Closing the procurement value gap

How smarter contracting can prevent 11% value leakage

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Executive summary

Procurement contracts are quietly leaking value. WorldCC research reveals that organizations lose an average of 11% of contract value, and the gap is widening relative to suppliers. This report examines where value is lost, why traditional procurement approaches are insufficient, and how organizations can reverse the trend.

The evidence points to an overall lack of coherence in how the contracting lifecycle is managed. Value leakage happens after signature, in how organizations translate contracts into behavior, governance, and relationships. However, the gaps are not confined to any one phase of the acquisition process. They reflect an enterprise-wide failure to structure and manage contracts as living commercial relationships rather than static documents.

Procurement and Legal, as traditionally configured, contribute to these gaps rather than closing them. Their tendency to focus on pre-award activity means the functions that might be expected to provide commercial expertise frequently exit at precisely the moment when that expertise is most needed. Closing the value gap requires not just better procurement, but a fundamental rethinking of accountability for contract outcomes.

Closing the Procurement Value Gap

Where is value lost?

The 11% average value leakage is not a single problem — it’s the accumulation of losses across multiple failure points.
This figure can often be significantly higher as most organizations do not formally track value leakage at all. Understanding where value is lost enables organizations to prioritize interventions and calculate their own exposure.
 
Sources of value leakage broken down across categories
Based on WorldCC research and practitioner interviews
Figure-02

Key takeaways

The "post-signature" exit: Value leakage happens after signature because Procurement and Legal, the functions with commercial expertise, frequently exit at the moment they are most needed.

The 11% cumulative loss: The 11% loss is not a single leak but an accumulation of failures, including missed savings, unmanaged clauses, and unauthorized changes. Most organizations do not formally track this.

Risk allocation is not risk management: Piling on risk clauses in templates does not manage risk; it simply determines who pays when things go wrong, often resulting in higher price premiums and "operationally hollow" contracts.

Foundational maturity failures: The most severe gaps are "clarity of responsibilities" and "process maturity." These are enterprise-wide failures, not just procurement-specific ones.

Static contracts in volatile markets:  traditional fixed-price, rigid contracts create an "illusion of control" and fail to provide the adaptability needed for today’s shifting trade dynamics and input costs.

The "human interface" in an AI world: While AI has massive potential for obligation tracking, it is only 80% correct without context. Human judgment and "contextual understanding" remain the critical safeguard against leakage.

Conclusion

The strategic level steps needed to plug the gap and avoid continued value leakage:
Graphic-03-2
The answer is not simply ‘better procurement’. Procurement, as traditionally configured, cannot close the gap because its primary mandate ends where the gap begins, at signature.

Closing the value gap requires organizations to follow the steps outlined in the 'Organizational check-list to close the value gap'. Market conditions have contributed to the increase in value leakage, and this trend will continue without deliberate action. Organizations that modernize their contracting approach, moving from template-driven control to adaptive governance, smarter digital workflows, and proactive performance management, will not only stem the leakage but turn contract management into a source of competitive advantage.
Organizational check-list of actions to close the value gap:
Figure-05

Closing the Procurement Value Gap

Written by

Tim Cummins Follow me on LinkedIn

President
WorldCC

Dan Springer

Chief Executive Officer
Ironclad

Sunita Verma

Chief Technology Officer
Ironclad

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