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Lawyers can be barrier to outsourcing success, finds survey


Lawyers in outsourcing deals need to gain a better commercial understanding and produce more relevant contracts, the head of a contract managers' trade body has said.

The International Association for Contract and Commercial Managers (IACCM) has published research claiming that nearly 60% of companies agreeing complicated outsourcing deals sometimes fail to complete the contracts underpinning the agreements.

IACCM chief executive Tim Cummins said that the lawyers that help to draft the complex agreements can be responsible for their non-completion.

"[Lawyers] often cause delay or divert negotiations onto areas that seem to others irrelevant – and which may eat up time and cause the contract to be incomplete," he said. "Lawyers need to get more involved in understanding desired outcomes and ensuring the contract is fit for purpose."

The IACCM's survey of outsourcing companies, users and consultants found that for 17% of companies contracts are left incomplete. For a further 40% contracts are complete only some of the time.

Outsourcing contracts can be lengthy and complicated, the IACCM said. "Contracting has become more complex than ever and must allow for gaps in knowledge and our inability to predict future events," said its report. "Academics today take the view that no contract can ever be complete – there will always be a need for review and change."

Cummins said that many outsourcing contracts are problematically incomplete.

"I would guess that around 25% have significant problems because they are incomplete," he said. "Some of that is because of missing information or content; and some is because the contract structure itself is inappropriate."

When deals go ahead and incomplete contracts are signed, the IACCM's survey found that 57% of companies at least sometimes experienced situations where there was no mutual effort to fix the problem.

The main obstacle to completing the contracts after the deal had been signed was an inability of the parties to come to agreement, the research said.

Cummins said that incompleteness can derail valuable deals. "Some result in the relationship falling apart. But in most cases, it creates claims or disputes, or simply causes significant delay," said Cummins. "These factors undermine the expected benefits – in terms of cost factors for both parties, but often also with regard to new sources of value or innovation."

The IACCM's research said that the most common problem arising from disputes caused by incomplete contracts was that the outsourcing service provider found their profits under pressure. In 33% of cases the service provider found their margins eroded, the survey said.

David Isaac, a partner in Pinsent Masons, the law firm behind OUT-LAW.COM, acknowledged the criticism in the survey.

"This survey confirms a common perception that, all too often, lawyers don't appear to add much value to deals. It's really important for us to hear that concern," he said.

"If clients don't value the contribution of their lawyers they won't consult them. I believe that when used properly, expert legal advisers can add real value to a deal by helping to resolve commercial outcomes. But lawyers can only do this if they earn the trust of their clients," said Isaac.

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