Inefficient management of supplier contracts

Surprisingly in today’s business environment a substantial number of ASX-Listed companies still do not efficiently manage supplier contracts.

Typically, service provider contracts are not reviewed as they come up for renewal, either through complacency or due to poor governance or management. Its staggering, especially when you consider the rapid pace at which industry and technology moves and the ability to drive cost saving through an efficient process.

Based on my direct experience with respect to registry provider contracts, they are typically evergreen contracts that roll-over continually without review.

A tender process is the most simple and efficient way to review and manage contracts up for renewal. Being the client, you control the tender process and dictate the key deliverables and timeframes to the tenderer, so it runs seamlessly with minimal burden on the management team.

Regardless of whether the client remains with the existing provider, the management team gains a significantly deeper understanding of the market offering and, consequently, can incorporate these services into the new contract while reducing the fees being charged. The outcome is a better service agreement with improved pricing.

While the number of ASX200 companies running competitive tenders for share registry and share plan administration services has increased over the past two years, there is an estimated 60% of companies that still have no process for review.

I have no doubt that the registry service provider contract is not the only contract that is not being regularly reviewed – surely this is a low hanging fruit opportunity for any company?

Paul Williams is the Managing Director of Automic Pty Ltd..