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Achieving a signed contract with a key supplier brings great relief and provides a sense of satisfaction to those involved in the sourcing process. A robust contract can deliver many benefits to the organization provided it is implemented well and properly communicated to end users.

If the detailed provisions of the contract are not widely known and put into practice, people will not use it, projected savings will not be achieved, to the detriment of the business. Here are our 5 ways to achieve better compliance to contracts:

  • Involve all stakeholders early in the process.

Compliance starts with obtaining the buy-in of the stakeholders. This is especially important in service commodities that require special expertise such as marketing services, facilities and travel.  It is hard to sell a contract to end users when they have had no input.

  • Communicate contract details

Clear communication is the key. Active users of the contract need to understand its aims and intentions and why it makes sense for them to make use of it. The expected benefits of the contract can only be achieved if everyone involved knows the pricing, the exact nature of goods or services to be provided, the time frames, locations, and any agreed mechanism for managing price variations. 

  • Document the highlights

Prepare an executive summary of 2-5 pages that summarises the important commercial aspects of the contract and use internal communication channels to get the information out to the people that will use the contract.   People will not use a contract that they do not understand. 

  • Tightly manage amendments and variations

Only authorised persons may sign contracts, this much we know. The same principle applies to any subsequent amendments or scope changes. All changes should be communicated through in the same way and through the same channels as for the original contract.   “Leakage” is often observed where variations are not documented nor communicated.   

  • Record non-compliance and maverick spending

There needs to be an effective monitoring and reporting system for non-compliance and deviations from expected behaviour. Users that were party to the development of the contract will be committed to making it work, others may not. Remedies should be implemented to get everyone in line.

Applying these principles will result in reduced costs and as a bonus, an enhanced reputation for the procurement function.

This article first appeared in Bespoke Bulletin in October 2015