Source to Contract (S2C)
Understand the complete S2C lifecycle from sourcing through contract execution. Learn about standard artifacts, workflows, and auditability requirements.
Course Overview
Duration
40-50 minutes
Level
Intermediate
Lessons
6 lessons
What you'll learn:
- S2C definition and stages
- Standard artifacts and documentation
- Contracting workflow basics
- Legal review and redlining processes
- Approval workflows and governance
- Auditability and decision records
S2C Definition and Stages
Source to Contract (S2C) is the end-to-end process from identifying a business need through sourcing, evaluation, award, and contract execution. It covers everything before purchase orders and payments.
S2C vs S2P
Understanding the difference helps clarify scope:
From need identification through contract execution. Includes sourcing, evaluation, award, and contract negotiation. Ends when contract is signed.
Includes S2C plus purchase orders, goods receipt, invoicing, and payment. The complete procurement-to-payment cycle.
S2C Stages
The S2C process typically includes these stages:
Figure 1: Source to Contract lifecycle and S2C vs S2P comparison
Intake and Planning
Capture business need, validate requirements, plan sourcing approach, allocate resources.
Requirements Definition
Document functional and non-functional requirements, define success criteria, prioritize needs.
Sourcing and RFX
Market research, supplier discovery, create and publish RFX, manage supplier communications.
Evaluation and Scoring
Review supplier responses, score against criteria, compare proposals, conduct due diligence.
Award Decision
Select winning supplier, document decision rationale, obtain approvals, notify suppliers.
Contract Negotiation
Negotiate terms, pricing, SLAs, legal clauses. Redline and review contract drafts.
Contract Execution
Final contract review, approvals, signatures, contract storage, handover to operations.
Example S2C timeline: Intake (Week 1) → Requirements (Week 2) → RFX Creation (Week 3) → Supplier Response (Week 4-5) → Evaluation (Week 6) → Award (Week 7) → Negotiation (Week 8-9) → Execution (Week 10). Total: 10 weeks for a typical strategic sourcing project.
Pro tip: S2C processes benefit from standardization. Using consistent workflows, templates, and approval paths ensures efficiency, compliance, and full auditability. Modern sourcing platforms enable guided workflows that enforce standardization while maintaining flexibility.
Standard Artifacts
S2C processes produce standard documents and artifacts. These documents capture requirements, communicate with suppliers, evaluate proposals, and document decisions. They provide the foundation for auditability.
Key S2C Artifacts
Figure 2: Standard S2C artifacts and their purposes
Requirements Document
Comprehensive document capturing functional, non-functional, and business requirements. Includes priorities, success criteria, constraints, and assumptions.
Purpose: Ensures all stakeholders agree on what's needed. Guides RFX creation and evaluation.
RFX Document
Request for Information, Proposal, Quotation, or Solution. Includes requirements, evaluation criteria, timeline, terms, and instructions for suppliers.
Purpose: Communicates needs to suppliers and solicits responses. Sets expectations and evaluation framework.
Evaluation Scorecard
Structured scoring framework with criteria, weights, scales, and evaluator assignments. Includes scoring rationale and comments.
Purpose: Enables objective, consistent evaluation. Documents how scores were determined for auditability.
Award Memo
Document summarizing evaluation results, award decision, rationale, and approvals. Includes cost analysis and risk assessment.
Purpose: Documents the award decision for stakeholders and auditors. Essential for governance and compliance.
Contract
Final executed agreement with terms, pricing, SLAs, legal clauses, and obligations. Includes all schedules and attachments.
Purpose: Legally binding agreement. Defines relationship, obligations, and remedies.
Supporting Documents
Additional documents support the S2C process:
- Supplier Q&A log: Tracks questions and answers during RFX period
- Due diligence reports: Supplier financial, legal, and compliance assessments
- Reference checks: Feedback from supplier's other customers
- Negotiation notes: Records of discussions, agreements, and trade-offs
- Approval records: Sign-offs from stakeholders and approvers
- Change logs: Document version history and modifications
Pro tip: Centralize all S2C artifacts in a single platform or repository. This ensures version control, easy access, and complete auditability. Scattered documents in email and file shares make audits difficult.
Contracting Workflow Basics
Contracting workflows manage the process from award decision through contract execution. They ensure proper review, approval, and documentation.
Contract Workflow Stages
Figure 3: Contracting workflow stages
1. Contract Drafting
Create initial contract based on award terms, standard templates, and negotiated agreements. Include all schedules, SLAs, and attachments.
2. Internal Review
Procurement, legal, finance, and business stakeholders review contract. Identify issues, required changes, and approvals needed.
3. Legal Review
Legal team reviews terms, identifies risks, suggests changes, and ensures compliance with policies and regulations.
4. Negotiation
Exchange contract drafts with supplier. Negotiate terms, resolve redlines, reach agreement on all clauses.
5. Approval
Obtain required approvals based on value, risk, or policy. May include procurement, finance, legal, and executive approvals.
6. Execution
Both parties sign contract. Store executed contract in contract management system. Notify stakeholders of execution.
Workflow Best Practices
- Define workflow upfront: Know who reviews what, when, and in what order
- Use templates: Standard contract templates speed drafting and ensure consistency
- Track versions: Maintain version control. Know which version is current and what changed
- Set deadlines: Define review timelines to prevent delays
- Centralize collaboration: Use platforms that enable centralized collaboration rather than email chains
- Document decisions: Record why changes were made or rejected
Example workflow: Procurement drafts contract (Day 1-2) → Legal reviews (Day 3-4) → Internal stakeholders review (Day 5-6) → Send to supplier (Day 7) → Supplier reviews and redlines (Day 8-10) → Negotiate changes (Day 11-14) → Final approval (Day 15) → Execution (Day 16). Total: 2-3 weeks for a typical contract.
