When a company files for Chapter 11, procurement must follow unique rules. The debtor-in-possession can assume or reject contracts and leases under 11 USC § 365.
As a result, supplier agreements, service contracts, and leases may be renegotiated or ended as part of restructuring. This authority shifts procurement’s role: the team must enable rapid contract triage, footprint rationalization, and supplier rebasing under tight deadlines, not just focus on cost and compliance.
Drawing from our experience with retail organizations undergoing Chapter 11, we guide procurement transformation in four distinct dimensions. Each dimension is interconnected but requires specific focus to drive an effective restructuring process:
Unlike standard procurement transformation, the first step is triage of all existing contracts and leases. Under Chapter 11, a procurement leader must help identify which contracts to assume (with cure payments and performance assurance) and which to reject (thus converting obligations into unsecured claims).
The operating model must reflect the “in-possession” status. Governance, approvals, and risk frameworks must align with the bankruptcy court, creditor committees, and new financing structures.
Time is critical in Chapter 11. Digital platforms must provide rapid spend visibility, contract analytics, and scenario simulation. For example, what happens if 150 supplier contracts are rejected? Suppliers may demand quick supplier-summary data, and procurement must deliver.
Suppliers must be managed through the disruption: contract status changes, payments may be delayed or restructured, requisition volumes may drop abruptly. Procurement’s talent must be trained for the new “restructuring mindset,” not the usual “cost-center mindset.”
When done well, procurement can drive value in a distressed environment by decoupling burdensome contracts, protecting liquidity, and accelerating recovery.
Procurement then becomes a critical lever in restructuring and sets up the business to re-emerge stronger. Procurement transformation under Chapter 11 is not just about doing things differently—it’s about doing different things, quickly, under a new set of legal and market rules.