The contract negotiation process can also be an opportunity to achieve more speed and effectiveness in contract negotiations, get quicker turnaround times with better collaboration processes and use automated tracking and contextual insights for smarter contract negotiations.
The contract negotiation process also allows you to add to the economic value of the relationship, shore up supply chain vulnerabilities, and shield your organization against risk.
What Is Contract Negotiation?
Contract negotiation is the process of coming to an agreement on a matter between two or more parties, with the aim of forming a binding contract. Contract negotiation takes that further by involving set terms and conditions which both parties have agreed upon in advance. This makes the process smoother, as both sides know what is expected of them and can focus on reaching an agreement.
Why Is Contract Negotiation Important?
Contract negotiation is a critical part of the contracting process. By negotiating a contract, both parties can ensure that the agreement is mutually beneficial and reflects the true nature of the business relationship. Contract negotiation also helps to avoid future conflicts by clarifying the expectations and responsibilities of each party. In addition, contract negotiation can help to establish a strong business relationship by demonstrating that both parties are willing to work together.
The Contract Negotiation Process
The contract negotiation process can be tedious and time-consuming, but it's critical to track every revision request and comment. Before the modern era, negotiators would write revision requests and comments in red ink on paper. This allowed both parties to easily track changes and ensure that each revision was agreed upon.
Today, contract negotiations can be done electronically, which can make tracking revisions more difficult. Therefore, it's important to have a contract management system in place that allows you to keep track of each change made during the negotiation process. This will help ensure that no changes are made without agreement from both parties. Here are four pieces of a successful contract negotiation process:
Third-Party Contract Collaboration
Achieve faster cycle times and reduce communication overhead with a secure online collaboration portal that enables self-service of contracts by third parties within parameters set by your company.
With the portal, vendors and third parties can register to get online access to their contracts, submit contract redlines, review contracts and upload compliance documentation. This access is especially valuable in situations where time zones are barriers, or continuous updates and contract maintenance are required. The Icertis Contract Intelligence platform also supports email-based collaboration with the ability to automatically upload emails and attachments to the system.
Redlines and Version Management
Significantly improve negotiation governance with redlining and version management. Every redline is saved as a new version and evaluated for impact on approval workflow, with exceptions routed through the correct review process.
The Microsoft Word Add-in lets users review any version, compare or combine versions and access the clause library and related agreement clauses.
Contract Negotiation Intelligence
Equip business stakeholders with the right insights during negotiations. While reviewing negotiated clauses, users can access library content and related agreements, such as looking up master agreement clauses while reviewing a statement of work. This allows users to understand the full history with the third party, so they can quickly decide on positions and accelerate closure. For example, a company may surface that a supplier had provided a better price to another division of the company, providing real-time leverage during negotiations, or identify risks associated with a customer’s payment history that could influence a position.
Collaborative Contract Administration
Leverage the platform’s online collaboration portal to enable third parties to perform self-service maintenance of profile and contract compliance. Third parties can receive obligation task assignments on the portal for completion, submit SLA or deliverable information against contracts, and receive proactive alerts on any contract administration or obligation tasks.
This improves visibility for all contract parties, accelerates contracting actions, and protects against important contract commitments or milestones from being missed. It also reinforces the contract platform as the single source of truth for all contract-related actions and documentation.