Contract review summary

You’re probably asked to review new agreements with suppliers on a regular basis. Your perceived role is one of looking over the terms, just to see if there is anything onerous in them that has been missed by others. Having a standardised report format will make your life easier.

Key financial costs

These contracts could range from minor overheads, e.g. for a postal franking machine, to a significant spend on a direct cost, e.g. using a new supplier for one of your product’s components. But what should you be looking for?

Terms included or attached to an agreement are mostly pretty standard fare. Generically, the additional finance costs of any agreement are found in three areas: (1) specified set-up fees; (2) any ongoing variation charges/penalties; and (3) cancellation fees/penalties when you want to cut short the arrangement. Budget holders who negotiate or renew agreements typically fail to pay attention to these areas, focusing instead on just the cost or level of service they are getting from the deal.

Establish an understanding with the budget holder about what you will be looking at in this type of limited review. You are not a legal expert. It’s the three key finance costs of any agreement you will be focusing on. Of course, if anything odd leaps off the page, you would certainly bring it to their attention.

Issue a short Contract Review Summary highlighting and commenting on the key financial terms in the agreement.