The Reality Of The Contract

0

Author: Margaret Gilbert

Having a contract should reflect the contractual obligations of both sides. The reality is that once the contract has been signed off, we move on to other things. The contract forms the basis of the contractual obligations but the reality is that the contract itself is not the ‘engine’, it is more of a ‘morale reminder – with teeth’.

The ‘engine’ is the goodwill of all involved. From this comes ideas, solutions and to move things along is the relationship which is in effect the ‘glue’.

When things go right it is about people making it happen. When things go wrong it is often because of people actions and a certain ‘don’t care’ or complacency. In this situation, the contract reality is that the contractual obligations have broken down.

How to gauge – a positive buyer/supplier relationship is a good indication as to overall attitude.  Lack of communication can give an indication of complacency and poor performance.

On the other hand – either party can be unhappy but you would not know it because the issues are not discussed and dealt with silence can be telling. Being polite and not indicating what is really felt beneath the surface does not help in the long run.

A positive relationship can achieve a lot in providing solutions and alternatives – this occurs over and above the contract.  It takes goodwill and the reality is that the contract outlines the requirements but you cannot contract for goodwill, a positive buyer/supplier relationship or positive communication. These things hopefully occur and can add to the contractual requirements and obligations.

Useful checklist:

  1. Does the relationship work well?
  2. Do both sides abide by the contract and no more?
  3. Is there effective ongoing communication?
  4. Do ideas flourish?

It is worth asking these questions. The objective is that the relationship works well, there is ongoing communication and most importantly that ideas flourish. This will be difficult to achieve if both sides abide by the contract and does not put more effort into it.

There is some thinking that the contract should not be referred to at all. This would make it difficult to measure the success of the contract through the stated KPIs. It is seen as a negative in some quarters that the contract is referenced. However, the contract is a ‘living document’ and should be referenced especially in terms of contract management, to look at what is possible and what can be achieved. This is positive and forward looking.

The contract reality is a mix of the contract undertaking and the ‘additions that occur that comes about more by way of relationship or goodwill rather than through the contractual obligations. Both are needed but often there is one. When things go wrong though it can influence the contractual obligations and the goodwill which can be lacking.

Each contract is different but there are similarities. Lastly, the contract reality is that if the goods or services occur and the relationship is not the best, then as long as the contractual obligations are met, there is no problem.

The aim is to have both and work should be put in to achieve. The question is: what do you want?   Once defined this can be what the reality of the contract is. Just as each contract is different then the definition of the contract focus can be different as well.

What we should not lose sight of however is that both parties abide by their specific and measurable contractual obligations.

The ability to work together has to be factored into any planning for the future. The aim is to work with suppliers who are interested in providing solutions and can look at ways in which this can be done rather than operating the ‘same’ way as they always have. Proactiveness is essential – from both sides.

One last question: do you know the reality of your contracts?

focus-email-sign-up_600x190

About Author

Leave A Reply