How Has COVID Changed Our View of Contracts and Contract Management?

Posted on December 14, 2022


The following is an excerpt from the December 13th article I wrote for the Terzo blog. Titled “Moving Contract Management Beyond Dormant Enforcement,” I talk about the transformation of contracts from being a “tool of enforcement” to becoming a source of “actionable insight” to facilitate greater cooperation and success for buyer and seller.

One of the most interesting revelations regarding contract management in the post-Covid world is that most organizations were only using 20% of their CLM platform – mainly under the control of the legal department.

Before the pandemic, CLM was viewed as a static repository of legal terminology and clauses to hold suppliers’ feet to the fire of enforcement. In other words, once executed, contracts were stored and forgotten until something went wrong. Then, as we discovered during the pandemic, companies scrambled to assess their vulnerabilities, liabilities, and potential paths to a resolution regarding disrupted supply chains. At that point, there was the beginning of the realization that contracts were not a tool of enforcement but a source of actionable knowledge that facilitated greater understanding and collaboration with suppliers.

From Adversaries to Strategic Partners

At our core, we want to be more of a data company – an enterprise AI company that extracts data intelligence across any and all business documents. – Justin Hiatt, Terzo

Most automated contracting systems were created by legal professionals for legal professionals, making CLM little more than a “glorified data storage” bin. In this context, contract management has traditionally been a dormant “search and enforce” tool instead of a “living” arrangement between strategic partners that can adapt to changing realities on a mutually beneficial basis for all stakeholders.  

When I say search and enforce, I am talking about the “file and forget” contract management strategy once the paperwork is signed. The problem is that a contract may work “at the moment” of execution but quickly become outdated and draconian when circumstances in the real-world change.

Richard Pennington, who I consider to be one of the most knowledgeable legal procurement minds in the industry – you can check out his LinkedIn profile to see what I mean, understands the difference between contract enforcement and strategic supplier engagement. He also understands the evolution of technological capability and its potential for elevating contract management beyond data dormancy to actionable intelligence.

What is Actionable Intelligence?

Use the following link to learn more about contracts and actionable intelligence.

Posted in: Commentary