2019-09-18 17:43:44

10 Pitfalls to Avoid in Contracting

I note that the post is from November 2015. Would you say that the statistics for these 10 have remained the same in 2019? Is it possible to get more information abo...
Replies: 2

KEO International Consultants
2020-05-26 13:02:59

Negotiation effectiveness

What are the fundamentals and effective tools to be taken into consideration before negotiation meetings. Please share negotiation cases initiated from both parties. I...
Replies: 1

Toronto transit commission
2020-03-27 15:19:59

Commercial Management Structure, Model, and Governance in Public Sector

Hi Everyone; Hope you and your loved ones are doing well and staying safe! We are in the process of Commercial Management Function establishment. We do have Materia...
Replies: 1
2018-10-12 14:32:00


A great article. Roles and responsibilities are often overlooked. We instead, as a buying organisation, like to define how something should be delivered.
Replies: 3

Worley Engineering
2018-09-18 09:34:19

How to handle a dominating client?

Thanks for the interesting article. From my experience, i've encountered number of client who likes to dominate the contract administration and project execution ...
Replies: 1

2016-12-01 06:07:29

Evaluating Warranty extension cost

In an EPC project, the project is delayed by employer and employer requests contractor to extend warranty. Employer agrees to provide a claim/ amendment for warranty e...
Older entries »
Replies: 4