Common mistake: Managing contract workflows via email. This leads to version confusion, missed approvals, and poor auditability. Use structured workflows with clear stages and approvals.
Legal Review, Redlines, and Approvals
Legal review ensures contracts protect the organization and comply with laws and policies. Redlining tracks changes during negotiation. Approvals ensure proper authorization before execution.
Legal Review Process
Legal teams review contracts for:
- Risk assessment: Identify legal, financial, and operational risks
- Compliance: Ensure terms comply with laws, regulations, and policies
- Standard terms: Verify use of approved contract language and clauses
- Liability and indemnification: Assess risk allocation and protection
- Termination and remedies: Review exit clauses and dispute resolution
- Data protection: Ensure GDPR, CCPA, and other data privacy requirements are met
Redlining Process
Redlining is the process of marking proposed changes to a contract. It shows what to add, delete, or modify.
Redlining best practices:
- Use track changes or redline tools to show modifications clearly
- Provide comments explaining why changes are needed
- Respond to all supplier redlines (accept, reject, or counter)
- Maintain version control and document all changes
- Keep a clean version alongside redlined version for clarity
Example: Supplier redlines liability clause to limit their liability to contract value. Legal counters with: "Liability limited to 2x annual contract value, with exceptions for data breaches and willful misconduct." This protects both parties while maintaining reasonable risk allocation.
Approval Workflows
Approval workflows ensure contracts are authorized by the right people before execution. Approval requirements typically depend on:
Figure 4: Typical contract approval workflow
- Contract value: Higher values require higher-level approvals
- Risk level: High-risk contracts need additional review
- Category: IT, legal, or strategic categories may have specific approvers
- Duration: Long-term contracts may need executive approval
- Policy exceptions: Deviations from standard terms require approval
Typical Approval Chain
Pro tip: Configure approval workflows in your sourcing platform. This ensures proper routing, prevents skipped approvals, and maintains a complete audit trail. Approvals can be sequential (one after another) or parallel (multiple approvers simultaneously).
Auditability and Decision Records
Auditability means you can demonstrate who made what decisions, when, and why. Complete decision records protect the organization, ensure compliance, and enable continuous improvement.
Why Auditability Matters
Auditability is essential for:
- Compliance: Regulatory audits require proof of proper processes and decisions
- Risk management: Defend decisions if challenged or if issues arise
- Governance: Demonstrate proper oversight and control
- Learning: Review past decisions to improve future processes
- Transparency: Show stakeholders how decisions were made
What to Document
For full auditability, document:
Decision Points
- Supplier selection rationale
- Evaluation scores and methodology
- Price comparisons and value analysis
- Risk assessments
- Approval decisions and rationale
Process Activities
- All communications with suppliers
- Q&A exchanges and responses
- Document versions and changes
- Approval workflows and sign-offs
- Negotiation history and agreements
Stakeholder Actions
- Who participated in evaluation
- Who approved what and when
- Who made changes and why
- Who had access to information
Audit Trail Requirements
A complete audit trail includes:
- Immutable logs: Records that cannot be altered or deleted
- Timestamped actions: Every action with date, time, and timezone
- User attribution: Who performed each action
- Change history: What changed, from what to what, and why
- Version control: Complete history of document versions
- Access logs: Who viewed or accessed information
Example audit trail entry: "2024-01-15 14:32:15 UTC - John Smith (Procurement Manager) updated evaluation score for Supplier A, Technical Criteria, from 7 to 8. Reason: Additional review confirmed solution meets scalability requirement. Previous value: 7/10, New value: 8/10."
Decision Records
Decision records document key decisions with context and rationale. They should answer:
- What decision was made?
- Who made it?
- When was it made?
- Why was it made? (rationale and context)
- What alternatives were considered?
- What approvals were obtained?
Pro tip: Modern sourcing platforms automatically create audit trails. Every action is logged with who, what, when, and why. This provides complete auditability without manual documentation. Auditors can review complete decision records in minutes rather than days.
Common mistake: Relying on email threads and spreadsheets for auditability. These are hard to search, easy to lose, and don't provide structured audit trails. When auditors ask "why did you choose Supplier A?" you need clear, documented rationale, not scattered emails.
Contract Lifecycle Management
Contract lifecycle management (CLM) extends beyond S2C execution. It covers the entire contract lifecycle from creation through renewal or termination.
Contract Lifecycle Stages
Creation
Draft contract based on award terms, templates, and negotiations. S2C stage.
Execution
Contract is signed by both parties. Stored in contract repository. S2C stage.
Active Management
Monitor performance, track obligations, manage changes, handle disputes. Post-S2C.
Renewal or Termination
At contract end, decide to renew, renegotiate, or terminate. Execute new contract or close out.
Key CLM Activities
- Contract storage: Centralized repository with search and retrieval
- Obligation tracking: Monitor deliverables, milestones, and commitments
- Performance monitoring: Track SLAs, KPIs, and supplier performance
- Change management: Handle amendments, addendums, and contract modifications
- Renewal management: Track expiration dates, initiate renewals, renegotiate terms
- Compliance monitoring: Ensure contract terms are followed, identify violations
Integration with S2C
S2C and CLM work together:
How they connect:
- S2C creates the contract and hands it off to CLM for execution
- CLM stores the executed contract and manages it through its lifecycle
- At renewal, CLM may trigger a new S2C process to re-source or renegotiate
- Performance data from CLM informs future S2C decisions
Pro tip: Integrate S2C and CLM systems. When a contract is executed in S2C, automatically create it in CLM. This eliminates manual data entry and ensures contracts are properly managed from day one.
Course Complete
You've mastered Source to Contract. Ready to learn about Source to Pay or dive into RFX specifics?