Simplifying Procurement Contracts and Key Challenges with Certify™

Procurement professionals are no strangers to the complexity and challenges of managing procurement contracts. The procurement process involves multiple stakeholders, often spanning various departments, each with its own priorities and goals. From inefficiencies in tracking contract compliance to concerns about risk exposure, procurement teams face numerous hurdles that can slow down their efforts and increase costs.

At the heart of these challenges lies a critical question: How can procurement teams ensure that their contracts are fair, compliant, and optimized for success? The answer lies in leveraging AI-powered tools like Certify™ to not only streamline the procurement process but also turn contracts into actionable, data-driven assets.

In this post, we’ll dive into the top procurement challenges, explore what a procurement contract is, outline the four types of procurement contracts, and explain how Certify™—our powerful AI-driven contract certification solution—can help procurement teams navigate these obstacles with confidence.

What is a Procurement Contract?

A procurement contract is a legally binding agreement between a buyer (typically a company or government organization) and a seller (supplier or contractor). It outlines the terms and conditions for the purchase of goods, services, or works. The purpose of these contracts is to ensure that both parties understand their obligations and expectations, including delivery timelines, pricing, quality standards, and payment terms.

Procurement contracts serve as a safeguard against disputes by clearly defining the responsibilities of both the buyer and the supplier. They can be structured in a variety of ways, depending on the nature of the procurement and the level of risk involved.

What Are the Four Types of Procurement Contracts?

Procurement contracts come in different types, each suited for specific business needs and risk profiles. The four main types of procurement contracts are:

1. Fixed-Price Contracts

In a fixed-price contract, the buyer and seller agree to a set price for the goods or services to be provided. This type of contract is typically used when the scope of work is well-defined and there is little risk of cost fluctuations. The seller assumes the risk of any cost overruns, while the buyer benefits from predictable costs.

2. Cost-Reimbursable Contracts

A cost-reimbursable contract involves the buyer reimbursing the seller for the actual costs incurred during the execution of the contract, plus an additional fee. This type of contract is used when the scope of work is unclear or when unforeseen circumstances may arise that impact costs. The buyer assumes more risk in this contract, but it provides flexibility for both parties.

3. Time and Materials Contracts

A time and materials contract is a hybrid between fixed-price and cost-reimbursable contracts. It allows the buyer to pay for the seller’s labor and material costs at pre-agreed rates, with a markup for profit. These contracts are often used for projects with uncertain scopes or for ongoing work where the exact time and materials required cannot be fully determined in advance.

4. Incentive-Based Contracts

An incentive-based contract is designed to motivate the seller to perform well by offering bonuses or rewards for meeting specific performance targets. These contracts are commonly used in long-term projects where the buyer wants to encourage high-quality work and timely delivery. The buyer assumes some risk but can benefit from improved outcomes.

Each type of procurement contract comes with its own set of benefits and risks, and choosing the right one depends on factors like project scope, risk tolerance, and the relationship between the buyer and supplier.

The Top Procurement Challenges Procurement Teams Face

Procurement contracts are foundational to the success of any business relationship, but they come with several inherent challenges that can be overwhelming without the right tools. Here are some of the most common pain points:

1. Lack of Visibility and Control

With a large volume of contracts to manage, procurement teams often struggle with limited visibility into their portfolio. This lack of insight makes it difficult to assess the risk and overall health of procurement contracts.

2. Manual and Time-Consuming Processes

Many procurement departments still rely on manual processes, which can result in delays, errors, and missed opportunities. Tracking changes, comparing terms, and ensuring compliance require a lot of time and effort.

3. Risk and Compliance Concerns

Managing procurement risks—whether they involve financial terms, market positioning, or regulatory compliance—is a constant struggle. Without the right data analytics, procurement professionals may overlook deviations from industry standards or fail to identify hidden risks within contract terms.

4. Ensuring Contract Fairness

Ensuring that procurement contracts are fair, balanced, and aligned with market standards is crucial. However, manually benchmarking terms against industry norms is an inefficient and error-prone task.

5. Difficulty in Tracking Contract Performance

Post-signature contract monitoring and performance tracking are often neglected. Procurement teams may not have the insights they need to ensure that vendors are meeting their obligations, potentially leading to costly issues later in the lifecycle.

Certify™: A Game Changer for Procurement Teams

Certify™ is the solution to these procurement contract challenges. It uses expert contract analysis and scoring backed by AI to provide actionable insights, benchmarks, and certification that help procurement teams optimize contract terms and manage risks more effectively.

1. Gain Full Visibility into Contract Performance

With Certify™, procurement teams can monitor contract performance in real time. It extracts and analyzes key contract data, allowing teams to track deviations from market norms and identify risks before they become problems. Through contract intelligence, you can easily visualize your portfolio’s health and identify contracts that need immediate attention.

2. Streamline Procurement Contract Certification

Manual contract approval workflows can slow down the process, increasing time-to-value. Certify™ automates the certification of procurement contracts by benchmarking them against verified market standards. This process accelerates approval times, ensuring contracts meet industry benchmarks for fairness and market readiness.

3. Risk Mitigation and Compliance Assurance

By leveraging deviation analysis and contract scoring, Certify™ helps procurement teams identify risks and compliance issues with accuracy. It surfaces insights into the specific areas where your contracts deviate from accepted standards, enabling you to take proactive steps toward mitigation and compliance before a contract is signed.

4. Benchmarking and Fairness Assessment

With Certify™, procurement professionals can benchmark their contract terms against thousands of real-world contracts and market standards. This capability ensures that your agreements are fair, competitive, and aligned with industry norms. By leveraging clause prevalence data and contract trend analysis, you can pinpoint favorable terms that benefit your organization.

5. Increased Deal Confidence and Faster Decision-Making

Certify™ empowers procurement teams to make informed decisions quickly. The AI-driven insights plus human contract expertise into contract metrics and deal health ensure that every certified procurement agreement is backed by data, leading to faster decision-making and more strategic partnerships.

You may also want to read Why Contract Certification Matters to Procurement

Benefits of Certified Procurement Agreements

1. Increased Efficiency

By automating contract benchmarking and certification, procurement teams can significantly reduce the time spent on manual contract management tasks. Certify™ frees up valuable time, allowing teams to focus on higher-value activities like strategic sourcing and supplier relationship management.

2. Enhanced Contract Visibility

With contract intelligence and contract insights dashboards, Certify™ and Verify™ offer a clear, up-to-date picture of the entire procurement portfolio. This visibility empowers procurement teams to identify and act on issues faster, leading to smarter decisions and reduced risks.

3. Better Risk Management

Certify™ helps procurement professionals stay ahead of potential risks by identifying deviations from market standards early in the contract lifecycle. By proactively addressing these issues, teams can avoid costly disputes and reduce the likelihood of compliance violations.

4. Improved Vendor Relationships

Certifying contracts ensures that agreements are fair and aligned with market standards, leading to stronger, more transparent vendor relationships. By presenting vendors with contracts backed by market readiness certification, procurement teams can build trust and improve negotiations.

5. Data-Driven Decisions

Procurement teams can make decisions based on real-time data rather than intuition. Certify™ provides data extraction and quantitative analysis, giving procurement professionals the insights they need to make strategic choices with confidence.

Conclusion: Accelerate Procurement Success with Certify™

The procurement process doesn't have to be mired in complexity, manual tasks, or risk. With Certify™, procurement teams gain a powerful tool to enhance contract visibility, streamline processes, and mitigate risks. By leveraging AI-powered contract certification, market benchmarking, and deviation analysis, procurement professionals can ensure that every agreement is aligned with industry standards, fair to all parties, and positioned for success.

Spencer Lasley

VP of Client Experience

Spencer helps enterprise teams accelerate revenue and customer success through strategic, data-driven solutions—backed by 10+ years of experience.