Contract Economics 101: An Introduction
Contract economics. Piques your interest, doesn’t it? Though I’d like to take credit, the term is not my brainchild; I first heard it from our CEO and have been intrigued by the concept ever since. So when you think about contract economics, what comes to mind?
Per Webster’s, the definition of economics (I’m a bit of definition, historical reference kind of gal if it isn’t obvious from my prior blogs) is
- (used with a singular verb) the science that dates with the production, distribution, and consumption of goods and services, or the material welfare of humankind.
- (used with a plural verb) financial considerations; economically significant aspects: What are the economics of such a project?
Considered in the context of the first reference, contract economics conceivably refers to the production, distribution and consumption of contracts. Works for me. Not sure about the reference to humankind – slightly lofty in my opinion. The second reference, the financial considerations of a contract – that is, managing a contract – is spot on. Here at Corridor Company, when we refer to contract economics, we mean the following:
- Focusing the right human resources – contract managers, attorneys, etc. – on the areas that they know and manage best and on the right business problems. Hearkening back to our studies of economics, I believe that this is referred to as comparative advantage, no?
- Optimizing the contracting process and using standardization (as appropriate) to help make the process more efficient. In contract management, as in business, time is money.
- Making the business case for a contract management system. We do, after all, sell contract management software.
- And finally, transforming your contracts into opportunities. More specifically, how do we transform contract management and the management of obligations from a risk management exercise into one that reveals opportunity. Let’s make economic sense of our contracts.
Four rather lofty discussion points, and the focus of Corridor's next four blogs (as well as a Corridor webinar) affectionately called Contract Economics. We hope you’ll join in the dialogue as it promises to be educational, thought-provoking, and (dare I suggest?) a sound investment of your time.
Contract Economics Blog Series
- Part 1 Focusing the Right Human Resources on the Right Business Problem
- Part 2 Leveraging Process and Automation
- Part 3 Building a Business Case for a Contract Management System
- Part 4 Transforming Contracts into Opportunities