Getting the optimal value for expenses related to contracts with third parties is an ongoing challenge for most businesses. This is especially true when services/products and contractual charging regimes are complex, difficult to understand, and lack transparency. This often leads to a lack of commercial control and a loss of value.
Scope creep, delivery and quality failures, poor or perverse incentives, bad planning and demand management, ill-informed buying, deliberate contract manipulation, miscommunication can all relate to a decrease in service value.
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An engineering company was experiencing cost growth in excess of its competitors and the market over a number of years. Management was concerned that this could not be clearly explained and that their efforts at cost control seemed misdirected and ineffective. We performed deep-dive commercial diagnostic “audits” on 20 contracts and identified agreed annual savings of 11% across their subcontracted operations. Examples of some of our findings on specific contracts included: