Contracts and Procurement are critical to your business success. Are they giving you appropriate value?

1. Walsh Enterprises Business & Financial Advisors
Huntington Beach, California USA
http://www.awalsh.us
walshal1@aol.com
(714) 465-2749
Contracts and Procurement
Are They Giving You Proper Value?
Al Walsh, CEO
Walsh Enterprises

2. Introduction
One of the many concentrations I have when entering a new company is
determining if the various functions are providing appropriate value to
the whole business organism.
Contracts and Procurement are the two areas where I’ve generally found
the most waste and lost opportunities.
Every company is structured differently, but these two functions tend to
be treated as “backwater” departments. Therefore, they don’t receive
the appropriate level of scrutiny, and they’re not motivated to excel.

3. Examples
I’ve witnessed many boondoggles over the course of my career. Here are
a few of the choicer examples:
• I conducted a contracts audit at a division of a major hi-tech firm,
finding $10 Million in unbilled delivered line items on contracts that
had been marked “Closed” and put in the dead file archives. The
Contracts Manager hated me for it, and fought me through the entire
audit. I don’t know if he retained his job, but he sure made a fool of
himself at a summation meeting with the General Manager.
• I walked into one aerospace firm and discovered that they had six
months sales in uncollected receivables because the billings were
being improperly prepared. The company was in a severe cash flow
bind because of it, but no one was doing anything.
• We acquired a company, and soon discovered that they had been
signing field service contracts for years which contained insurance
clauses that made them responsible if anything went wrong;
regardless of who was at fault. The customer could screw up and
blow up their own facility, and we’d get the bill merely for being on-
site.

4. Giving Value
Contracts and Procurement are critical functions. The can make the
difference between a successful job and losing your butt. They can
make the difference between business success and failure. Give
these functions the scrutiny they deserve. Make them a dynamic part
of your business.
• Are your Procurement personnel just order-givers, or are they actively
shopping for the best product / price mix?
• Are your Contracts personnel mere clerks, or are they actively
involved?

5. Get Them Involved
In order for you to get the most from these functions, you need to include
them from the bid stage all the way through to completion and closure.
• Your Contracts personnel and your Lawyers should be the ultimate
experts in contract matters; and should be working closely together.
• Don’t just drop a shopping list on your Procurement personnel after
planning a job and expect them to deliver per your arbitrary timing &
specifications. They have marketplace realities to deal with too.
• Management, Manufacturing, Engineering, Procurement, Contracts,
Finance, and your other functions should all be working closely
together from first step to last on any job.
• Many companies treat contracts like rare books; hiding them away.
Many people in your company need to see them because they’re
responsible for bidding, winning, performing, enforcing, and billing
them. Distribute the contracts to those who have a legitimate need to
know.

6. Conclusion
I’ve just scratched the surface of what you should be looking for, but
hopefully I’ve given you some constructive food for thought to do
your own internal assessment.
If you treat them like “backwater” administrative functions, you’ll
probably get what you deserve.
If you let them “step up to the plate” and they come up short - maybe you
need new leadership.
Be sure you give them the resources the need to do their jobs too. Don’t
expect them to support complex operations with rudimentary tools.