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Contract Preparation and Closing

B2

Develop IT's own contract negotiation position in advance (for example, by identifying negotiable and non-negotiable items, and considering incentives). Understand the IT service provider's success criteria to create win-win situations.

Improvement Planning

Practices-Outcomes-Metrics (POM)

Representative POMs are described for Contract Preparation and Closing at each level of maturity.

1Initial
  • Practice
    Rely on the best endeavours of available personnel.
2Basic
  • Practice
    Prepare contract terms and conditions on a case-by-case basis.
    Outcome
    Whilst a consistent approach may not be evident, the basis for more generalised terms and conditions begins to emerge.
    Metrics
    • % of contracts that are based on the same template.
    • % of failed Sourcing deals.
    • The duration of a provider partnership.
  • Practice
    Prepare and close large Sourcing contracts with some input from the procurement function.
    Outcome
    The involvement of procurement in contract preparation and closing benefits the large Sourcing contracts through incorporating a business perspective.
    Metric
    % of contracts designed in co-operation with corporate procurement.
3Intermediate
  • Practice
    Adapt Sourcing contracts to reflect the specific requirements and circumstances of the Sourcing context.
    Outcome
    Contracts reflect the overall goal of a value-creating provider partnership, not just a cost-saving one.
    Metrics
    • Duration of provider partnerships.
    • % of Sourcing partners that are not meeting performance targets.
  • Practice
    Ensure contract preparation and closing involves input from the procurement function.
    Outcome
    The IT function is in alignment with the procurement function and the organization contracting process.
    Metric
    % of contracts designed in cooperation with corporate procurement.
4Advanced
  • Practice
    Consider provider incentivization clauses that specifically address the Sourcing provider's own success criteria in Sourcing contracts.
    Outcome
    Sourcing contracts provide win-win opportunities for both the organization and the provider.
    Metrics
    • The duration of provider partnerships.
    • % of satisfied staff.
  • Practice
    Fully integrate contract preparation and closing in the procurement process.
    Outcome
    Potential synergies can be realized.
    Metric
    # of synergies realized.
5Optimized
  • Practice
    Ensure inter-provider operational level agreements (OLAs) in Sourcing contracts in multi-Sourcing contexts are included.
    Outcomes
    • Providers are incentivized to co-operate with one another for the benefit of the IT function and for themselves.
    • Templates are up-to-date and can be used in different contexts.
    Metrics
    • % of multi-sourced spend for which inter-provider OLAs are in place.
    • The frequency of reviews of OLA/SLA templates.
  • Practice
    Continually review on an organization-wide basis, contract preparation and closing activities.
    Outcome
    Realized synergies can be optimized.
    Metrics
    • # of joint meetings with procurement on contracting improvement.
    • # of synergies realized.