Contracting Function.

Historically, the contracting function was the means by which a Business concludes contractual arrangements with third parties in a written form.  

The contracting function sought to capture the details of anticipated commercial arrangements, recording the parties' rights and obligations in a clear and succinct way and outlined how disputes were adjudicated.

However, today, the contacting function is much more – it is an embodiment of corporate policy reflecting corporate values and cultures and is potent means by which corporate goals are realised.  

The contracting function is the wrapper around which operational stability (supply chain, facilities, funding, staffing, etc) delivers the “means” by which Business can operate.  

Critical, though the contracting function is a chief enabler by which Businesses secure revenues and drive growth whether through new markets, products or commercial collaborations.  

Unquestionably, the contracting function is a decisive corporate instrument – how well it is optimised will impact operational stability, revenue protection and the ability to drive business growth.

Far from being a “documentation” service – how the contracting function performs is a bellwether for overall corporate performance – it can lose a Business money as easily as it can help make a Business money.

The state of contracting functions within a business tends to correlate positively with performance perceptions of the legal team within the Business generally.

The Contracting Function is important to the Business for the following reasons:

◼️ Deal Generation: the ability to convert potential deals into actual deals

◼️ Revenue: provides the legal basis for revenue streams into the Business

◼️ Risk Mitigation: seeks to manage the risks associated with commercial activity

◼️ Supply Chain & Operations: securing supply chain stability

◼️ Compliance: it reinforces

◼️ Workforce: secures the talent that comprises your workforce

◼️ Collaboration: provides the legal framework for third-party collaborations

◼️ New Markets: provides the basis for pursuing new market entry projects 

An optimised Contracting Function delivers the following value to the Business:

◼️ Deal Making Agility: an enhanced ability to execute deals
 
◼️ Revenue Protection: protecting contract/project value dilution 

◼️ Risk Management: protecting the business against legal, commercial and compliance risks 

◼️ Operational Certainty: locks in the ability to deliver operational certainty 

◼️ Cost Savings: the elimination of unnecessary costs, most particularly manpower-related costs 

◼️ Market Reputation: enhances market reputation 

◼️ Data Insights: the ability to access data-based insights to manage contracting risks 

◼️ Supplier Ecosystem: a more stable and value-generating supplier ecosystem 

The best practice features of an optimised Contracting Function include:
◼️ Contracting Policy: the GLP ideally expresses a “range” of permissible outcomes.

◼️ Template Libraries: harmonised and standardised legal templates 

◼️ Document Automation: documentation automation tools

◼️ Support Tools: effective contract negotiation support tools  

◼️ User Training: extensive user training on actual contract function assets 

◼️ Balanced Positions: sensible and reasonable risk allocation   

◼️ Negotiation Tools: negotiations support tools such as Playbooks, checklists, etc 

◼️ CLMS: contract management life cycle tool/processes 

◼️ Contracting Workflow: clear contract approval workflows 

◼️ Legal Tech Tools:  supporting legal tech tools such as  

◼️ Process Automation: automation of key processes 

◼️ Delegation of Authority: clear guidance around who can sign what
 
◼️ Performance Based: a focus on performance-based contracting  

◼️ Contract Administration: strong contract administration capabilities 

◼️ Data Analytics & KPIs: basic KPIs as part of a data analytics program 

A poorly optimised contracting function will give rise to the following inefficiencies:
◼️ Increased Time Cost: excessive time cost associated with achieving contract closure
 
◼️ Contract Closure Times: unhelpfully long contract closure times 

◼️ Decreased Business Agility: diminished ability to respond to business opportunities quickly 

◼️ Increased Disputes: an increased incidence of contractual-related disputes 

◼️ Inconsistent Risk Profile: an ad-hoc/inconsistent risk profile across the contract portfolio
 
◼️ Business Reputation: diminished business reputation as counterparties find you hard to deal with  

◼️ Legal Value Recognition: legal team value recognition correlates with contact function optimisation
 
◼️ Poor Tech Adoption: difficulties in effectively adopting tech due to offline inefficiencies  

The contracting function is one of the most mature in-house legal functions in terms of readiness for tech-enabled productivity interventions. 

Examples of major tech productivity intervention opportunities include:  

◼️ CLMS: an electronic platform over which contracts are generated, tracked, approved and archived. 
Many CLMS include additional advanced features such as A.I. based insights, etc.
  

◼️ AI Contract Reviews: Software-assisted contract reviews effectively offer issue identification and resolution guidance. Some solutions purport to offer redlining as well, although this is a nascent area. 

◼️ Document Automation: document assembly/contract-generating applications.

◼️ Process automation: applications that provide automation software infrastructure to allow you to automate and monitor task progression in contract-related approval pathways.

◼️ Inconsistent Risk Profile: an ad-hoc/inconsistent risk profile across the contract portfolio 

◼️ DMS: A standard DMS system is a frequent e-basis for archiving storage

While tech interventions across the contract function hold much promise, few legal teams have managed to meet their productivity expectations.  

That said, a golden rule for tech-enabling your contracting function is that if it is not currently working offline, it will most certainly not work for you online. 

Feel free to explore each of the critical resource enablers that are comprised of an optimally performing contracting function by clicking on the interactive map at the top of the page. 

Visit the next station: Group Legal Policy. 

Or you can go back to the overall GLS Legal Transformation Tube Map. 

In most cases, the GLS Legal Operations Centre contains everything you need to effectively optimise your contracting function yourself – or feel free to reach out to us – and we can do it for/with you. 

Feel free to contact GLS to book a consult to discuss your contract function optimisation needs right here.