Why Contract Compliance is Contract Performance

The Challenge of Contract Management

Most companies are managing tens of thousands of contracts alongside thousands to even a million invoices. As Allan Bolam, Senior Manager of Audit Operations at PRGX, pointed out during the webinar, “Supply contracts are everywhere, and they’re often not delivering what we expect.” With external supply costs typically costing a significant amount of revenue, even small inefficiencies can have major impacts on your bottom line.

According to the World Commerce & Contracting, poor contract management can cost up to 9% of your bottom line, while excellence in this area can add 8% – representing a 17-point swing in performance. This highlights why ensuring compliance isn’t just an administrative function but a strategic business imperative.

What is Contract Compliance?

As Alan explained in the webinar, contract compliance goes beyond simple oversight. Using a powerful analogy, he compared supplier contracts to a car: “On the surface, everything looks fine. It’s signed, it’s running, the supplier’s delivering. But just like a car, what really matters is what’s happening under the bonnet (hood).”

Contract compliance acts as the financial mechanic – lifting the hood, checking the engine, and making sure every part is performing according to the contract (the manual). You don’t just assume it’s working because it’s moving forward; you verify it’s working correctly and delivering maximum value.

The webinar revealed common issues discovered during compliance reviews, including:

• Agreed discounts never applied
• “Gray margin” proliferation, even from suppliers claiming to operate on thin margins
• Charges for services specifically excluded in contract terms

How Contract Compliance Sets the Stage for Streamlined Negotiation

The webinar highlighted several best practices for effective contract management:

1. Get the language right – Contracts succeed or fail on clarity; ambiguous wording leads to billing errors and misaligned expectations
2. Align both parties – Ensure everyone understands the contract; define financial mechanics clearly
3. Ensure accountability – Control contracts and track every change
4. Embed governance – Schedule regular reviews and track SLAs/KPIs for critical suppliers
5. Monitor continuously – Compliance isn’t a one-off; keep communication flowing throughout the contract lifecycle

Learn more about best practices in  The 2026 Guide to Negotiating & Optimizing Supplier Contracts.

As Alan asked during the webinar: “You invest months creating contracts with legal, procurement, operations, and partners, but how much time do you spend making sure they’re actually delivered during the duration of the contract?”

The John Lewis Partnership Journey with PRGX Contract Compliance

Keith Rosser, Contract Manager at the John Lewis Partnership, shared his organization’s evolution from initial skepticism to enthusiastic adoption of contract compliance practices.

“For me, contract compliance is contract performance,” Keith emphasized. “It’s about how you can get the best performance out of the contract.”

The John Lewis Partnership faces common challenges – thousands of contracts managed by a relatively small contract management team. While they handle day-to-day SLAs and basics, they rarely have the opportunity to perform forensic audits or “lift the hood” on contract performance.

Keith described their journey:

1. Initial reluctance from the business to engage with contract compliance
2. Building interest by presenting speculative numbers about potential value
3. Starting with a proof of concept focused on complex organizations with high turnover
4. Expanding before the POC even completed, as the value became apparent
5. Evolving to a structured program with multiple “waves” of contract reviews

A telling sign of success: “We’ve now had contract managers come to us and say, ‘We’ve got this, I wonder if you can help’ – they’ve come to us, we haven’t gone to them. That’s always quite a good sign.”

When asked about the best time to conduct contract compliance reviews, Keith was emphatic: “Now is good, quite frankly. If you’ve never done it, do it now.”

How PRGX’s Purpose-Built Contract Insights™ AI Elevates Contract Compliance

Amit Dingare, Chief AI Officer at PRGX, explained how their purpose-built technology, Contract Insights, transforms contract compliance through seven key steps:

1. Contract Upload – Processing and organizing contracts by suppliers
2. Deduplication – Identifying the latest and signed versions while eliminating duplicates
3. Clause Extraction – Using AI models that understand semantic meaning to extract important clauses
4. Table Extraction – Handling complex tabular data that often contains critical commercial terms
5. Contract Hierarchy – Building temporal hierarchies to understand how clauses evolve over time
6. Automated Spend Category – Assigning spend categories to suppliers for better organization and analysis
7. Opportunity Identification – Creating clause summaries and identifying attributes that correlate with overpayment opportunities

As Amit explained, general-purpose AI tools are like a “Swiss Army knife” – they have functions, but you wouldn’t use one to fix a car engine. With the complexities of supplier contract management, purpose-built AI guided by expert oversight delivers the highest ROI.

The tool focuses on three primary clause categories: pricing/cost clauses, risk clauses, and performance clauses. By connecting contract analysis with historical data, it helps identify the highest-value opportunities for recovery and improvement.

Contract Compliance as a Strategic Advantage

As the webinar concluded, Alan Bolam emphasized that contract compliance is just the beginning:

1. Contract Compliance is your retroactive check – the financial mechanic lifting the hood to ensure contracts perform as intended
2. Contract Optimization moves you into a proactive stance, using insights to negotiate better terms across your entire portfolio
3. Contract Monitoring keeps contracts finely tuned so they deliver consistently and issues don’t resurface

By combining deep expertise with AI cutting-edge technology, organizations can achieve best-in-class Contract Management and unlock maximum value from their supplier relationships. Here is a summary of webinar highlights.

• The Hidden Costs of Poor Contract Compliance: Learn why inefficiencies can cost up to 9% of your bottom line and how excellence can create a 17-point performance swing.
• What is Contract Compliance? Understand how it goes beyond oversight and acts as the “financial mechanic,” uncovering hidden inefficiencies and ensuring contracts deliver maximum value.
• Best Practices for Managing Contracts: From aligning contract language to embedding governance, get actionable tips to streamline negotiations with suppliers.
• Real-World Insights from the John Lewis Partnership: See how they moved from skepticism to structured programs recovering significant value.
• Purpose-Built AI Solution: Discover how PRGX Contract Insights™ AI use seven advanced steps, including clause extraction and opportunity identification, to recover revenue and improve contract performance.
• Moving Beyond Compliance: Understand how proactive optimization and continuous monitoring elevate contracts into strategic assets.

Watch the full webinar to learn more about how AI-powered contract compliance can help your organization recover revenue and strengthen supplier relationships. Or schedule time to chat with an expert about your unique goals. Here is the recap of the key topics. Let us know if you have any questions!