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June 29, 2018 Insights

Leveraging the Power of Technology in Contract Management

By: Rachita Maker

Technology has come a long way in less than a decade. We have seen its power in many forms in our daily lives – from ordering food to providing interactive customer service.

I have personally been tracking the use of technology and Artificial Intelligence (AI) in contract management since 2009, when it was still at a nascent stage. What’s certain is that the adoption of technology in our field will only pick up in pace over the next five years.

There is a broad range of opinions as to the impact of technology on contract analysis – from a magic wand that eliminates the need for human review to a basic time-saver for a mostly human process. In my experience, I view this technology as currently falling somewhere in the middle – as an enabler for human teams. Technology alone isn’t a panacea for all problems related to contracts. It takes the right combination of technology paired with robust processes, and implementation by skilled people.

To help you better understand technology options, we’ve defined the most common terms in technology for contract management:

Below are some of the most practical ways to leverage the combined power of AI and other types of technology with project teams that have experience harnessing this power.

Determine If You Can Use Automation

My team and I have identified certain criteria for determining if a project is well-suited for automation, including volumes, complexity, language, quality of text searchability and structure of the contracts.

If your organization has thousands of contracts which are relatively straightforward and predominantly on your template, and the metadata that you are looking to abstract is voluminous (lots of fields), and not very complex (e.g. party names, date, term, etc.), then I strongly recommend the use of an automated tool. You are likely to save anywhere between 30-50% of the manual effort in such an exercise. This can mean significant dollar savings.

If your organization has custom and complex contracts (e.g. IT outsourcing contracts, primarily on counter-party paper), and the type of information you need requires a high level of subjective analysis and summarization (e.g. tracking contractual obligations around SLAs and pricing), then an automated tool may assist in streamlining the workflow; however, my experience to-date is that the tools do not achieve a significant time reduction in abstraction taking into account the time and effort required to conduct manual data validation, quality control and abstraction of the fields that the tool does not pick up. That said, I acknowledge that the capabilities of these tools is improving all the time!

Most AI companies acknowledge that a level of human quality control is still needed for the most accurate results.

Organize Your Document Set

While there are tools that are able to sift through document sets and help in the identification of only relevant contractual documents, over the years my clients have experienced both successes and failures in leveraging this functionality.

Even though I’ve seen how technology can help to sort and filter duplicates, I strongly recommend conducting a manual clean-up exercise that ensures the completeness of your contract data. During clean-up, you can determine that there are no missing pages, attachments, or related documents, and remove irrelevant or out of scope documents. Further, this clean-up should ensure that all parent/child and family documents are complete and together (i.e. master agreements are associated with their sub agreements). To be clear, what I’m advocating here is a combination of human capital and technology in order to achieve a complete and accurate data set.

Once you have a clean set of data, uploading documents to an automated tool is as simple as ‘drag and drop’. Once uploaded, the tool can take over the task of processing the data. Leveraging built-in OCR technology, the documents will be machine readable, and the tool will capture the provisions you want to have analysed.

Establish the Right Level of Customization

Most contract analysis tools have their own set of built-in standard provisions that the tool has been trained to review and analyse, but you can also customize the tool to capture the provisions required in your analysis. I personally like and use Kira’s Quick Study module. This helps me and my team combine machine learning capabilities with human intelligence. The Quick Study module helps to customize the system to my client’s requirements, which can be dynamic in nature. More importantly, I don’t have to be a ‘tech geek’ to code the system. One important benefit of Kira’s Quick Study module is that it helps to measure the accuracy of the provisions that you teach the tool to abstract. Accuracy in the world of AI for contract analysis is calculated by combining recall and precision. For example, if the tool is trained to capture the term clause, the recall number would be the number of times the tool could capture the term clause. Whereas, precision is calculated based on the information captured in addition to the term clause, such as termination provision. A good accuracy percentage is achieved by getting the balance right between recall and precision.

Validate Using Human Eyes

Assuming you need an “almost perfect” degree of accuracy, the output from any tool will require review by a set of human eyes for quality control. In my experience, you can currently expect anywhere between 70-85% accuracy in the output from the tool’s built-in provision models alone; whereas, you can improve this level of accuracy with an additional manual review.

There will always be issues where dates are handwritten, or the tool sometimes captures excess information or misses out on capturing certain provisions all together. Most AI companies understand this, and they acknowledge that a level of human quality control is still needed for the most accurate results.

Find the Balance Between Speed and Cost

Some projects may cost less using manual review, particularly leveraging the labour arbitrage that offshore centres provide. However, if time is of the essence, then using an AI or another technology tool will certainly speed up your review process and help you complete the project on time. It is important to understand the drivers for your organization before making that decision.

Getting Started with Technology

By setting the right expectations and taking adequate steps, technology can assist you in managing large volumes of contracts efficiently and in a cost-effective manner. Aligning expectations with what technology can and cannot do is very important for a successful outcome. Technology will add to the financial investment, and you will want to make sure you are getting the required ROI.

For lawyers who are considering using technology in contract management, it is important to understand what you want the technology to do, and then to find the right partner to help you. Since most forms of technology still require human training and application, choosing the project team is as important as choosing the technology.

Integreon leverages several AI tools, including Kira Systems. I have personally been involved in a number of complex contract analysis engagements, including one for one of the world’s leading ride sharing companies. Click here to learn more about this engagement.

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