2
in place and the organisation is adequately covered against potential threats. Business users should use the contracts to ensure that the delivery of products and services occurs within the agreed terms. It is positive that the majority of organisations in our survey said they are able to access their contracts easily (which in our experience is not always the case). However, the real question is how the contracts are used during their lifetime, if at all. ‘Maverick’ spend In many organisations we work with, we find that a considerable amount of spend is either not covered by a formal contract or a contract exists but people do not use it. The minimal use of existing contracts means that either the contracts are not favourable, and therefore not worth using, or that the requisitioners are unaware of the contracts. In any case, it is important to monitor compliance and understand the level to which contracts are utilised. That understanding is gained via a comparison between the purchase orders, receipts, invoices and contracts (assuming that purchase orders and invoices make reference to the contract number they are called off against). In the survey we asked whether such an exercise has been completed. About three-quarters of respondents (72.6%) are aware of the level of spend that is not covered by a contract, whereas 16.8% of respondents are not.
Figure 21: DO YOU KNOW WHAT IS YOUR OFF-CONTRACT SPEND (SPEND THAT IS NOT COVERED BY A CONTRACT)?
Don’t know No Yes
72.6%
16.8%
8.4%
0
10%
20% 30% 40% 50%
60%
70%
80%
Most respondents indicated that their off-contract spend ranges from 5%-10% or 10%-30%. Incredibly, 16% of respondents believed that more than 50% of their spend on third-party products and services was not covered by a contract. Of these, 67% have not completed any analysis of their contracts in the past 2-3 years.
Figure 22: WHAT IS THE APPROXIMATE OFF-CONTRACT SPEND AS A PERCENTAGE OF TOTAL THIRD PARTY SPEND?
10% - 30% 5% - 10% More than 50% 30% - 50%
28%
28%
16%
14.7%
Less than 5%
13.3%
0
5%
10%
15%
30%
20%
25%
35
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