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Ways to Improve Contracts using Benchmarking Clauses

by: Sarah Joson

Monday, February 25, 2013 | Outsourcing News |

Using Benchmarking on Outsourcing Contracts

Benchmark clauses have long been used in contracts. These provide companies a perspective on the state of the market as well as the competitors.

According to an article written by Senior Consultant at ISG Robyn Singlehurst, posted at info.ISG-One.com, benchmarks should have these characteristics to be successful, especially in new contracts.    

The benchmark  should have a workable program (schedule). For services and products that often change in pricing, benchmarking should be done annually. For those that are in a more stable industry or market, it should be done every two to three years. However, if there are changes to be made, it should be able to cover the benchmarking expenses.

It should be directed to the perfect target. Benchmark clauses should be able to withstand the test of time. For instance, you are aiming for the average benchmark; it should still be valuable after several years of implementation. One thing to consider two or three years from now is: will the provider allow you to take up its margins?

It should be able to follow a certain format. Instead of having to revise a few months from when it was drafted or having to revise month after month, it would be better if changes are addressed in a specific date. For example, when it comes to changes in pricing, providers can bill clients every month or in their usual schedule, but the changes in pricing can be done retroactively.  
It should make the decision-making process easier.
Benchmark clauses that already include a list of the providers can make the work easier and faster, considering that there are countless providers in each industry which will take up time and money.

It should be absolute
. Make sure parties involved follow the outcome of the benchmarking process. If one side does not agree and refuses to perform their part, then having a benchmark will be useless.

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