Archive for the ‘Contract Management’ Category

Safety in Contracts

Thursday, June 24th, 2021

 

Today’s post is by Dave Wenig, Sr.Vice President of Sales and Services at SafeSourcing.

We’ve all heard that there is safety in numbers. It’s generally understood that in a larger group, each individual has a lower chance of something bad happening. Fish do it… humans too.

The point is that safety is a general concern. While we all take precautions to ensure personal safety, often the same level of attention is not paid to the safety of our contracts. Of course, there are contract management solutions available to provide safety relative to your contracts.

As I see it, contract safety is knowing when contracts are set to expire and proactively taking steps to prevent unfavorable auto-renewals. Contract Safety is knowing that the price you negotiated is also the price you pay throughout the contract term. Contract safety is always having your contracts at hand in the event that you need to review them.

Without these elements, you don’t have contract safety. If you don’t know where the contract is or you can’t verify the terms including pricing, or you don’t know when the contract ends, then you do not have contract safety.

Again, there is reasonably sound logic behind the theory that there is safety in numbers. I encourage you to take the same logical approach the safety of your contracts.

Dave Wenig is a Regional Sales Manager at SafeSourcing and is a devoted champion of saving money. Dave or any member of the experienced team at SafeSourcing would be happy to discuss how SafeContract™ can provide you with contract safety. For more information, please contact a SafeSourcing representative.

We look forward to your comments.

 

 

Contract review is tedious work?

Tuesday, June 1st, 2021

 

Todays post is from Ronald D. Southard, CEO at SafeSourcing Inc.

Many large companies have law departments and at least as many don’t. Most small companies don’t either. Which company is in better position to review and evaluate existing contracts?

The answer is neither or maybe both. The first important question for each type of company is who is actually evaluating the contracts, and just because they have a law degree does not mean that contract evaluation is a specific skill set this individual may possess. This author strongly recommends choosing who will provide this function within your company or as a service and then make absolutely sure that they have the skill set required to do the job and stay up to date.

There are any number of contract management certificate programs available from prestigious and well know institutions. To name a few, there is Villanova University, The University of California Irvine and St. Louis University. In addition there are organizations that also offer this type of training. Probably the most well know is, the National Contract Management Association or NCMA that has been around for over 50 years.

Many of these organizations offer on line courses that can be completed within a reasonable period of time. Many of the University and College courses are actually accredited as well as affiliated with NCMA.

Once you have resources that are certified, provide them with the tools they need to do their job. All companies have 100’s if not 1000’s of contracts and most do not have a contract management solution. These solutions today are available via the cloud in Software as a Service model for very little investment. You can buy what you need when you need it. Most of good providers will also assist with evaluating your existing contracts in order to create your Meta data and populate your  contract database.

SafeSourcing offers a cloud based Software as a Service contract management solution called SafeContract™ which is supported by these types of services.

Please contact a SafeSourcing  customer services representative in order to learn more.

We look forward to and appreciate your comments.

How does your organization ensure that every award of business is implemented or delivered as awarded?

Thursday, April 1st, 2021

 

Todays post is by Ron Southard, CEO at SafeSourcing Inc.

I wrote this a while ago, it’s still true today. If you miss any of these steps your sourcing efforts have been wasted.

Stopping contract leakage is one of the most difficult tasks in the entire procurement lifecycle. To begin with, you need to understand where the data to be measured is kept. Good luck if you do not have a contract management solution. Once you have a clear idea as to the location of the data, it needs to be looked at on a regular basis in order to insure leakage is not occurring. The question here is what constitutes leakage and how often it should be reviewed such as monthly depending on contract language. Most contract management systems have alerts that can be triggered as frequently as required.

If you had a contract management system, most of the following list speaks too many of areas in which contract leakage can occur and can also be measured. These discrepancies happen in all companies large and small. If you are aware of them, capture them and report on them there is a reasonable possibility of controlling them. Again, you can’t do it without a contract management system

1. Buying without a contract.
2. Expensing something outside of a contract
3. Having multiple contracts in place:
4. Executing a new agreement when one is already in place
5. Paying a price different from the contract
6. Delivery variances
7. Quality specifications variances
8. Making payments at a prices different from the contract
9. Scope creep of the product or service purchased without change control
10. Resulting Invoice discrepancies
11. Missed volume discounts
12. Insurance discrepancies
13. Shipping discrepancies
14. Expired contracts resulting in price uplift (evergreening)
15. Overtime Violations
16. Material discrepancies
17. Sub Contractor discrepancies

Don’t work hard to drive benefits from your procurement organization and then lose much of what you have gained due to contract leakage. Ask your e-procurement solutions provider how they can help.

