Contract transformation - Improving end to end contracting

Progression in technology has meant that, over the last decade, contracts have become longer, more complex and sometimes harder to negotiate as businesses have been keen to have the most protective contracts possible. Over time, businesses often build up multiple contract templates to ensure that every contracting eventuality is covered. But what if there could be a different approach?

Whilst contracting on lengthy, complex contracts may be advantageous from a legal perspective as the position of the business is well protected, there are disadvantages to this approach and our experience shows that businesses are becoming more live to this issue. End to end contracting can be slow, legal costs are increased, relationships with suppliers can be hindered, focus on key strategic priorities is lost and there is inconsistency between templates and final contract negotiating positions.

We are seeing a real step change in our clients’ approach to this issue, where they are starting to favour the following approach:

• simple, shorter contracts with real thought regarding “important” clauses and those which are “nice to haves”
• a reduced number of templates to make them more manageable and increase consistency
• bolt on extra clauses and modules to deal with more complex contracts
• a balanced risk approach to reduce contract negotiation times
• detailed playbooks with pre-drafted fall-back clauses to speed up contracting, create consistency and reduce the need to keep re-investing the wheel

Although there are some increased risks in this, our clients are seeing some significant advantages from changing their approach. The real benefits being delivered include:

• increasing speed of end to end contracting, allowing legal advisers to focus on the most difficult and strategically important contracts and free up legal department time
• allowing procurement teams to progress contracts more easily without having to seek constant guidance from legal
• consistency of templates, meaning increased familiarity and speed of contracting
• consistent fall-backs and negotiating positions
• optional clauses and modules to ensure more complex clauses are only used where necessary

We are also experiencing that clients are starting to embrace the use of technology platforms to automate contracts and the approach outlined above certainly helps to support contract automation. Whilst contract automation for complex contracts may still be in its infancy and we have seen challenges and worked on solutions to conquer this, the approach outlined will also help with future contract automation. This will be the way of the future.

So it feels as though technology has brought us full circle. Over the last 20 years technology has meant we have been drafting more complex and lengthy contracts covering every eventuality, but the move toward contract automation and AI means clients are reverting back to the simple.

If you would like to discuss how to make your contracts more efficient and reduce risk, you can find out more about TEAM Global, our technology-driven solution for managing global contract templates, or get in touch with one of the contacts below.