Taking Control of Your Contracts:
Best Practices for Contract
Management
Richard Waugh
VP of Corporate Development at Zycus
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Richard Waugh, VP Corporate Development at Zycus, has an extensive
background in B2B E-Commerce, going back to his early career at GE, where he
helped launch GE'S Trading Process Network (TPN), the first on-line
Marketplace for Sourcing and Procurement in the mid 1990's. He was
Co-Founder of B2eMarkets, one of the first SaaS (Software as a Service) Sourcing
Suite providers and later covered the Supply Management market as an Industry
Analyst for the Aberdeen Group.
Kalisha Crawford, Esq.
Director of Legal Services at GreenPoint
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Kalisha Crawford, Director of Legal Services at GreenPoint Global, is a former
practicing litigator and a legal business development and client management
professional. Kalisha has deep experience in the contract management and
compliance arenas, with special attention to vendor contracts, agreement
inventory and backlog, and provision analysis and organization.
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Who should be concerned with contract management?
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Why do you need it?
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What are the benefits?
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How is it done?
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What are my options?
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Top 10 Takeaways
Presentation Agenda –
Areas Covered
Inefficiencies Cost Your Company Time and Money!
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IACCM estimates that 9% of annual revenue is lost due to poor contract
management
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Estimates from 2004 projected $153 billion dollars annually are lost to
inefficient contracting processes
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Aberdeen Group
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Errors cost a company up to 12% of their annual contract expenditures
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PricewaterhouseCoopers
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ERP Solutions only cover 20% - 30% of the needs of most enterprises
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Goldman Sachs
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SOX requires CFOs and CEOs to certify that they have evaluated the
procedures and controls in their organizations and that they are
effective
Why do we need
contract management?
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You may have heard the quotation that roughly says “Nothing is certain but death
and taxes.”
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In our modern society there is a third certainty: CONTRACTS!
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No matter what industry, your business has contracts
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With suppliers
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With customers
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With employees
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Time, Money, and Opportunity are lost every day due to poor contract
management.
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Industries
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Insurance
- Pharmaceutical
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Healthcare
- Retail
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Government
- Manufacturing
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Financial Institutions
- Software & Technology
Why Should We Be Concerned
About Contract Management?
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Procurement and Sourcing Managers
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Contract Managers
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Compliance Managers
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Regulatory Reporting functions
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General Counsel
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CLOs
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CFOs
Who Should Be Concerned
About Contract Management?
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Central Repository: Houses all documents (riders,
amendments, etc.); searchable; accessible by all required users
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Highly configurable: Scalable, customizable, back-end
compliant
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Monitor contract performance: Track timing, pricing, terms,
and internal adherence to policies
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Notification and Alerts: Receive notifications and alerts for
milestone dates, auto-renewals, and opportunities for
renegotiation
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Vendor, Supplier and Customer Risk Management: Country
and supplier risk ratings; outstanding litigation and other risks of
doing business with vendors
Benefits of
Contract Management:
Process Overview
Quiz Question #1
What do you think represents the average weekly loss a
company suffers due to inefficient contracting processes:
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$122,000
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$245,000
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$377,000
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$718,000
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$1,000,000+
Quiz Question #1
The average weekly loss a company suffers due to inefficient
contracting processes:
1.
$122,000
2.
$245,000
3.
$377,000
4.
$718,000
5.
$1,000,000+
Contract Management
Lifecycle
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Experienced Subject Matter Experts
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OCR and conversion experts
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Experienced contract attorneys and paralegal teams can
address your backlog
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Create summaries of contract provisions
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Populate database
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Manage contract workflows and prepare documents
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Supplement information – risk analysis, global business and
legal research
14
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Project and Change Management
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Change can be managed by experts with experience in
contract management implementations
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Trained on contract management software and clients’
internal systems
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Projects are managed by a partner, not a burden on current
internal teams
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Managers are able to maximize time and value
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Software tools and support
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Automation of contract creation and management
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Workflows, alerts and reporting
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Central repository and searchable database
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Advanced, customizable features
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Compatibility with existing internal systems
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Technical support and maintenance
Legal/Contracting groups are challenged to serve all stakeholders
Nobody has the luxury of losing revenues by missing contractual commitments or renewals
Visibility
Compliance
& Risk
Non-Standardized
Terms
Contract Lifecycle
Timing
Challenges
Authorized user access
Create and manage users Create user views
Expiry/Renewal Alerts Utilization Alerts FOREX/Commodity Index Alerts
Multidimensional reports Adhoc & Precanned reports Share, print & export reports Spend to contract match
Non contractual spend tracker Track FOREX /
Commodity Index trends and deviation
Track utilization of contracts
Search by category/ Supplier/Contract No. Search by Keyword Line item Search
Secured Access User defined access Multi Parameter Search Reports & analysis Compliance Tracker Utilization Tracker Alert & Reminders iContract Repository
Contract Management Solutions:
Repository
Author contracts using MS Word MS Word to iContract import Configurable step wise process Set hierarchies Invite multiple stakeholder Standard/customized negotiation workflow Review & add amendments Easy Template Retrieval Create new Templates Pre-approved Clauses Author contracts using MS Word MS Word to iContract import Configurable step wise process Set hierarchies Invite multiple stakeholder Standard/customized negotiation workflow Review & add amendments Easy Template Retrieval Create new Templates Pre-approved Clauses iCONTRACT AUTHORING Collaborative Authoring Contract Negotiation Template Library MS Word integrated Wizard Based Contract Authoring Clause Library
Contract Management Solutions:
Authoring
Renewals
• Auto renewals a key issue
Key Contract
Terms
• Termination for convenience, payment terms, risk mitigationContract
Ownership
• Who is the Sourcing manager? • Who is the contract owner?Contract
Hierarchies
• SOWs,Prime and Sub Agreements, Amendments
Challenge 1:
Visibility
Solution:
Visibility
Implement a central repository to store and
manage your contract information
Identify key terms which need to be tracked for
key contracts
Reports to provide trend analysis
Auto renewal reports and contract expiration
alerts to prepare for sourcing projects Ensure all evergreen contracts are reviewed
with business owners and identify opportunities for
Purchase price
compliance
• How to we ensure that we get the pricing we negotiated for?
