The top contract and commercial management priority for the engineering and construction companies globally is to improve their internal processes (67% of the 51 respondents to the World Commerce and Contracting Benchmark CCM Survey).
Despite wanting to improve their processes:
- the majority won’t adopt new tools and systems to do that (only 33% are even considering this, roughly half as many compared to the cross-sector average of nearly double that, 62%).
- the majority won’t develop new or revised terms or standard contracts (24% are considering this, also roughly half the cross-sector average).
- the vast majority (80%) aren’t interested in simplification <sobs quietly>.
So where are our strengths in contract and commercial management (CCM)?
Of those surveyed:
- nearly 60% have a repository of signed contracts (and nearly 95% are in the process or would like to implement this)
- more than half can assemble standard contracts from templates
- just over 40% have a contract dashboard for CCM reporting
- over half monitor compliance with contract terms after contract signature – at the very least this partly reflects the nature of stage and periodic payments as well as testing in engineering.
The report highlights that the engineering and construction sectors have ‘a greater level of integrated buy-side/sell-side responsibilities‘ than the cross-sector average, as it invested early in CCM technology.
Now… it is beginning to lag behind.
Key areas where the engineering and construction sectors could boost their capabilities in CCM include these (where less than 25% of the respondents have deployed these tools):
- automated extraction of contract obligations – this may be due to the prevalence of amended standard forms making automation harder
- analytics for individual contracts
- ability to assemble contracts from a clause library – this is futuristic thinking
- digitized contract playbooks aka negotiation templates.
Simplifying contracts can help with contract assembly – clause banks require stand-alone clauses on a topic not the complex cross-referencing many rely on. I am also working with clients to create contract playbooks to help them negotiate terms with confidence as well as setting out alternatives.
What should you do?
Easy: benchmark your own company’s performance against these items. For many SMEs just being able to find and create contracts simply would be a major improvement.
Middling: compare your progress against others; decide what you want to focus on eg which process is most critical to your success? Can you digitize payment or make it simpler?
Harder: measure your company against the best in the world and set some goals to improve. Do you have simple contract libraries, CCM automation and playbooks?
Star performer: set standards, vision, goals and strategy that will set you apart from the rest of your sector.