We look forward to and appreciate your comments.

What are you doing about your Contract Management Needs?

Friday, February 26th, 2021

 

Todays post is by Ronald D. Southard, CEO at SafeSourcing Inc.

If you want to insure against contract leakage that can be as much as 5% per year and also protect the savings from your hard fought eNegotiations, it may be time to take a look at your contract management needs.

Most contract management systems have relatively short ROI periods. In fact a company might even be lucky enough as they go through their data collection process to find a single contract that when analyzed might pay for the entire system.

There are all sorts of benefits associated with using contract management software. Probably the most important and least recognized of which is finally having all spend data in one location enabling more effective negotiations. If you have ever run an e-procurement event and tried to assemble a simple specification or incumbent supplier data you already understand the time involved. Administrative costs alone can be reduced by 25-30%.  That’s a huge number in today’s world of insufficient staff.

If you want to get started, here are some basics that a system should be able to provide.

1. Create contracts
2. Maintain contracts
3. Control contracts
4. Track user access to contracts
5. Track and monitor the status of contract Meta data
a. Award date
b. Contract begin date
c. Contract end date
d. Begin delivery date
e. Escalator language
f. Notification clauses
g. Termination Clauses
6. Automatically alert buyers and management of required actions
7. Custom Reporting
8. Supplier Scorecards

If you want to get started tomorrow, please contact a SafeSourcing customer services account manager and ask about SafeContract™.

We look forward to and appreciate you comments

In these days of big data, how should retailers manage their legacy contracts?

Wednesday, February 24th, 2021

 

We are all aware that the majority of retailers large and small do not have contract management solutions in place. In order to mitigate their risk, where should focus be placed when beginning implementation?

We have conversations all of the time with retailers as to what is the best way to store and leverage the language or data within existing contracts. My answer has always been the same and that is the identification of your critical Metadata.

According to Wikipedia Metadata is loosely defined as data about data. Though this definition is easy to remember, it is not very precise. The strength of this definition is in recognizing that metadata is data. As such, metadata can be stored and managed in a database.

When we think about contract management, we need to be thinking about mitigating risk and not necessarily all of the language embedded in a contract. On many occasions this information is listed on addendums or attachments and not necessarily in the master agreement itself. For sake of simplicity, and this is certainly not an exhaustive list the following twenty items reflect the type of metadata you might want to hi-lite and set alert targets against in your current contracts.

1.  Supplier or Seller Information
2.  Purchaser or Buyer Information
3.  Detail of Goods to be purchased
4.  Detail of Services to be purchased
5.  Delivery Timeline Details of the Goods and or Services
6.  Agreed Upon Price
7.  When and where should payments are to be made?
8.  Payment Terms
9.  Down Payment Terms
10.  Delivery Dates
11.  Delivery Location or locations
12.  Risk of Loss or Damage and transfer language
13.  Is Assignment of this Agreement Allowed?
14.  Detailed Warranty
15.  Trademark infringement language
16.  Origination Dates
17.  Termination Dates
18.  Termination Notice
19.  Additional Clauses
20.  Signature Details

The above should be data that is considered for inclusion during the review process that your solution provider puts in place for you during the early stages of implementation, training and review of any contract management offering.

If you’d like to learn more about SafeContract™ from Safesourcing and the services provided to assist in defining your Metadata please contact a SafeSourcing customer services account manager.

We look forward to and appreciate your comments.

Are You Still Printing And Filing Documents in Filing Cabinets?

Wednesday, July 22nd, 2020

 

Today’s post is from our archives at  SafeSourcing Inc

paperstacks

 

 

 

 

 

 

 

 

I suppose I am “old school” to have paper in hand and make my edits in red pen, then make my revisions to the electronic document, and save those edits in our document management system. Now I have a hard copy in a filing cabinet that, more than likely, no one will ever see and eventually be shredded.

We are a Green company, and I am becoming more cognizant of that by limiting what I print, and save more trees. By utilizing the document management system, the original drafts, as well as all of the edited copies are saved, anyone from our company, at any point and time, can visit those documents and follow the train of thought from beginning to end. It saves time and paper to have those documents accessible.

