“Jimmy the dog” and the benefits of an independent contract audit

My wife has recently been suffering from, “empty nest” syndrome.  This is despite the fact our daughters (aged 19 and 22) both live at home.  They are independent and no longer need to be looked after.  After much consideration, her solution to this dilemma was the acquisition of our first dog: a west highland white terrier.

“Jimmy” duly arrived at aged nine weeks and took up residence.  From the first he was a pleasure, full of mischief and achingly cute.  After a few weeks however I began to wonder whether my bloodied and scarred hands and feet were normal and how, if ever, we would be able to stop him creating little surprises in the most unexpected and unwelcome places.

Although I had read and digested the advice of the Kennel Club, after one particularly painful attack, I decided to call on the services of a dog psychologist.  She spent two hours with the whole family and analysed our relationship with Jimmy.  We were making some basic errors which, with simple measures such as the use of a water pistol and the judicious and timely application of food were cured.

Jimmy is now a pleasure and my wounds are healing nicely.

Contract audit

The moral of my story about Jimmy the dog is that sometimes it’s good to bring in an expert and independent third party to look at your relationships.  An independent review of contractual arrangements, for example, can bring a number of benefits.  It can:

  • Identify commercial opportunities to reduce costs
  • Help recover overcharges
  • Provide assurance that the contract is being properly applied

The simple application of a fresh pair of eyes can identify things which may not be achieved in the normal run of business.  Delivery Managers are often too busy with operational or day to day matters and may not have the appropriate audit skills to uncover issues quickly and effectively.  It is not uncommon for Procurement Managers to let the contract and then allow it to gather dust on a shelf until the next round of tendering.

Timing

The dog psychologist’s intervention with Jimmy was very timely.  Had we delayed, his behaviours would have become ingrained.  Similarly there are times when a contract audit can be most advantageous.  For example:

    • Just before a Contract is due to expire and is about to be re-tendered: to inform the tender process and to take the last opportunity to recover any overcharges
    • At the beginning of a Contract: to set the tone and make sure the right behaviours are ingrained
    • Whenever there are problems with the delivery of a contract: to get to the bottom of commercial issues and understand if the Contract is sustainable
    • If you become aware of wider problems with a supplier such as poor performance on other clients or profitability issues:  to see if there is likely to be any impact on the delivery of your Contract

Minimising risk through the right audit approach

The dog psychologist’s approach was to develop trust and respect between my family and Jimmy.  She explained that a more physical and aggressive approach to dog training would ultimately lead to the wrong behaviours.  It would literally come back to bite us.

The same is true of contract audit.  An aggressive approach which takes up a lot of a supplier’s time and ignores the supplier’s needs, can damage the relationship between the parties to the Contract.  It can send a message that you don’t trust the supplier and you are looking to screw them on costs.  It can also put pressure on the client to try and recover, “savings” as a result of overly aggressive commercial tactics.  We have heard horror stories, for example, of profit recovery organisations threatening to sue the companies which have employed them if they don’t follow through with aggressive commercial actions.

The right third party can undertake contract audit to deliver the benefits noted above without adversely affecting the relationship between the parties.  By taking an independent but professionally sceptic view of the arrangement and dealing with suppliers sensitively this is achievable.  Even the use of a water pistol and food inducements are unnecessary.

For help and advice on mimimising your risk, talk to us today.