Procurement should be leading the charge to equip organizations with the supplies and resources that move business forward. But they’re increasingly bogged down with rote contract negotiating and review tasks that frequently must be escalated to Legal, depending on the experience of available personnel.
Ideally, Procurement would focus solely on negotiating deals and saving costs for the business while Legal takes care of the legalese. However, with Legal also facing its own workload and efficiency burdens, Procurement is often forced to pick up the slack to prevent business from entirely grinding to a halt and their internal clients not having tools they need to do their work.
Procurement has carried this burden long enough. They should obtain the support they need when they need it, and adopting legal technology can be the first step towards this. Legal AI tools can help Procurement more efficiently review routine contracts consistently, freeing them to add value in more significant ways.
Procurement’s job is hard enough
Procurement has one of the toughest jobs in corporate organizations – it’s their duty to see that everyone has what they need to perform their jobs successfully. Although this sounds straightforward, it rarely is, especially considering the array of responsibilities that Procurement is often juggling.
From identifying needs to product sourcing, supplier management, payment processing, and inventory management, Procurement’s plate is full but they’re also responsible for negotiating contracts just like Legal, yet often without many attorneys on staff to review them.
When Procurement works seamlessly, their colleagues won’t even know they’re there. Procurement really is the unsung hero of the organization. But when deals get held up, all that hard work behind the scenes seems to go unnoticed. That’s why it’s imperative to have a consistent methodology in place for Procurement to use to review and negotiate agreements with speed and precision.
If Procurement is able to complete agreements with vendors faster, the impact on the business is bigger with the benefit the company gains from the vendor. At the end of the day, internal clients don’t necessarily care about things that help Procurement do their job better, only that they have the tools they need when they need them so they can keep meeting their own goals.
Further complicating this is that reviewers (buyers) often have no formal legal training and possess wildly varying experience reviewing contracts, depending on seniority. Some buyers are unfamiliar with contracts and can be intimidated by legalese. As a result, the business can experience slow turnaround times as buyers escalate to Legal.
“We strive to run our Purchasing unit so that our buyers are able to work confidently and in a way that allows them to provide the best and most efficient procurement support for our organization and the various business needs that arise. Ideally, buyers should be in a position to feel comfortable in knowing what they’re looking at and whether it’s something they can push back on agreeing to or if it’s truly a new and novel issue.” — Amanda Schindler, Head of Purchasing at Natixis CIB Americas
Amanda Schindler, Head of Purchasing at Natixis CIB Americas, notes that when Procurement teams take on reviewing routine contracts without Legal’s involvement, there can be some reluctance surrounding reading contracts manually and pushing back on business lines:
When companies’ buyers don’t know exactly what they’re looking at in a contract and if it’s something they can agree to or if it’s truly a new issue, there can be delays while they have to escalate contracts to Legal for those determinations.
But Legal itself is frequently ill-equipped to provide the support other business units need. Legal departments are unprepared for the speed at which digital business operates; in fact, 76% of general counsel confess that managing current workloads is challenging for them.
According to Chris Bennett, commercial attorney at eBay, the legal team has anywhere between 10 to 30 deals pending at any point in time. Procurement was often left waiting for Legal to prioritize and approve agreements, and those delays caused unnecessary tension between purchasers and the legal department internally, as well as external stress with suppliers.
“Contracts often form the beginning of our relationship with a new client and can really set the tone for the entire partnership,” said Bennett. “Delays in getting started and friction over clauses that eventually may be waived anyway don’t set the right tone.” — Chris Bennett, commercial attorney at eBay
Procurement leaders would rather focus on finding ways to save money and costs through the deals they make while leaving Legal to hash out the details. They want the legal support to identify the critical legal issues within offered contracts, so they’re equipped to do the job they do best – closing profitable deals.
“Legal’s job is to protect the company. My job is to do that too but more importantly save the company as much money as I can. So where do I want to spend my time? The sooner I know the disputed issues in a contract, the sooner I know I can use them as negotiation points. I want my people to have more time to: a) know what they have to negotiate against; and b) focus more on the commercial and business relationship instead of the legalese.” — Marc Goldberg, former Vice-President of Financial Shared Services at Dun & Bradstreet
Thankfully, AI contract review software provides the tools that empower Procurement departments to do just this. With contract review automation (CRA) tools, buyers can negotiate with confidence, knowing they can call on legal tech that has been tailored to their companies’ policies and automatically applied to their contracts – just as if Legal were doing the review themselves.
6 Benefits of AI-powered contract review automation solutions for Procurement
AI-powered contract review automation solutions allow Procurement to enjoy the on-demand support that Legal is often too busy to provide, especially for low-value contract review work, effectively letting them work faster. In addition to this, CRA software offers the following six benefits:
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Enables Bargaining Confidence
AI quickly surfaces and offers insights into loopholes and potential sinkholes the other party is pushing for that are different from company policy. Reviewers might use these as bargaining chips to negotiate from a position of strength, knowing they have the support they need for success.
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Frees up Procurement
Crucially, legal AI tools mean that Procurement no longer has to burden itself with legal risk – no matter how small. Rather than lose sleep over legal implications, Procurement reviewers instead can focus on negotiations and nurturing supplier relationships while armed with the legal insights that contract review automation software provides.
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Provides Consistency & Reduces Risk
When left to review contracts manually, accuracy and consistency can vary considerably from buyer to buyer. However, implementing legal AI codifies legal policy and standardizes the review process, supporting less-experienced Procurement reviewers and ensuring a more consistent review process overall.
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Reduces Escalation to Legal
Legal departments are too often overworked and overburdened with low-value contract review tasks, with general counsel admitting 1 in 5 in-house counsel hours is spent on low-complexity, routine tasks. Contract review software can empower Procurement to quickly handle these rote review tasks, leaving buyers to move forward on deals without unnecessarily burdening the Legal department.
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Speeds up Turnaround Time
Procurement is already enduring a lot of back-and-forth with suppliers through multiple iterations of offers and counteroffers; it doesn’t need to add the delays of waiting on Legal to provide input on every minor change. With the support of legal AI, Procurement can rapidly obtain the advice they need, allowing them to push deals through faster.
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Eliminates Friction with Legal
With Procurement no longer needing to flood Legal with low-value, low-threshold contract review work or take up these tasks themselves, both departments can breathe easier. Procurement and Legal teams can rest assured knowing that when they work together, it will be on meaningful collaborations with strategic or commercial importance.
An empowered Procurement department is a win for business
AI contract review software allows business units to obtain legal judgment without requiring direct legal advice from an attorney; with it, Procurement can focus more on buying and renewing, while Legal can finally become the strategic business partner it was always meant to be. It’s a win-win for business.
