The International Association for Contract and Commercial Management (IACCM) has issued its annual list of the most frequently negotiated terms. The results raise serious questions about the efficiency and effectiveness of most contract management operations.

Based on a survey of more than 500 international companies, the IACCM study revealed that supply and contract managers (spurred by their legal departments) continue to spend the bulk of their time rehashing and renegotiating the most commonly used terms that appear in every company’s so-called “standard” T’s & C’s.

According to the study, the Top 10 terms and conditions that supply and contract managers negotiate most frequently include:

1. Limitation of liability
2. Indemnification
3. Intellectual Property
4. Price/charge/price changes
5. Termination (cause/convenience)
6. Warranty
7. Confidential information/data protection
8. Delivery/acceptance
9. Payment
10. Liquidated damages (You can get the full report on the complete list of most-frequently negotiated terms by participating in the IACCM survey here.)

In a follow-up discussion, IACCM President and CEO Tim Cummins validated my concerns by questioning why supply and contract managers spend so much time negotiating standard terms: “As a profession, we don’t spend enough time analyzing our contractual language,” Tim told me. “If you’re constantly renegotiating your standard terms it may be an indication that you need to revist those terms.”

Indeed, constantly renegotiating your limitation of liability clause leaves less time (and makes trading partners less willing) to gain alignment on key terms, such as service levels, freight and shipping, and export/import regulations were further down the list. These are critical and highly variable terms that fluctuate with your unique specifications and requirements. The are also key determinants of the total value a supply or contract manager reaps from a supplier or partner agreement. Such terms have becoming increasingly important in the face of increased outsourcing and globalization.

Yet, the IACCM study shows that most supply and contract managers default to combative negotiation approaches. Asks Tim: “Why focus negotiations on contentious issues that address the consequences of failure, when efforts could be directed toward collaboration and incentives and methods to achieve success?”

Tim questions supplier negotiation approaches as well: “As sellers, why provoke negative buyer reaction to terms we know they will not accept. Why not consciously seek to move discussions to areas that build concensus and trust?”

The collaborative or lean contracting approaches espoused by the IACCM are being employed with great results by top-performing supply and contract management organizations, such as Toyota, Pepsi, and Qualcomm.

You can hear first-hand the techniques Qualcomm has used to streamline contracting and enhance compliance for its supplier, customer, and IP contracts at the Sure-Fire Contract Compliance Procedures Webinar I am hosting on Wednesday, January 17th. Click here to register for free. Hope to see you there.

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