During a recent webinar on Contracting Models, we addressed the need to be flexible in how one moves through the contract development and drafting phase. This raises a question which many of us need to resolve in our commercial contracting practices – to what extent do we need to be flexible without sacrificing the governance and guidelines which we have developed?
During strategic discussions, with a cross-section of our team, peers and management, we will inevitably discuss the broader risk positions and approaches which make commercial sense. In those discussions, we will hopefully also discuss the boundaries of our approaches and resolve when and why we are willing to cross those boundaries, e.g., what financial incentives will bring us across those thresholds.
Drawing an analogy with driving, we must define the lane in which we will travel, but there must be rules discussed and determined regarding whether and when to change lanes, e.g., a traffic jam or a slow driver ahead.
Unfortunately, contracting professionals are instructed on which lane to occupy, and to never change lanes without prior permission. Whenever there is a need to change lanes, the contracting practitioner is advised by the policy owner, such as legal, risk management or finance, that they (the policy owner) are too busy and that an answer will be shared in the near future. But the answer never comes. Furthering the analogy, the driver simply must wait until the traffic jam dissipates or the slower driver exits the lane.
The commercial contracting practitioner might offer some constructive feedback, intended to preempt further delays in the contracting process, but unfortunately the subject matter and process experts deem the input as an anomaly and dismiss it.
Yet, those who are able to overcome these resistance points, and create flexibility in their commercial contracting processes are able to bypass the traffic jams. They know when and why they can change lanes or exit the road to avoid the traffic. These commercial contracting practitioners are viewed by their peers and commercial partners as experts – many want to carpool with them.
As automation and artificial intelligence are becoming more integrated into commercial contracting processes and practices, the equivalent of “GPS for contracting journeys” will become more common. But, until that happens, one must find a way to drive their contracts with flexibility within the structure and governance which has been established, allowing for a safe but speedy journey.