The Ultimate Guide for the Procurement Contract Playbook
Why you need a Contract Playbook for your Supplier Contract Reviews
Having a Contract Playbook is powerful because it means all of your Procurement team understands what is acceptable. The Procurement team should know the significant issues that the business cannot accept.
So by the time the contract goes to your Contract Management or Legal team, both parties should have already discussed the key clauses.
Even if they haven't, the contract reviewers are clear on the contract positions they need to take.
A Contract Playbook is a must for your Supplier Contract Reviews.
There are two reasons why a Contract Playbook is a must for your Supplier Contract Reviews:
A Contract Playbook will help ensure that you have included all the essential elements of your supplier contract in the review process. In short, it works kinda like a Contract Review Checklist, and this can be super helpful (especially to more junior contract managers).
The Contract Playbook will guide the review team and guide them on what to keep an eye out for in each part of the contract (such as required provisions). This makes it easier to spot potential issues or areas where changes may be needed at an early stage during the review process – when they are more straightforward and less costly to address than if left until later! A bonus consideration here is how you could potentially use the contract playbook in contract focussed platforms to speed up the time to review and contract signature.
What is a Contract Playbook?
A Contract Playbook is a set of guidelines that help you to manage your supplier contracts. I've seen two types of contract playbooks. One for your own templates, which set out the positions and fallback positions to your current terms, including the language to be used. This language is usually stored in a clause bank.
The second contract playbook is solely used to review the supplier terms. It will likely mirror the above point, but the fallback positions and use of a clause bank will be more limited. You must author the fallback points to match the supplier's contract terms.
I think this is an excellent explanation from Sterling Miller:
A contract playbook is a document that, in some fashion, breaks down the company's standard contract terms, sets out an explanation of each clause along with fallback clauses (i.e., variations of the standard provisions that the company would accept if the customer wants to negotiate a standard clause), and notes when the company will "walk away" from a contract.
The Contract Playbook is a company-wide document.
What do I mean by the above statement?
I mean that the entire business should have some input for several reasons. Reason one is that we want to ensure we are capturing various issues, concerns and risks from across the business.
Let's consider why are we doing the procurement exercise and contract reviews? It's to further the business goals and aims. That's what we're talking about here. I refer to this as "alignment to the business", which is often relatively weak with procurement teams. By involving people across the business and detailing what they need protected or included in any services or goods that a supplier provides, you can build out suitable and proportional positions to achieve this.
Additionally, it brings the business together just a little bit and shows that you want to be aligned.
Reason two follows from reason one. Suppose your business has been involved in creating the Contract Playbook. In that case, it's difficult for them to challenge any part of the contract review process.
You know, as well as I do, that people across the business will decide that they want something extra special in the contract in the last seconds of the negotiation. This gives you a legitimate "way out" of pushing for this. However, please don't use the Contract Playbook as a yes/no tool. You should use it as a guide - more on that later.
Reason 2 means that if there are any issues with the Contract review, it's likely down to a position not being captured. Be wary of creating a contractual position for everything, as the document can soon become unusable.
I'm hoping you see the use already here but let's discuss this more.
Why you need a Contract Playbook for Supplier Contract Reviews
A Contract Playbook is an excellent way to start with Supplier Contract Reviews. It can help you identify risks and opportunities, define your goals and objectives, and identify critical areas of the contract that need to be reviewed.
The Playbook is also helpful in ensuring consistency across contracts by including checklists, templates and other resources used in the analysis process.
When should a Contract Playbook be used?
Here are some common scenarios where you might want to use a Contract Playbook:
When you issue contract templates to your suppliers, they make amendments to these terms.
When you review the supplier's contract terms and need to check the positions in their contract against your risk positions which are set out in the Contract Playbook.
But there is more to using a Contract Playbook than blindly following it. We need to ensure that we have an efficient contract review process. This contract review process should guide us from start to finish; it should have a clear direction and defined goals.
Supplier Contract Reviews should begin with a clear plan.
The best way to ensure your supplier contract review is successful is to start with a clear plan. Your plan will guide you through the process and help ensure you're not missing anything important. The following are some examples of what should go into your plan:
A checklist of items that need to be reviewed in each contract. This could include any changes made since the last review, if there are any new contacts or agreements or if there have been any changes in payment dates or rates.
Regarding a checklist, I like to include it in my contract review software. This is one element I built into Gatekeeper when I used it to manage all of my contract reviews.
To be successful as a Procurement Contract Manager and to ensure that your business feels that you are a value add, you need to be clear on timelines. An estimated timeline for when each supplier contract will be reviewed is an excellent start to building out the best relationships with your business as a Procurement Contract Manager.
