Contract Request Stage

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Contracts are one of the most critical tools in organizational operations. According to a Gartner research, contracts govern between 60 percent and 80 percent of B2B transactions. However, it is a fact that contracts are expensive for businesses to create – making it essential for companies today to understand the Contract Lifecycle and find ways to make it more efficient.

According to a World CC (formerly known as IACCM) study, businesses today are spending 38% more to create each new contract than they used to spend 6 years ago. The cost of drafting, negotiating, and finalizing a simple contract stands at about $6,900, while the average price of a “mid-complexity” contract is $21,300. The most complex contracts can cost you upwards of hundreds of thousands of dollars.

Your organization can save enormous costs by improving the efficiency of the contract process. Let us start by understanding the first stage of the process, ‘Contract Request.’

What is the Contract Request Stage? – Definition

The Contract Request Stage is also known as the pre-award stage. This refers to the stage before two or more parties have negotiated. At this point, your company is considering writing a contract and evaluating the needs and motivations behind the potential contract. 

contract request

‌Some things to consider include:

  •  What do you expect to gain from this contract? 
  •  What are your objectives? Is this a contract to ensure service payment? 
  • Is this a non-disclosure agreement? 

There are many different types of contracts. Your goal is to narrow down your objectives as much as possible so that your team can create the best contract for your needs. 

Once you have set the parameters, it is time to approach the other party to draft a contract and discuss authoring a contract with your legal department.  

What are the Common Challenges During the Contract Request Stage?

Common Challenges 1

Unclear Goals‌

When a business enters into a contract, it is critical to have clear goals and expectations — and it is even more important that all parties are on the same page. For example, if this is a contract for products or services procurement, both parties must agree on the cost. In the case of an employment contract, it is equally crucial that all parties understand the tasks and responsibilities to be handled by the concerned position.  

A contract that lacks clear objectives from the beginning is difficult to draft, negotiate, and finalize. That is why the initial stage of the contract lifecycle is so crucial – it establishes the tone for the entire procedure. At this point, it is critical to communicate clearly and directly.

Winging it‌

Many businesses do not have a formal system in place for dealing with contract requests: 

  • Who is the one who should make the request? 
  • Is there a template for submitting the request? 
  • What information should you include in the contract request?
  • What information should you exclude? 

You must ensure that these questions are addressed well before the contract request stage.

Businesses should ideally have a clear structure in place for issuing contract requests. Unfortunately, this is not always the case. As a result, many team members simply improvise as they go.

Such undefined processes severely complicate matters when the legal department begins drafting the actual contract. This is because improvising at the contract request stage may lead to collecting the wrong information or asking the wrong questions. 

As a result, legal spend far more time than necessary drafting the contract. Going back, double-checking documentation, and contacting the other party with additional questions slows contract processing and raises the overall cost of the transaction.   

Confusing Intake Process

The intake process is a critical part of the contract request process. Once you have chosen what type of contract you require and its objectives, it is time to start contract creation. ‌  ‌ 

In many organizations, this usually involves contacting the legal department and requesting that they write up a new vendor contract, sales agreement, or non-disclosure agreement. Contracts received from your business partners are also submitted similarly. 

Many organizations still manage the intake process via email or even on paper. Most of the time, this results in a slow process with a lot of back-and-forth communication, which slows things down unnecessarily. Moreover, miscommunication also tends to cause conflict between the various departments of your company. 

For example, sales may get miffed with legal for asking numerous questions rather than simply drafting the contract. Similarly, legal may get annoyed with sales if they fail to provide critical information up front. 

There is also a real possibility that emails (or physical forms) will be lost, forcing you to restart the entire process. 

Over to You

Contracts are becoming an increasingly crucial component of the corporate world, and this does not appear to be changing anytime soon. However, what you can alter is the method your company employs when drafting contracts. 

Have you tried integrating CLM solutions such as Contractflow to improve the process efficiency while saving time and money?

Explore Additional Resources To Know More

Mastering Contract Analytics in Excel Sheet
Contract Obligation Tracker
E-Book_Contract_management_analytics
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