On Tuesday 9th March I had the pleasure of taking part in a roundtable discussion on the future of contracting as part of the GSA’s Festival of Sourcing (click here for a recording of the session).
The session was moderated by Chris Bates, Partner at Ashurst LLP, with the following panellists and I was joined on the panel but Arnab Dutt OBE (Chair, Social Value Policy Unit at Federation of Small Businesses), Joel Walker (Global Head of Corporate Services Procurement at Vodafone) and Ian Puddy (Partner at Independent Advisor Network).
There was a general consensus amongst the panellists that in many ways the current pandemic may act an inflection point for contracting in the sourcing industry with plenty of opportunities to consolidate best practice over the past 12 months into systemic change.
We touched on the relationship between larger corporates and SMEs, how best to reflect good governance and best practice (such as the GSA’s very own Global Sourcing Standard) into contracts and how the contracting process itself might evolve for the better.
Key themes included:
- Collaboration and relationship building: Collaboration has been a key theme throughout the pandemic. Customers and suppliers alike have prioritised cooperation and business continuity over enforcing contractual remedies. In turn, this seems to have resulted in a less adversarial culture than the panellists had experienced pre-Covid.
- Focus on SMEs: The pandemic has brought in sharp relief the integral role of SMEs in crisis response and reengineering the economy, whether through increased reliance on local shops or small businesses engaged in PPE production. However, there was an acknowledgement that current sourcing practices, including drawn-out procurement processes that are expensive to participate in, coupled with a high degree of risk transfer sought by larger corporates can act as a significant barrier to SME participation and innovation.
- Standardising approaches to contracting: The panel considered whether strategic sourcing might take inspiration from the construction industry in developing common terms which are then tweaked to reflect the unique nature of the particular sourcing relationships. While some attendees noted the prevalence of disputes within that sector, there was consensus that a common standard could have the potential to build back trust into the contracting process and reduce the adversarial nature of negotiations.
- ’Appropriate’, rather than ‘gold plated’ terms: The ‘best’ contract is one that’s appropriate to the deal. All too often, disproportionate energy is spent negotiating ‘back end’ terms and conditions, rather than properly defining the parties’ respective obligations.
- Don’t leave the Ts&Cs to post down-select: Sharing draft contracts in the early stages of vendor selection is a good way of driving the RFP process and ensuring that vendors are committed.
- Design thinking and making contracts business friendly: On contract execution, the role of the legal adviser typically ceases (unless of course a dispute arises) and contracts are handed over to project manager or operational managers to manage. Therefore, it is fundamental that the services, roles and obligations are clearly delineated in agreements in order that contracts are effectively used by the business and disputes are prevented. Design thinking concepts can be adopted to breathe new life into often unwieldy documents and turn them into workable, living documents (for example, through the use of diagrams and charts to describe process flows and responsibilities).
The session was intended, in part, to kick start the GSA’s contracting workstream for the next 12 months and we will be diving deeper into all of these topics and more through a series of workshops and roundtable sessions. If you are interested in getting involved, please contact firstname.lastname@example.org.