From our website: www.safesourcing.com

SafeDocument™

SafeDocument™ is a document repository that allows companies to collaborate on documents through an online tool that is a cloud-based SaaS offering available through simple internet access. This tool Provides document sharing and collaboration options where users can organize, edit, protect, and track their documents.

SafeDocument™ includes safety features and controls that enable users to safely share large files across their organization, including the ability to save and recall multiple versions of a document and a notification system that alerts users when changes to the document have occurred.

Implementing SafeDocument™ provides companies with a cost-effective alternative to enterprise content management solutions that is safe and easy to use.

To learn more about SafeDocument™ SafeSourcing can assist you in exploring your document management procedures for your business or on our “Risk Free” trial program, please contact a SafeSourcing Customer Service Representative.  We have an entire customer services team waiting to assist you today.

We look forward to your comments.

 

Knowing Who Your Suppliers Are – Onsite Visits – Part I of II

Thursday, April 2nd, 2020

 

Todays post is from our SafeSourcing Archives

One of the important practices recognized by many successful procurement professionals is that of performing onsite visits to both their new and incumbent suppliers.  So much can be learned about how your suppliers do business that may affect your future decisions and contracts.

Today’s blog will be focusing on visits to domestic suppliers and Part II will have more details on visiting your international suppliers.

If you are dealing with a new supplier and scheduling an onsite visit, this is the opportunity for you to validate all of the details they have presented in their RFP/RFI response or presentation; validating that they have the staff, resources and facilities to handle the demand you are requiring of them.

This will be an opportunity to meet the sales and support team that will be assisting you and your company when the inevitable problem does occur, so take advantage of this time to get acquainted with the supplier’s staff.

If you are dealing with an incumbent supplier, make sure you have thoroughly reviewed your existing contract so that details about the level of service and quality promised can be focused on as part of the visit.  Make sure that you request, in advance, any additional reporting from your IT department or from the supplier on the history of the relationship so far.  This would include quality issues, shipping issues, product delays, inventory availability or any other special circumstance that may have occurred.  This visit will be the right time for you discuss these with the supplier face-to-face.

A final very important area to spend time in your visit, whether new or existing supplier, is the shipping area.  Here you will have a very clear idea of how the supplier is organized and you may even get a glimpse at the companies they get their raw materials from as well as other customers they are shipping too for future reference and follow-up.  Information found in this area will also go a long way when having contract negotiations with your incumbent suppliers for concessions on how your products and deliveries are handled.

Onsite visits are critical to understanding who you suppliers are and can be extremely valuable negotiation checkpoints.  My next blog will focus on the differences and things to consider when visiting international suppliers.

If you are interested in locating potential new sources of supply, please contact SafeSourcing.  The SafeSourceIt™ Supplier Database contains 457,000 globally.

We look forward to and appreciate your comments.

Contract Types

Tuesday, August 21st, 2018

 

Today’s post is from our SafeSourcing Archives.

If you don’t like the pricing model of the contract you’re working within but didn’t know you had other options, here is a high-level overview of a few of the standard contract types being used today:

Cost Plus: An agreement wherein the seller agrees to charge based on cost of goods sold, plus whatever profit margin is required to make the project viable. One example is where a highly commoditized good is subject to price regulation or index pricing, and therefore will have their pricing fluctuate based on the market constraints. The only pricing the vendor has control over in this scenario, is their profit margin, which will be the only pricing variable the vendor can agree to discount during negotiations.

Guaranteed Maximum Price: Similar to a Cost Plus contract, a GMP agreement is where the contractor is reimbursed for their actual cost, but also is paid an agreed upon fee. This fee is not to be exceeded unless the scope of the project changes, for which a formal “change order” can be enacted.

Incentive Contracts: This agreement begins as a cost reimbursement model, but varies based on whether or not previously determined goals were met. The incentives can be positive or negative, such that a vendor can be rewarded for underrunning the estimated cost of the project, or penalized for being over-budget. Both scenarios still require timely delivery of finished project. One potential drawback though, is that it can be difficult to monitor quality of work/product meets standards, as this model can also incentivize vendors to cut corners.

Time and Material: This contract type is fairly self-explanatory, in that the basis for pricing is on the number of man-hours used, and any necessary materials to complete the work contracted. Profit is either baked into the hourly rate, or invoiced as an add-on. This contract type is most typically used in situations where it is difficult to forecast the number of hours needed to complete, and must be billed as needed.