Control Maverick
Spend
• How do we ensure that people buy from these contracts?
Visibility of existing
contracts
• How do we ensure that people are aware of existing contracts for products and services?
Challenge 2:
Compliance
Solution:
Compliance
Match established contracts with actual spend transactions
to identify non approved vendors.
Ensure that you track utilization of the contract.
Match purchase information with contract to identify purchase price compliance as
well as rebates.
Increased visibility of contracts with integration with your ERP
system
• PO should refer to a contract to get pricing
Contract Utilization
and Performance
Contract Utilization
and Performance
Different categories use different templates
• 5 different indemnification clauses across different templates
Most of spend is services and we don’t have standard
templates
• Professional services a classic example
We are global in nature so can’t standardize our
templates
• Ensure multi-lingual is supported
Challenge 3:
Standardization
Solution:
Standardization
Standardize your terms and clauses by working
with different stakeholders.
Implement a process which automatically
guides sourcing managers to the right
template based on a question based survey.
Track what terms are often negotiated and change those terms in
the base templates.
Define a clause hierarchy based on the
different region requirements. Identify services which
are bought repeatedly and define your own templates based on third
Standard Template &
Clause Library
Quiz Question #2
Lost Time in Sales Cycle
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Which of the following represents the amount of the
sales cycle surrounding contracting and contract
management?
1.
Little or none
2.
2%
3.
12%
Quiz Question #2
Lost Time in Sales Cycle
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Which of the following represents the amount of the
sales cycle surrounding contracting and contract
management?
1.
Little or none
2.
2%
3.
12%
Approvals take too long Redline and negotiation is a tedious process.
I don’t know the approval hierarchy Signatures and scanning executed documents takes too long
Challenge 4:
Cycle Time
Solution:
Cycle Time
Automate the approval process though a CLM tool
• Pre defined approval hierarchy based on category, Spend etc.
Implement Clause level approvals
• Don’t send entire contract for review , define clause ownership and automate
this process.
Track the efficiency of contracting process and
make adjustments. Use E Signature to automate the signature
Quiz Question #3
Management Cost Savings
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How much can I cut operating and processing
costs associated with managing contracts?
1.
2 – 3%
2.
4.5 – 5 %
3.
8 – 10%
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How much can I cut operating and processing costs
associated with managing contracts?
1.
2 – 3%
2.
4.5 – 5 %
3.
8 – 10%
4.
10 – 30%*
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* These savings increase as you utilize partners!
Quiz Question #3
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10. Your backlog is not insurmountable!
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9.
The longer you wait, the worse it will get.
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8.
Automation and streamlining are attainable with software.
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7.
Avoid compromising your internal teams!
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6.
Outsourcing project & change management has huge cost savings.
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5.
Monitor productivity and custodial activity metrics.
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4.
Never miss an important date with automatic alerts.
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3. Not taking action will expose you to compliance &
regulatory risks!
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2. Without a clear CM system your organization wastes
time, money and effort.
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1. You are losing out on sales, incentives, and other
inherent value Contract Management helps avoid loss
and generates increased revenue and opportunity.
Richard Waugh, Zycus
VP of Corporate Development Richard.Waugh@zycus.com
Kalisha M. Crawford, Esq., GreenPoint Legal Director of Legal Services
Kalisha.Crawford@greenpointglobal.com David Kinnear, GreenPoint Legal
Managing Director – Business Development David.Kinnear@greenpointglobal.com
