In the strategic and tactical parts of the procurement process de most effective way of procurement and most suitable suppliers are selected. Unfortunately, it often happens that value expected to be achieved from these new contracts leaks away or the contractor does not deliver as expected. Cost increases, scope creep, underperformance, delivery time overruns, or poor relations with the supplier are prevalent. Contract management aims at securing the value expected when signing the contract.
Contract management (CM) is part of the operation of the procurement and contracting process. CM can be distinguished in contract administration and supplier management. Contract administration is the process of actively managing contract documents with the aim of having relevant information available at the right moment in the right place, both electronic and physical documents. Supplier management comprises those activities aimed at exploring, starting, and maintaining relationships with contracted suppliers as well as the measurement and management of suppliers’ contractual obligations and performance.
CM commences with the handover of executed contracts and all pertaining documents to the contract manager and the responsible person in the line. It ends with the transition of responsibilities to a new contracted supplier, when the old contract has expired.
Two aspects for the success of CM are:
- the digital administration of all contracts, pertaining documents, and
- contract details and actively managing supplier relations.
Depending on the organizational maturity en the desired outcome of CM, the process may focus on:
- contract administration (compliance, fraud detection and prevention),
- relationship management,
- performance management,
- cost reduction,
- dispute handling, or
- supporting innovation.
Rob Martens Consultancy & Training can assist your organization with the development and implementation of contract management and provide training to your employees. Examples of where we successfully implemented contract management are an oil major in the United Kingdom and a municipality in the Netherlands.