Just think about how we sign a contract today. We agree on the document types and templates (CDA, MSA, SOW, SMP, price sheet, DPA), we exchange comments and consolidate those. Then we work out service parameters (SLA, KPIs), describe them with the proposed flows in detail, workout roles and responsibilities, regulate timelines and milestones. Subsequently we settle pricing, base costs, surplus, discounts and penalties, payments, service acceptance, key terms. Finally, when the document heap is agreed and clean, we put our signatures on them in a consented sequence and exchange copies.
For a complex service you are nailing in parameters that are yet to be determined and adjusted to the needs of the project. Many things you are setting in stone are yet to be seen while implementation and first run of the service. The prices and costs might still vary, and that can also be to your favour. All that energy into initial contracting drains business, legal and procurement resources, and has no end to it as you are guaranteed to be officially amending your documents regularly even up till the service can actually start.
Imagine the following. Your put two signatures on a blank sheet of paper. This is your declaration of intent to work together. With the vendor you want to work with, you trust can do the job for you. You commit. You both do. Then you start implementing the service together, you design the flow, workout roles and responsibilities, calibrate timelines. You precise the service parameter, agree on KPIs while you dry run the service. If all set, up and running, you compose your project governance documents, you finalise pricing, tie in all loose ends on terms. And you can call that intuitive process contracting.
Even if in reality such a process would not be adopted by most companies, it would be the natural way to do it, and you should remember that. You should remind your functions of the same and you should mandate then to be flexible in their approaches and encourage them to take the appropriate amount of perceivable business risk in order to make the vendor engagement process less troublesome, more outcome and customer oriented. Instead of creating conglomerates of contractual burdens for both your business as well as for your vendors, consider:
• An integrated procurement and contracting process
• Pre-qualified preferred vendors
• Multi-axial price sheets (work category, complexity, service level)
• Combination of fixed prices and actuals
• Framework agreements without fixed volumes
• Pilots and vendor probation periods
• Enabling multiple vendors competing for orders
• Live calibration of work shifting towards better price/value
In addition, it is very important to assess time to contract executed and to see where your deadlines are slipping. It is natural that contracting can only rely on business and vendor inputs when finalising documents, but a routine contract like one for simple services should never take unreasonably long time to close. You need to set KPIs for contracting in a way that that it fosters speed and customer satisfaction, which you will also need to gather regular feedback for. At the end of the day the goal is not the contract itself, but to get the service started or at least its implementation to commence for the business function as soon as possible.
A healthy level of risk taking here means that the contracts should not be aimed to be perfect, but rather to be good enough. This can be justified with them being ongoing services, which are probably not of highest value on a corporate level, and where the delivery is the ongoing satisfaction of the ordering function and where the lack thereof will anyway trigger the penalty process or eventually lead to termination of the agreement and the service relationship. Please also do not forget GxP services will be subject to regular quality auditing which should also give additional reassurance that you do not need to be utmost uptight at the point of contracting.
If you would like to know more about all the above, please contact us and we will explain in detail, and tell you how they could be applied to your organisation and processes. Such approaches are highly recommended if you want to move from singular service and vendor management practices to integrated eco-system management. At StratoServ sciences we can help you implement such practices, as well in developing your eco-system model to shift your procurement and business functions to work with this sophisticated concept to maximise what you are getting out of your services portfolio. In other words, to get much more out of what you are spending already and that means not only future proofing in terms of volumes but making the work and life of your business functions much more pleasant. Please stay tuned for more to come on eco-system management and what that can do for your business.