Commercial & Contract Management – What’s the value?

18 février 2016.Albert Schot.0 Likes.0 Comments

A practical case

A Company had just won a public tender of about 1 M $. The CEO had some concerns about the deal, and wished some external advice.

After reading the contractual documents and a discussion with the core team, the Commercial & Contract Management observed 3 key issues:

  1. Contract flaw Nb 1
    The (already signed) contract grossly mismatched client with provider obligations
  2. Limited Project Management
    The project management was limited to 0.5 days /week, leaving no room for pro activity
  3. Contract flaw Nb 2
    The contract referred to services, but the company actually offered an existing product

Contract flaw Nb 1 – Mismatched Obligations

The contract pushed Client’s own risks unto the Provider. But as the contract was already agreed, the Commercial & Contract Management could not reopen such issue, even the more that a contract change was made practically impossible. Those risks, without ability to control them, are a great threat on the project’s success.

Limited Project Management

The budget had 0.5 day/week of project management effort. This is OK for planning and barely for meeting attendance. And if you add that: the client is complex, the project runs over 6 months, and the contract terms risks, the Company seemed quite assured to fail the project, or at least have massive financial overruns.

Contract flaw Nb 2 – A Product Offered Under Services Terms

The Company offered a total solution already placed at previous clients. But the contract terms, referred to a ‘one of a kind’ service built up. Any variation to the Company’s product means costly recoding.


Given the late involvement of the Commercial & Contract Management, the room for improvement was fairly limited. The question is thus can we live with it?

What would you have recommended to the CEO?

Here is what a Commercial & Contract Management recommended

Action Plan

  1. Without a shared goodwill, and an open collaboration, the project will fail with quasi certainty.
  2. Thus, spend all upfront efforts to get Client’s fair and strong cooperation before even starting the work. Try to leave aside the contract terms, and concentrate on a successful project.
  3. Talk openly about the project risks and those necessary actions to the project’s success. Re-assign (and minute such) each obligation to the party to which it fairly should belong to.
  4. Increasing and strengthening Project Management effort, with clear proactive milestones and early warnings. Each such warnings need immediate action plans and management report and follow up. Failing to do so would inevitably lead to an increase Company’s costs by 10-70%.
  5. Often remind the Client that this solution is implemented elsewhere (and works fine),  modifications will cause delays and avoid future versions to apply to such modifications.
  6. Finally, the company needs to reorganise itself from a service provider to a product company. With a Product Manager, a road map with product enhancement versioning, and an appropriate licence agreement for its product.

According to you, were the cost of the Commercial & Contract Manager (4 days’ effort) worth it?

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