Commercial Management

Commercial management studies pricing, risk allocation and incentive design in a trading relationship: how an agreement is structured so both parties have a stake in the intended outcome.

Commercial management sits above what contract management administers: it determines the design of the price and incentive structure itself, for instance in outcome-based or performance contracts. Contract management then monitors whether that structure is honoured. Without commercial management, an outcome-based contract becomes an ordinary input contract wearing a different label.

• Does the pricing structure reward the desired behaviour, or does it inadvertently reward volume alone?
• Who carries the risk of demand fluctuation, and is that explicitly priced?

• Literature on performance contracting and outcome-based contracting within procurement and services.

• Outcome-based contracts that do not think through the underlying incentive structure produce perverse optimisation on the measured outcome rather than the intended one.

• Sourcing & Contracting

• Price and incentive design for performance contracts

• Regieorganisatie — managing organisation / intelligent client function

  Commercial design happens before regie begins; regie cannot repair a badly designed incentive structure, only make it visible.

[Content pending]

The standards section arrives in Part 7.

• A contract labelled 'outcome-based' while payment is still fully based on hours delivered.

It is insufficiently documented what share of so-called outcome-based FM contracts genuinely shifts risk to the provider versus merely changing the reporting.

• World Commerce & Contracting, research on outcome-based contracting.