The Road to Contract Portfolio Management: Determining the Optimal Level of Standardisation of the Contract Portfolio

Anders Laurvig Kierstein, Jonathan Hjelholt Jensen & Thomas Lavsen

Student thesis: Master thesis

Abstract

This Master Thesis seeks to develop the concept of Contract Portfolio Management and examine the use of the transaction cost economic theory as a resource management tool to enable the possibility of determining the optimal level of standardisation in the contractual work of the company across the contract portfolio. Thus, the frame of this Thesis is to actively deduce optimal contract drafting and management of the contract portfolio and to examine in which way the implementation of Contract Portfolio Management can help the company in doing so. Initially the concept of Contract Portfolio Management is defined. This concept is i.a. built on the principles of the well-developed, but yet only vaguely defined, concept of Contract Management. Whereas Contract Management focuses on the relationship between contracting parties, and the contracting in itself, this Thesis raises the level of analysis to the contract portfolio, in order to examine factors that affect the management of the contract portfolio. Furthermore, the need and justification for Contract Portfolio Management is described, based primarily on articles and reports from The International Association for Contract & Commercial Management, illustrating an incoherence between the most negotiated contractual terms, and the terms deemed to add the most value to contracts. With that established, this Thesis explores the underlying legal and economic conditions related to both the contract portfolio, different IT contract types, the individual contract, and various contract clauses, creating the basis for the analysis of the optimisation of standardised contract clauses across either the entire contract portfolio or the individual contract type. The terms of legal predictability and flexibility are introduced, in order to quantify the ability of the company to deduct applicable law and apply the measures of proactive law, when deemed optimal. The transaction costs are used as a resource management tool, to enable the company to optimise the allocation of resources, in order to deduct the optimal trade-off between minimising transaction costs, maximising the legal predictability and facilitating value-creation, given the specific circumstances. Based on a derivation of the comparability and complexity of the different contract types, performances, and the portfolio in general, an optimised configuration of Contract Portfolio Management is proposed, conferring a corresponding amount of autonomy to the individual decision-maker within the company. Furthermore, based on the characteristics of the portfolio and the optimal configuration of the Contract Portfolio Management, this Thesis elaborates on the conditions for standardisation of various representative contractual clauses across the contract portfolio or a single type of contract. Finally, this Thesis examines different practical solutions to the implementation of Contract Portfolio Management in the company, enabling optimisation of the allocation of resources in the effort to maximise the legal predictability and minimise transaction costs, while facilitating further value creation, possibly by incorporating proactive clauses.

EducationsMSc in Commercial Law, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2020
Number of pages137
SupervisorsKim Ƙstergaard