Relationship Models

It is important for both parties to understand and agree the appropriate type of relationship model for the particular contract, recognising it will not be the same for all agreements (Industry Capability Network)


Information about Relationship Models

In most contracts the model of a relationship lies between the traditional arm's length arrangement and a full partnership agreement The former model, also known as 'transactional', describes the relationship where "the agency orders and the supplier supplies". The arm's length model does not require a supplier to understand the purchasing company and its business objective or add value above just supplying the goods or services "in full, on time and to specification". As an example, this relationship model can be applicable to software licensing. Partnership agreement, on the other hand, arises when buyer and supplier understand each other’s business objectives and communicate openly. This relationship is about adding value and requires sharing risks and rewards. Partnership arrangements work better when there is a degree of cultural alignment, certain convergence in goals and the commitment to the relationship at all levels (Industry Capability Network:7).

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