30 Reasons Your Procurement Team Should Use Your Own Paper!
Are you still relying on your suppliers’ contracts for purchases? It’s time to rethink that approach. By using your own contracts, your procurement and legal teams will achieve greater efficiency, reduce third-party risk, and streamline business processes.
Incorporating your own contract forms in solicitations not only levels the playing field for suppliers but also strengthens your buying position, giving you a stronger hand in negotiations.
The benefits of using your own contracts are clear. With the advanced services and technology available today, there’s no excuse not to make the switch. Embrace this change and unlock new potential for your business.
The most common reason stated by CPOs and GCs for not having their own contract templates is that they don’t have resources with the skill and time to build their own set. The people who could create templates are the same ones who are overly busy reviewing supplier-provided contracts. Further, many CPOs and GCs believe it is at least a half-year project to develop a set of templates and then another half-year to get people to use the templates correctly.
Today, these excuses are invalid. Creating standardized procurement contracts is no longer the “big lift” it has been. With available procurement contract packages as a starting point and leveraging expert systems and large language models, developing a custom set of contract templates is possible within a few days or weeks.
Intuitively, you know that having your own contract forms would make everyone’s work life easier. If you need more than your intuition to get motivated, below are 30 reasons why most of your company’s purchases should be on your paper. There are likely even more reasons that are specific to your organization.
30 Reasons to Use Your Own Paper!
Control and Efficiency
1. Control over contract language
2. Enable consistent language across contract types
3. Improve efficiency in contract creation, review, and negotiation
4. Build a competitive advantage in contracting
5. Speed employee onboarding
6. Reduce the approval process and cycle-time
7. Increase scalability
8. Streamline supplier onboarding
9. Standardize contract management processes
Legal and Regulatory Compliance
10. Maintain strict alignment with company values and mission
11. Ensure compliance with relevant laws and regulations
12. Enhance intellectual property protection
13. Encourage ethical business practices
Risk Management and Mitigation
14. Increased adaptability
15. Reduce the risk of errors
16. Improving quality assurance and control
17. Establish sustainability and environmental responsibility
18. Foster a culture of continuous improvement and
innovation
Relationship Management and Collaboration
19. Incorporate relational contracting concepts
20. Establish clarity in roles and responsibilities
21. Facilitate common stakeholder knowledge
22. Enhance supplier selection and evaluation
23. Improve supplier diversity and inclusion
24. Improve negotiation effectiveness
Supplier Performance Management
25. Improve managing supplier performance
26. Simplify contract amendments
27. Demonstrate commitment to corporate governance
28. Build processes for continuous contract improvement
29. Facilitate auditing and reporting
30. Develop sets of content
Read on for a deeper dive into each reason.
Control and Efficiency
1. Increased control over contract language.
Establishing your company as the party setting the basis for the relationship allows you to control a high percentage of the contract language. Edits to your standard forms resulting from negotiations are deviations you allow from your standard, not deviations you have to force into supplier standards.
2. Enable consistent language across contract types.
Using consistent language for certain clauses across multiple spend categories is critical to managing your company’s procurement risk profile. You can only reasonably achieve this by using your own set of contract forms.
3. Improve efficiency in contract creation, review, and negotiation.
Standardized contract forms allow for rapid contract creation, eliminating most reviews, and speeding negotiations, typically saving over 90% of the time and resources you would spend using supplier-provided contracts. Owning user-friendly templates speeds the contract negotiation process as internal stakeholders and suppliers become familiar with your contract forms.
4. Build competitive advantage in contracting.
Using your contract forms gives you a competitive advantage by demonstrating a professional and organized approach to contracting vs. adopting the myriad standards your suppliers prefer. This helps build trust and position, providing an advantage in negotiations.
5. Speed employee onboarding.
Training new employees on your contract forms lets you focus on a defined set of topics vs. broad contracting principles. With your contract forms in place, you can concentrate the training on key clauses and the underlying laws, regulations, industry standards, and internal processes that pertain to each key clause.
6. Reduce approval process and cycle time.
Using your contract forms accelerates internal approval processes. Since your legal team and other decision-makers are familiar with the standard templates, they can quickly review and approve contracts without spending extensive time deciphering unfamiliar terms or formats.
7. Increase scalability.
Scaling procurement, contracting, and contract management without significant increases in staffing is possible only when you use standardized contract forms. Otherwise, every purchase involves procurement, business, and legal reviews, or sometimes due to time pressure, acquiescence to supplier terms with little or no review.
8. Streamline supplier onboarding.
Onboarding new suppliers, whether replacing an incumbent or providing new products and services, is easier when your organization’s processes match those prescribed in your supplier contracts. Otherwise, you must morph your processes to fit those described in supplier contracts.
9. Standardize contract management processes.
Providing a clear and consistent framework for addressing changes in scope, deliverables, timelines, and prices, you can more easily adapt contracts to reflect evolving business needs rather than trying to make those changes in each supplier contract.
Legal and Regulatory Compliance
10. Maintain strict alignment with company values and mission.
Aligning your contract forms with your values and mission, including ethical and sustainability considerations, builds a reputation as a socially responsible organization. By incorporating clauses related to environmental practices, fair labor standards, and other ethical considerations, you demonstrate your commitment to corporate social responsibility, enhancing your image and attracting suppliers with similar values.