I'd value these two matters more than any when creating a clear plan for your contract reviews. Add in the Contract Playbook, and you're on to a winning formula.
Supplier Contract Reviews should have defined goals and objectives.
The first thing you should do before you start developing your Supplier Contract Review Playbook is to define what problem you're trying to solve. Whenever I'm building out a Contract Review Process, I want to ensure that we're solving problems. One of the problems I have with Contract Reviews is what happens when the Contract Review is undertaken by someone else? This could be another Procurement Contract Manager in your team, In-House Legal Counsel if you have any, or it could be your External Legal Team.
We need to ensure that the Contract Playbook and the entire Contract Review Process are clear on what needs to be achieved and when.
Suppose everyone understands the positions needed when redlining the Supplier Contracts and how the end-to-end Contract Review Process operates. In that case, the Contract Reviewers will focus solely on the Contract Review and the Contract Negotiations.
Analysis of the contract terms and conditions.
Reviewing the specific terms in the contract is the crucial point of this entire process.
When conducting a supplier contract review, it's essential for any Procurement Contract Manager to be familiar with the different types of terms and conditions that can be included in a supplier contract.
One way to build that familiarity is to ensure they've learned the contents of the Contract Playbook and understand why each position is in place.
There are several categories of key contractual clauses that can appear in any agreement between parties or organisations that we are likely to focus on as part of this Contract Playbook:
Warranties/guarantees/indemnities
Intellectual property protection/licensing provisions
Conflict resolution mechanisms (arbitration/mediation/governing law/choice of law)
Liabilities
Insurance
Specific Performance
Performance Obligations (SLAs/KPIs)
Obligations in general
These should take centre stage in your Contract Playbook regardless of your industry.
How does a Contract Playbook improve contract review ROI?
A Contract Playbook is a tool that helps you to plan and prepare for your Supplier Contract Review.
It allows you to focus on the most critical issues in the supplier contract so that no time is wasted during the review process.
This framework provides a structured approach for managing your Supplier Contract Review process.
A Contract Playbook also helps you identify areas of improvement in your contracts and procurement processes so that you can continuously improve over time.
A Contract Playbook offers a powerful, efficient way to address contracts with repetitive changes.
The Playbook streamlines your process using a template to collect all the data you need for each contract review. The power of this data collection is enhanced when you use software, such as a Contract Lifecycle Management Solution or Procurement Tech with Contracts included in capturing the data. When you or your team are ready to start reviewing, they only need to open the Playbook and select the appropriate contract type, supplier category or segmentation of the supplier.
Lesson learnings from past Supplier Relationship Management (SRM) experiences with the same supplier or similar suppliers can be invaluable in guiding the Supplier Contract Review process.
You may be familiar with the concept of a "lessons learned" document, a report produced following an event or series of events that outlines what went right and wrong during the process. This information can then be used to help improve future performance.
Lessons from past Supplier Relationship Management (SRM) experiences with the same supplier or similar suppliers can be invaluable in guiding the Supplier Contract Review process. It is crucial to understand if certain practices have been effective in previous engagements and whether they are still relevant today.
For example, you may find that one process effectively reduced costs but has become outdated due to changes in technology or practice within your industry.
Or perhaps another process worked well for one contract but not another because there were unique circumstances related to both contracts that made them different from each other—and also different from similar contracts at other companies or government agencies within your jurisdiction where you conduct business as well as internationally when conducting cross-border transactions such as eProcurement exercises (ePro).
If you're managing your Suppliers through the entire Procurement and Contract Lifecycle, you should capture lessons learned throughout the process. The data captured through lessons learned could be a game changer for your Procurement and Contract Management Team and the wider business.
Closing thoughts on the Contract Playbook
A Contract Playbook has many benefits, but I wanted to highlight some negatives.
It can cause you to review blindly against the Playbook. The Playbook and each position should be a guide. It is impossible to achieve proportionality in every clause you review for every type of supplier contract you will review.
It takes a lot of effort and hard work to create, maintain and use. That's the simple truth of it. You need to iterate often; you need to analyse how it is used and the effectiveness of your positions.
That being said, I believe it is an invaluable tool in bringing the business together on what contracts need to do for it and making contract reviews slicker. This means it's speedier to get to the contract signature, which is vital with businesses' pace.
The benefits of a Contract Playbook are clear. Contract reviews are not only more efficient, but they're also easier to manage and can lead to better outcomes. The bottom line is: if you don't have a Contract Playbook for your Supplier Contract Reviews, you're missing out!