The GSA has recently undertaken some research into contracting which has revealed that 71% of GSA members believe they are going to undertake contract and scope realignments as a result of Covid-19, 48% are looking at contract extensions, 87% are looking at how they can innovate more, 56% are looking to work to shorter length contracts in regards to time and 63% want to improve their knowledge on risk management.
The discussion was joined by Amanda Claridge, Chris Smith and Steve Watson from Peru Consulting, Chris Bates from Ashurst, Colin Nelson from John Lewis, Dominic Dryden from CMS, Imran Syed from DLA Piper and Orla Thompson from TLT Solicitors.
The discussion centred around the following points:
- There is an increased trend of clients looking to renegotiate current contracts and there is some hesitancy to enter into new contracts, with a focus on exit strategy and business continuity plans. Philip highlights the GSA guide to exit planning. The general consensus is that there is already awareness in place for business continuity plans, with some debate around whether customers will become more relaxed, having been through a pandemic and having the ‘everything will be okay’ mindset.
- It has become apparent that there has been a lack of documentation during the quick changes that have been made due to Covid-19, there is a suggestion of having a tidy up and back tracking to document amendments made, due to the pandemic.
- Following on to look at alternative contracting models, Steve Watson introduces the fit for purpose, endless contracting model, which is based on feedback from suppliers following the pandemic. This model involves having no predetermined length from the outset, in the view that both parties will review the contract regularly to determine whether it is still fit for purpose in services offered; commercial terms, and the degree of innovation and flexibility, and will allow a reset if the external conditions dictate.
- Other models are discussed; Project13 from the Institute of Engineers and trends towards alliance contracting. Engineering contracts are on standard forms, built to be fair from the start to minimise negotiations throughout the process.
- Although there are documents available for those needing assistance with their contracting, they are usually focused on specific clauses rather than principles throughout the contracting process. It was suggested it would be great if the GSA can create best practice available for those who face an impasse, providing helpful guidance and a charter of good behaviour to lawyers and suppliers alike. Again, a general set of principles would be beneficial over a list of clauses to help navigate through different situations, as standard terms would be too difficult to maintain. If this is something to be developed, it’s important to ensure it is promoted properly to be well used. Where contracts have broken down in the past, they have been biased on one side. It’s important to promote and develop the supplier-buyer relationship within the principles to ensure contracts are fair on both partners throughout the term.
- There is a worry that lawyers are asked to get involved too late in the negotiation process. It isn’t sensible to negotiate for such a long time without legal input and down select to one supplier as that removes all competitive tension in negotiations. This has tended to lead to negative connotations for the sourcing industry and that convey that lawyers are causing issues late in the sourcing process. The basics of negotiation are seemingly being ignored as buyers are worried about the length of the process. Steve Watson shares his ‘Seven Deadly Sins of Major Contract Procurement’ which can be found here, highlighting the basic elements that are regularly failing in organisations.
- Phillip highlights the difference between purchasers and stakeholders as the stakeholders are usually the problem in the contracting process.
- How to emerge from COVID-19 from a contracting
perspective. Looking at BCP, security issues, reasserting practice and
procedures, properly documenting changes agreed and exit planning. Ensuring a
return to the previous norm but recognising flexibility shown/learnt during the
recent period needs to be retained and therefore what lessons were learned then
and now about how to achieve it.
- A look to different contracting models, but a
focus on contracting principles
- Sourcing best practice with regards to
contracting. How to use the legal resource to best advantage at the various
stages. Stakeholder expectations and getting the right level of input from
stakeholders is a big part of this.
- Futures: the use of Blockchain and/or AI in