Companies routinely sign contracts and promptly file them away, often neglecting to thoroughly review the terms and costs agreed to. The truth is major cost reductions regularly lurk unnoticed within signed contracts.

By analyzing contracts before renewal, major cost reductions can often be achieved on services, pricing, length of term, and other outdated provisions. Even minor improvements add up when addressed across an entire contract portfolio.

Why You’re Leaving Money on the Table

The “set it and forget it” mentality around contracting often sets up a company to overpay for products and services over the term of the agreement. Escalating pricing, terms and unnecessary or underutilized services get renewed year after year without regular evaluation. Expenses then continue to rise without realizing savings could be uncovered.

When to Review Contracts 

The best time to analyze your contracts is 6-12 months prior to renewal. This allows ample time to identify areas for improvement and negotiate favorable updates with vendors and suppliers or to competitively bid out the work. It also prevents you from getting boxed into the standard or automatic renewal terms.

Analyzing Contracts to Uncover Cost Savings

Thoroughly analyzing your contracts can uncover numerous opportunities to reduce expenses and improve your bottom line. Making contract analysis part of your regular business processes ensures you never overlook savings opportunities within your signed agreements. You can then renegotiate contracts to favorably update outdated, inefficient, or expensive terms.

Areas to Analyze Savings

  1. Pricing: Review all costs to find opportunities to pay less. Look closely at fees, penalties, taxes, and provisions for price increases.
  2. Services: Determine whether you still need all services listed in the contract. Eliminate unused or unnecessary ones.
  3. Length: Consider defined term contracts to bid services regularly to realize the best market rates.
  4. Outdated Terms: Update contract language to reflect changes in technology, business processes, company needs and more.
  5. Volume Discounts: Look for ways to consolidate contracts with the same vendor to achieve better volume pricing.

The Impact: Major Savings

Contract analysis uncovers savings most companies never realize they are leaving on the table. The effort yields an exceptionally high return on investment through lower ongoing costs and improved agreement terms.

Tracking realized cost reductions also allows you to quantify the value of making contract reviews a continual process. You have nothing to lose and plenty of savings to gain.

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Photo of Christopher Kinney Christopher Kinney

As a consultant with Gray Reed Advisory, Christopher Kinney advises and assists companies and local governments of all sizes to manage their contract inventory effectively and efficiently through the lifecycle of an agreement.  He is experienced at advising on choosing the right solicitation…

As a consultant with Gray Reed Advisory, Christopher Kinney advises and assists companies and local governments of all sizes to manage their contract inventory effectively and efficiently through the lifecycle of an agreement.  He is experienced at advising on choosing the right solicitation path (e.g., RFP, IFB, RFSQ) best suited to accomplish your goals from developing and orchestrating the solicitation process, evaluating responses, negotiating and drafting contracts, managing obligations, and maximizing value during agreement renewal.

Christopher is also currently Gray Reed’s Contracts Administrator and responsible for maintaining the Firm’s agreements including preparing, analyzing, reviewing, drafting and negotiating various vendor and service agreements, ranging from standard to highly complex. Prior to joining the firm, Christopher spent nearly 17 years in government contracting with the County of Los Angeles.

Christopher earned his Bachelor of Arts degree from California State University – Bakersfield and is a proud veteran of the United States Army.