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Managing Indirect Spend: Enhancing Profitability Through Strategic Sourcing by William R. Dorn, Joe Payne

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CHAPTER SEVEN

Get It in Writing

The Contracting Phase

THE CONTRACTING PHASE of a strategic sourcing project converts the business terms and concepts developed during the RFx (request for x: information, quote, or proposal) stage and confirmed during negotiations into a written document agreed to and signed by both the supplier and customer. Many variables determine the type of language and terms that should be considered when writing a commercial contract, such as the nature of the item being purchased (a product or a service), the scope of work, the number of locations that will fall under the agreement, and commitments made by both parties during negotiations. This chapter is not intended to be a legal guide or to review the exact language that should be included in every type of commercial agreement. That is your legal team’s business. Instead, this chapter discusses best practices from a purchasing perspective—terms that should and should not be included in a contract, ways to use contracts to ensure service levels are met, recourse for disputes, and when to include your legal team in the contracting process.

ESSENTIAL COMPONENTS OF A CONTRACT

Organizations have varying approaches to constructing contracts. Some contracts outline all the terms of the relationship between buyer and seller in a page or two. Others can easily exceed 100 pages or more. Why such a difference in page count and, therefore, content? You might expect the answer to have a lot to do with how critical ...

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