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Contract Change Management is the ‘Life’ in CLM

“You could not step twice into the same river; for other waters are ever flowing on to you!”--- said the ‘weeping philosopher’ Heraclitus of Ephesus. Many people have called him by different names in later generations as per their perceptions. Many have gone to the extent of calling him ‘Obscure’! I don’t understand where is the riddle in these kinds of quotes where he simply means ‘Change is the only constant in life/things.’

Anyways, I don’t intend to get drawn in to any philosophical debates apart from deriving by analogy that: “Change is the only constant in contracts and it is the ‘life’ in Contract Life Cycle Management (CLM)."

CLM is generally divided into two phases:

  • Pre-award (before a contract is signed)

  • Post-award (after a contract is signed)

I was having this interesting conversation with a friend of mine about the importance of one over another and future trends. By way of introduction, he is a senior in-house counsel with a fortune 100 company, wherein he negotiates critical deals from buy/sell side. It started with my asking him about the most important aspects of negotiation. He named quite a few clauses ranging from financial management to performance management and closing with risk and compliance. What I was amazed at was, that he did not mention anything related to ‘Change’ which generally means any addition, upgrade, update, reduction, deletion, modification, improvement, relocation or adjustment in respect of the Services, Projects, Deliverables. Below-mentioned categories are generally excluded from the definition of ‘Change’ in Contracts. However, they are an integral part of overall ‘Change Management’:

  • Contract Amendments;

  • Service Requests;

  • BAU Changes; or,

  • IMACs (Install, Move, Add, Change)

  • Emergency Changes

Also, ‘Change Control’ provisions though an important aspect of ‘Change Management’ is a different thing altogether.

He reasoned that these were not that important as most of them are ‘boilerplate’ and/or clauses covering operational aspects.

I wonder, if a layman could ignore all these important aspects of ‘Change Management’ in Pre-award discussions. It is these very provisions on which the breathing of all other clauses depends in the Post-award Phase.

Scenario 1

What if the selected Supplier was the lowest bidder but has focused well on ensuring favorable language for ‘Change’ and other related provisions and thus starts passing on additional costs through ‘Change Management’ in Post-award Phase?

Most companies still do not have Post-award governance teams. But let us assume that many of them do.

How often are these teams then complying with Commercial Contracting Policies (CCPs) and Delegation of Authority (DoA) matrices for these ‘Change Requests’?

Many a times regular contract conformance is just w.r.t. the financial matrices as multiple change requests pour in. What about the other provisions my dear friend spent so much time negotiating?

Again, many a times contract conformance is an annual process. Think about the holistic compliance throughout the year.

Worst still, at times there is no conformance at all. Just one ‘Change Order’ gets signed after another and the poor Contract keeps lying in some Drawer/Shared Drive/SharePoint/Contract Management Tool.

Scenario 2

What if the negotiated price for a term was the lowest but there are heavy exit penalties and technology/services has become redundant?

Surely, it becomes expensive to live as well as to die!

Scenario 3

Let us assume you want to hive off a part of your business or want to be sold altogether.

Due diligence is all about your liabilities and assets that is underlying in the contracts. Your valuations are not only about your assets but also about the ease of exiting your liabilities.

I can go on illustrating and hypothesizing but think it is enough for those who have seen the whole spectrum of CLM, they only can appreciate that ‘Change’ is the ‘Life’.

My dear friend: anticipating change, negotiating change, drafting change and managing change are all a part of CLM. Not all of them might sit on the same side of a fence called ‘Signature’ and get importance but all of them really matter for they are the only constant. I am just trying to write something. It is not me nor you, it is ‘Change’ that is right!

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