Contract Preparation and Closing
Develop the contract negotiation position (for example, by identifying negotiable and non-negotiable items, building flexibility into supplier contracts to avoid lock-in and allow for agility), and understand the IT supplier's success criteria.
Improvement Planning
Practices-Outcomes-Metrics (POM)
Representative POMs are described for Contract Preparation and Closing at each level of maturity.
- 1Initial
- Practice
- Best endeavours of available personnel.
- 2Basic
- Practice
- Prepare contract terms and conditions on a case-by-case basis focused on a limited set of primary variables, such as cost, security, quality, and legal recourse.
- Outcome
- Whilst a consistent approach may not be evident, the basis for more generalised terms and conditions begins to emerge.
- Metric
- % of contracts that are based on the same template % of failed sourcing dealsAverage duration of a Tier 1 supplier partnership
- Practice
- Prepare and close large sourcing contracts with some input from the procurement function.
- Outcome
- The involvement of the procurement function in contract preparation and closing benefits the large sourcing contracts by the addition of a stronger 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, including consideration of the supplier's own success criteria .
- Outcome
- Contracts reflect the overall goal of a value-creating supplier partnership, not just a cost-saving one.
- Metric
- Average duration of a Tier 1 supplier partnership% of sourcing partners that are not meeting performance targets
- Practice
- Ensure that contract preparation and closing routinely includes input from the procurement function.
- Outcome
- The IT sourcing contract is aligned with the procurement function and the wider organization's contracting process.
- Metric
- % of contracts designed in cooperation with corporate procurement
- 4Advanced
- Practices
- Confirm that all pertinent contract elements reflect the organization's risk appetite and strike a balance between incentivizing innovation by the IT supplier and ensuring cost-effective IT product and service delivery.
- Consider clauses that specifically address the supplier's own success criteria in sourcing contracts.
- Outcome
- Sourcing contracts provide win-win opportunities for both the organization and the supplier.
- Metric
- Average duration of a Tier 1 supplier partnership
- Practice
- Fully integrate IT contract preparation and closing with the procurement process.
- Outcome
- Potential synergies can be realized.
- Metric
- # of synergies realized
- 5Optimized
- Practice
- Ensure inter-supplier operational level agreements (OLAs) can support agility and innovation for the organization in sourcing and multi-sourcing contexts and are included in contracts.
- Outcome
- Suppliers are incentivized to co-operate with one another for the benefit of the organization and for themselves.
- Metric
- % of multi-sourced spend for which inter-supplier OLAs are in placeThe frequency of reviews of OLA/SLA templates
- Practice
- Continually review contract preparation and closing activities on an organization-wide basis.
- Outcome
- Realized synergies can be optimized.
- Metric
- # of joint meetings with procurement on contracting improvement# of synergies realized