11. Ensure compliance with relevant laws and regulations.
Ensuring compliance with applicable laws and regulations, including GDPR, HIPAA, and other data privacy and security regulations, as well as labor laws, environmental regulations, and other relevant areas, is much simpler when it’s your language in the contract. Further, you eliminate the risk of mistakenly not including a key term in supplier-provided contracts.
12. Enhance intellectual property protection.
Including detailed intellectual property (IP) protection clauses that address your unique concerns and requirements. Detailed confidentiality and data security provisions allow standardized employee training on sharing confidential information, resulting in improved policy compliance.
13. Encourage ethical business practices.
Using clauses that are specific to your ethical business practices and requirements, such as anti-bribery, anti-corruption, and fair labor standards, allows you to describe the exact practices and regulatory adherence expected of your suppliers rather than a more generalized statement on ethics which provides little or no enforceability.
Risk Management and Mitigation
14. Increase adaptability.
Using your contract forms allows you to quickly adapt to changes in laws, regulations, or industry best practices. Your organization can swiftly update its standard contract forms to reflect new requirements or best practices, ensuring continued compliance and relevance.
15. Reduce the risk of errors.
Using your contract forms allows you to include terms and conditions that are important to your company, eliminating the risk of inadvertently not inserting such terms in supplier contracts or losing clarity of intent when redlining supplier contracts. Adhering to consistency in contract language, formatting, and terminology reduces your organization’s risk of errors and eliminates misunderstandings when interpreting supplier contracts.
16. Improve quality assurance and control.
Including specific quality assurance and quality control clauses allow you to describe the quality program and expectations consistently across spend categories. Further, this allows attached specifications to address just purchase-specific quality needs, simplifying contract content and allowing for easier compliance verification.
17. Establish sustainability and environmental responsibility.
Using clauses specific to your company’s sustainability and environmental program and reporting requirements forms the basis for auditable supply chain ESG.
18. Foster a culture of continuous improvement and innovation.
Setting expectations for continuous improvement by your suppliers enables you to incorporate supplier CI into your product and service roadmaps. Rather than just lip service, through standardized contract forms, you can consistently define program expectations and reporting requirements.
Relationship Management and Collaboration
19. Incorporate relational contracting concepts.
Defining guiding principles for the relationship, including approaches to joint process improvement, price and delivery management, issue escalation using defined roles, and other relational contracting elements, are likely to be overly challenging to redline into a supplier-provided contract. Instead, when suppliers read a well-crafted contract that includes these terms, they are more likely to engage in meaningful discussion regarding the buyer-supplier relationship.
20. Establish clarity in roles and responsibilities.
Consistently defining contract roles enables your internal stakeholders to provide appropriately skilled people to support the contracts you put in place. Relying on supplier contracts produces multiple, unique stakeholder roles, making it harder for your stakeholders to assign the right resources.
21. Facilitate common stakeholder knowledge.
Facilitating common knowledge of procurement contracts for stakeholders across your company reduces the misinterpretations and time spent trying to understand individual supplier agreements among stakeholders. With consistent format and language, various departments and stakeholders more easily understand each agreement’s terms and conditions, leading to better collaboration, faster decision-making, and more effective contract management.
22. Enhance supplier selection and evaluation.
Evaluating proposals and offers is much easier when suppliers start with the same contractual requirements. Including contract conformance as an evaluation factor allows stakeholders to see the contractual differences and assess the implications of supplier exceptions.
23. Improve supplier diversity and inclusion.
Incorporating consistent, specific requirements related to supplier diversity and inclusion allows suppliers to address diversity as part of their offers and will enable stakeholders to evaluate their proposals effectively.
24. Improve negotiation effectiveness.
Using standardized contracts allows for standardizing alternate clauses when suppliers push back, reducing back-and-forth wordsmithing. Further, you can standardize points of negotiation and script responses internal negotiators can use to counter supplier pushback establishing consistent company positions.
Performance Tracking and Improvement
25. Improve supplier performance management.
Including specific performance metrics and key performance indicators (KPIs) helps effectively track and manage supplier performance. While the values for the metrics will vary for each contract, the key metrics are standardized for each category, driving consistency of performance across suppliers.
26. Simplify contract amendments.
Amending existing contracts takes less time as the writer is familiar with the original agreement’s standardized contract structure and language.
27. Demonstrate commitment to corporate governance.
Standardizing supplier contracts signals to employees and suppliers a commitment to strong corporate governance. Such a signal enhances your organization’s reputation among shareholders, regulators, and other stakeholders, improving trust and confidence in its management practices.
28. Build processes for continuous contract improvement.
Regularly reviewing contract terms and incorporating lessons learned from contract disputes and successes is only possible when you use consistent contract forms. You can then conduct quarterly contract roundtables to incorporate learnings, close loopholes, and otherwise strengthen your company’s position.
29. Facilitate auditing and reporting.
Monitoring compliance, tracking performance metrics, and identifying trends are easier when contracts are consistent across spend categories.
30. Develop complete sets of content.
Contract forms are one piece of the content you need to run your procurement operation efficiently and drive supplier performance. The other elements are RFP templates, evaluation matrix templates, and supplier performance scorecard templates. Have one set for each category of spend.
Summary
There is no longer any justification for relying solely on your suppliers' contracts. Developing your own set of contract templates now requires only a one-to-three-week effort. When combined with an advanced authoring solution, your team can begin using your own contract forms within a month or less.
Considering these 30 reasons for using your own contract forms, as well as any additional reasons specific to your organization, the business case overwhelmingly supports investing in your contract documents.