Risk-reward or gain share (GS) commercial agreements can be a fantastic way of incentivising over-delivery and incremental added value, especially in professional and consultancy services. However, if deployed naïvely GS can not only destroy contract value, but can dilute goodwill and possibly lead to litigation.
The strength of a procurement consultancy can be determined by how intelligently they negotiate their contracts.
Success of GS within procurement relies on the implementation of key rules. Marrying GS to the right type of project and aligning the principles of GS with a savings methodology are but two of the ways in which the risk-reward equation must be balanced.
For detailed advice on designing GS agreements, read the full article in the new edition of Supply Business