Earlier this year the IACCM published ‘The Future of Contracting’ which was the culmination of inputs from 2,000+ practitioners as to what contract management would look like in 2020.
There were many themes that came out, however, two of them were: the role of automation and tools; and the area of skills, organisation, and proceses.
There was a view that tools would need to move from tactical/transactional tools of today towards being strategic, decision support tools capable of operating at a portfolio level in the future. In parallel with this there will be a need to move in the skills possessed by professionals to operate and make economic decisions and trade-offs in an increasingly complex and interlinked world.
In recent times we have seen companies drive buy-side and sell-side teams to an agenda of “more for less” with the trend being teams retreating into the creation of short-term savings and their roles becoming increasingly transactional. Whilst for many comapnies this focus on efficiency is perhaps one of survival, the events of the last couple of months in relation to the awarding of the West Coast Main Line rail franchise in the UK highlights the need for organisations to maintain strength in the area of commercial management and not just contract management.
In the case of the WCML the press have simplified the issue, highlighting that the team didn’t properly take into consideration the impact of inflation and passenger numbers. Anyone who has been involved in bidding or assessing such a complex long term deal will understand that when you unpack this, the devil is in the detail. For example, the inflation in relation to the costs of electricity, will be different to the inflation in relation to wages, etc.. and in relation to the numbers of passengers it isn’t just the number of passengers (load factor), it’s also about the ticket yields which in a partially regulated environment is another layer of complexity.
As the IACCM work highlighted, it brings to the surface the importance of robust, validated & verified business and solution modelling and the need for the skills to use such tools. Only when you have this capability to model the economic impact of the agreements and relationships proposed can you truly make rational and coherent decisions when you are dealing with such a complex opportunity.
This wider economic understanding is one of the key differences between contract management and commercial management and is equally valid buy-side and supply-side teams. Whilst in terms of the IACCM work 2020 is perhaps here for some organisations that operate in a complex environment today, over time more and more organisations will need these skills and therefore the recent, costly errors on this one project should be a wake up call for many organisations and the commercial/contract management professionals alike.