Revenue leakage from long-term contracts and what it suggests for law departments

Mark Harris, the CEO of Axiom, referred to a surprising finding from one of his company’s projects. Speaking at Georgetown University’s Center for the Study of the Legal Profession conference on March 9th, Harris referred to long-term contracts and their “revenue leakage.” One company, he said, spent more than $100 million a year on its commercial contracts suffered revenue leakage from them estimated at 5-7 percent. Harris did not elaborate, but it may be that failures to renew or to raise rates or shift costs accounted for that lost income. Nor did he claim that typical companies endure such a hemorrhage.

My reaction to Harris’s vignette stems from a law department’s involvement with contracts, or as importantly with contract administration. If losses of such a magnitude afflict many companies, lawyers are letting down their clients. Somehow, better contracts should put fingers in some of those dikes, savvier interpretations of their client’s rights, or better oversight of executed contracts could turn law departments that can claim a portion of the saved money as profit centers. We need to know if revenue leakage from contracts happens at that rate and what the law department can do to apply a tourniquet.

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