By: Andi Stark
For many large organizations, the real financial damage begins after the contract is signed, not during the negotiation. New research from World Commerce & Contracting, produced with contract platform provider Ironclad, estimates that businesses lose an average of 11 percent of contract value through so‑called “value leakage” during delivery and contract management.
Applied to a company with 500 million dollars in contracted spend, that 11 percent gap translates into roughly 55 million dollars in preventable losses each year. The report argues that this drag on performance is not primarily driven by bad deals or adversarial suppliers, but by fragmented governance, weak handovers, and limited post-signature oversight.
WorldCC’s president, Tim Cummins, describes the problem as a structural defect rather than a negotiation failure. “This is not a result of bad deals, but of a system failure where commercial expertise exits the room the moment a contract is signed,” he said, framing the issue as a challenge for the executive suite rather than just procurement teams.
Where the 11 Percent Goes
The report breaks value leakage into a series of small, compounding failures across the contract lifecycle. Unauthorized or unrecorded scope changes account for an estimated 2 to 3 percent of spend, as project and operations teams make informal adjustments that are never reconciled against contractual baselines. Missed price adjustments, whether escalation provisions that are triggered without scrutiny or agreed reductions that are never applied, add another 1 to 2 percent.
Innovation clauses, gain-share mechanisms, and continuous improvement commitments often sit dormant. The research suggests that another 1 to 2 percent of value disappears when negotiated benefits are not activated, monitored, or translated into operational plans. Service-level failures, poorly enforced performance obligations, and weak use of remedies further widen the gap, particularly in sectors with complex service contracts.
For organizations with higher contract complexity, the total exposure can climb well beyond the 11 percent average. In a high-complexity environment, the report estimates that losses on a 500-million-dollar spend base can reach 75 million dollars a year, once untracked leakage across pricing, performance, and change management is included. Many enterprises do not formally measure these losses, making them difficult to surface in routine management reporting.
Procurement’s Limits and the Handover Gap
One of the stark findings of the study is that procurement alone cannot close the gap. WorldCC’s capability benchmarking data points to the most severe weaknesses in “clarity of responsibilities” and “process maturity,” suggesting that accountability for contract outcomes is unclear across functions. Procurement teams often step back once contracts are awarded, while operational owners may lack the commercial training or data needed to manage obligations and supplier performance.
The report describes a recurring “handover gap” in which the knowledge built during sourcing is not transferred to delivery teams. Obligations, incentive structures, price mechanisms, and risk-sharing clauses are rarely captured in a form that front-line managers can use. As a result, contracts are filed rather than operationalized, and many of the financial and strategic benefits negotiated at signature remain unrealized.
Measurement practices reinforce this pattern. Procurement performance is still largely tracked through negotiated savings at award, with limited emphasis on whether contracted benefits materialize over the life of the deal. Post-signature ownership tends to be fragmented across finance, operations, legal, and business units, with no single function mandated to protect value throughout the contract term.
Technology, Accountability, and a Path to Recovery
Technology vendors and associations see an opening in this gap. WorldCC cites market forecasts suggesting that the contract management software segment could grow at double-digit annual rates as organizations seek greater visibility into obligations, renewals, and performance data. AI-enabled contract lifecycle management tools now promise automated clause analysis, obligation extraction, and alerts around key dates, all aimed at turning static documents into data-rich assets.
Dan Springer, chief executive of Ironclad, argues that the core challenge is not lack of negotiated value but failure to activate it. “Most organizations have negotiated tremendous value into their contracts, and it’s just sitting there unrealized,” he said, adding that AI-enabled systems can help convert contracts into “living assets” that track and support performance over time.
WorldCC’s analysis suggests that organizations that redesign their contracting operating model and invest in better contract management can realistically recover 2 to 3 percent of spend in the first year, with a cumulative recovery of 5 to 10 percent over a three-year program. For a 500 million spend base, that equates to 25 to 50 million dollars in recovered value, enough to command board-level attention.
The report stops short of prescribing a single solution, but it calls for clearer accountability for contract outcomes, stronger post-award governance, and better integration between procurement, legal, finance, and delivery teams. As finance functions move toward continuous planning and face pressure to protect margins, the 11 percent problem is likely to move from specialist conversations about contracting to broader debates about how companies manage performance and risk after the ink is dry.
Disclaimer: The findings and estimates presented in this article are based on research from World Commerce & Contracting in collaboration with Ironclad. While efforts have been made to ensure the accuracy of the information, individual results may vary depending on specific company circumstances and contract complexities. This article does not offer financial or legal advice. Readers are encouraged to consult with relevant experts before making any decisions.
