- The pandemic effect. The events of 2020 forced many clients to collaborate with their suppliers for the first time. They riffled through their contracts and found that arguing over the force majeure clause was not going to help them meet their business objectives. They had to put the contract to one side and decide how to keep the wheels of commerce turning. Clients and their suppliers had to collaborate to achieve the desired outcome.
- Details v relationship. When times are tough, the temptation is often to micro-manage events, but it was often better to focus on the outcome. One panellist claimed that ‘Relationships eat contract detail for breakfast.’ Relying on relationships – instead of the letter of the law – allowed suppliers to work together to solve project issues. Should we ditch the details in our contracts?
- Transparency. As clients began to support their suppliers, they also tried to ensure profitability (or a fair reward) and this created the need to share data and pricing information more transparently. Contracts can enable transparency and frame the contract as a bedrock that we build relationships on… but only if introduced early and forming a critical part of supplier relationship management. [Digital and CLM tools may change this landscape radically.]
- Culture change? It is too early to predict a change in the culture of contracting across the world, and perhaps contracts don’t drive better behaviours or create trust (as some of us hope). Although contract details – such as early warning, business resilience or continuity, unexpected events – provide a good framework for collaboration and discussion, as well as signalling the style of supplier relationship that client wants, they may not be enough to create true collaboration. What you need to know is whether all the parties are committed to this style of working together.
What should you do?
Think carefully about how you can build, enhance and demonstrate trust with your clients or suppliers. Can you start small eg with suppliers who were proactive during the pandemic and test whether a new culture for contracting would provide business benefits?
Collaboration can help us better manage risk and disruption… so let’s be ready for the next global issue with relationship-based contracts.