The hidden revenue leak that most organisations suffer is still underestimate. Poor contract and commercial management can destroy up to 9.2% of annual revenue
That figure comes from research by World Commerce & Contracting (WorldCC) which found that organisations routinely lose significant value through unclear scopes, poorly allocated risks, ineffective governance, inadequate stakeholder engagement, and weak contract administration.
At first glance, 9.2% may not sound catastrophic. But when translated into real-world contract values, the scale becomes startling.
For a £20,000 contract, that’s a potential loss of £1,840.
For a £1 million contract, it’s £92,000.
For a £100 million contract, the potential value erosion exceeds £9 million.
In an environment where organisations are under increasing pressure to deliver efficiencies, improve productivity, and demonstrate value for money, these losses should be impossible to ignore. Yet many organisations continue to view contract management as an administrative necessity rather than a strategic business capability. The result is millions of pounds of preventable value leakage every year. Well-constructed contracts exist to create certainty, they define obligations, allocate risks, establish performance expectations, and provide mechanisms for resolving issues when things don’t go according to plan.
However, when contracts are poorly managed, that certainty disappears. Instead of acting as tools that support delivery and performance, contracts become sources of confusion, conflict, delay, and cost escalation. The consequences can include:
Scope creep and uncontrolled change
Supplier disputes and claims
Missed service levels
Delayed project delivery
Unclear accountability
Increased operational costs
Reduced customer satisfaction
Reputational damage
The UK National Audit Office (NAO) has repeatedly highlighted examples where weak contract oversight has led to increased costs and reduced service quality across major programmes. While procurement teams often focus significant effort on securing competitive prices during tendering, the reality is that most value is either created or lost during contract delivery. Winning a competitive price at contract award means little if the organisation subsequently loses value through poor governance, inefficient service delivery management, unmanaged risks, and ineffective supplier performance management.
In my experience, many organisations invest heavily in procurement, they develop robust sourcing strategies, they run competitive tenders, they use my 10 c model to select suppliers, they negotiate aggressively and seek to meet savings targets. However, once the contract is signed, attention often shifts elsewhere. The assumption is that delivery teams will simply manage the contract, often these are technical people who are managers of contracts and not commercial astute contract managers.
This creates what many commercial professionals recognise as the “procurement paradox.” That is organisations spend months selecting suppliers and negotiating terms, then invest relatively little effort in ensuring those terms are delivered as per the contract they have set up.
Organisations must realise that contract award is not the finish line, It’s the starting point. It is ironic that value erosion rarely occurs because of one catastrophic failure, more often, it results from dozens of small issues that accumulate over time to eat away at the value and the margins. One of the most common causes of contractual disputes is ambiguity. If stakeholders interpret requirements differently, suppliers may deliver something technically compliant but operationally unsuitable. This is often the case when the key stakeholders were not involved or consulted about their requirements. This can lead to:
Additional work
Change requests
Delays
Disputes over responsibility
Increased costs
Clear requirements and well-defined deliverables significantly reduce these risks.
Contracts often fail because risks are assigned to the wrong party, when suppliers are asked to carry risks they cannot reasonably control, they increase prices or seek opportunities to recover costs later. Conversely, when organisations retain excessive risk without proper controls, they expose themselves to financial and operational consequences. Effective commercial management focuses on allocating risk to the party best placed to manage it. Governance is often viewed as bureaucracy, but in reality, good governance provides visibility, accountability, and control. Without structured governance arrangements, organisations struggle to identify emerging issues before they become significant problems. Most contracts evolve over time, and needs change due to technology, market conditions and regulatory requirements change. Without robust change management processes, organisations can quickly lose control of costs via expensive variations.In my experience many organisations only focus on supplier management only when problems occur, but by that point, relationships are already under pressure. Best practice organisations actively develop collaborative supplier relationships that encourage transparency, innovation, and continuous improvement. As we all know, the modern contracting environment is becoming increasingly complex, organisations now face
Global supply chain disruption
Inflationary pressures
Skills shortages
Cybersecurity risks
Sustainability requirements
Increasing regulatory obligations
Rapid technological change
These factors increase uncertainty and place greater demands on contract managers and commercial professionals. Without active management, organisations can find themselves exposed to risks that were never anticipated when the agreement was originally negotiated. This is why contract management is no longer simply about compliance. Today it is about resilience, and successful organisations recognise that investment in the training and development of professional commercial and contract managers is a wise investment as they contribute directly to their strategic objectives.