Unit Price: In this contract type, the activity or good is grouped into a pre-defined unit. The vendor is then paid a fixed amount for each unit completed. Profit and overhead is typically included in the unit rate, and rate is determined in part by estimated total units contracted.

Lump Sum: A Lump Sum contract is typically enacted when a full scope of work is well defined, enabling the vendor to quote the exact amount required to complete the project. This contract type can be financially risky to a vendor who could later discover hidden costs to perform the project, and can be risky to the timeline of the principle, as the contract would not penalize or reward timeliness as would an Incentive Contract.

For more information on how SafeSourcing can assist your team with this process or on our “Risk Free” trial program, please contact a SafeSourcing Customer Service Representative. We have an entire customer services team waiting to assist you today.

Should retailers manage their in place contracts with SaaS based Contract Management Offerings?

Wednesday, May 16th, 2018

 

Todays post is from Ron Southard, CEO at SafeSourcing.

It is not secret that the majority of global retailers both large and small do not have contract management solutions in place. Nor, do they have document management systems in place. In order to mitigate their risk, where should focus be placed when beginning implementation?

SafeContract™ which is a Software as a Service cloud based offering is the best way to store and leverage the pertinent language or data within existing contracts. What this means is that there is also a need to create a process with which to identify the Metadata within your contracts.

According to Wikipedia Metadata is loosely defined as data about data. Though this definition is easy to remember, it is not very precise. The strength of this definition is in recognizing that metadata is data. As such, metadata can be stored and managed in a database.

When we think about contract management, we need to be thinking about mitigating risk and not necessarily all of the language embedded in a contract. On many occasions this information is listed on addendums or attachments. For sake of simplicity, and this is certainly not an exhaustive list the following twenty items reflect the metadata you might want to hi-lite and set alert targets against in storage of current contracts.

1. Supplier or Seller Information
2. Purchaser or Buyer Information
3. Detail of Goods to be purchased
4. Detail of Services to be purchased
5. Delivery Timeline Details of the Goods and or Services
6. Agreed upon pricing
7. When and where should payments are to be made?
8. Payment Terms
9. Down Payment Terms
10. Delivery Dates
11. Delivery Location or locations
12. Risk of Loss or Damage and transfer language
13. Is Assignment of this Agreement Allowed?
14. Detailed Warranty
15. Trademark infringement language
16. Origination Dates
17. Termination Dates
18. Termination Notice
19. Additional Clauses
20. Signature Details
21. Auto Renewal Language

The above list should be at a minimum the type of data that is considered for your Metadata table for inclusion during the document review process that your SafeSourcing will put in place for you as a supporting service during the early stages of implementation, training and review of your SafeContract™ SaaS cloud based offering.

To learn more please contact a SafeSourcing customerr services representative.

We look forward to and appreciate your comments.

What is a price or commodity index and how is it used?

Thursday, April 5th, 2018

 

Todays post is by Ronald D. Southard, CEO at SafeSourcing Inc.

SafeSourcing uses a number of  indices in our sourcing events every day and the same question always comes up from buyers when we do. While this is an older post from our archives I believe you will still find it useful today.

This author has heard a lot lately about prices indexes or indices. Every time we source something we are asked what index should we use. Although there are times when an index is helpful in sourcing in order to manage contracted pricing once a baseline has been determined versus the rise or fall of an index, that is not always the case for every product.

I was reading our local paper today “The Arizona Republic”. In their MARKET TIP on page 3 of the business section they had a nice synopsis of the Consumer Price Index or CPI relative to measuring inflation. It was brief and holds true in terms of how indices are used to measure the rise or drop in prices over time. In your annual contracts you may wish to review them quarterly and have escalator language that locks in price increases or decreases versus a specific index to protect you from volatile commodity markets like the oil market.

According to the Bureau of Labor Statistics website, the Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The CPI is used as an economic indicator, a deflator of other economic series and as a means of adjusting dollar values. The CPI affects nearly all Americans because of the many ways it is used.

To learn more about how the CPI index is used please visit the Bureau of Labor Statistics website.

If you’d like to learn more about the variety of indices and how they impact the many products that you buy for reuse as well as resale or if you are not in the business of prognostication, please contact a SafeSourcing  customer services account manager.

We look forward to and appreciate your comments.