4
Figure 51: DO YOU HAVE A SPEND THRESHOLD ABOVE WHICH A WRITTEN CONTRACT IS REQUIRED IN ORDER TO PROCURE PRODUCTS AND SERVICES?
Don’t know No Yes
50%
46.6%
3.4%
0
10%
20%
30%
40%
50%
The purpose of setting this spend threshold is to achieve consistency (i.e. not relying on the buyers’ perception for the need of a contract) and minimise the risk of no contractual coverage, where this is required. After the drafting and signing of a contract (steps 1-3 of the contract lifecycle – see Figure 50), there should be mechanisms for monitoring a contract throughout its life (steps 4-5). Elements of a contract that should be monitored closely include key dates such as the start, expiry and renewal dates. We have seen numerous cases where companies became liable for additional payments and contract terms because they didn’t have mechanisms in place to notify them of contract expiry dates. One of the most memorable examples was a multinational bank that missed the termination / renewal date of a significant software contract, which then cost millions of euros to terminate. More than half of our sample (53.9%) said the key dates of their contracts are recorded in a database and are manually monitored. However, just 29.2% of respondents said there is no systematic way to monitor these dates, and only one in 10 (12.4%) have an automated process for monitoring the expiry / renewal dates.
Figure 52: HOW ARE CONTRACTS’ EXPIRY / RENEWAL DATES TRACKED?
Expiry / renewal dates of contracts are recorded in a database and monitored manually There is no systematic process for monitoring the expiry / renewal dates of contracts A system automatically notifies the appropriate stakeholders of upcoming expiry / renewal dates Don’t know
53.9%
29.2%
12.4%
3.4%
Other
1.1%
0
10%
20%
30%
40%
50%
60%
The majority of respondents in the survey (83%) involve the legal department in contract drafting / renewal, while 12.5% do not.
Figure 53: IS THE LEGAL FUNCTION INVOLVED WHEN A SUPPLIER CONTRACT IS PRODUCED OR AMENDED?
Don’t know No Yes
83%
12.5%
4.5%
0
10%
20% 30% 40%
50%
60%
70%
80%
90%
The benefit of involving the legal department in contract creation, negotiation and execution is that company-wide terms are negotiated and included in the contracts. Although the legal department may not be leading the contract management process within your organisation,
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