1. What is Contract Management?
Contract management is the management of contracts made with customers, suppliers, etc. Contract management includes the execution, management, monitoring and evaluation of the conditions with the aim that the parties involved adhere to them. Documenting the contracts in an accessible system and managing expectations and minimizing risks during the course of the contract is an important part of contract management. The 3 sub areas contract management, monitoring and surveillance and evaluation are also important parts of contract management.
2. The contract realization process
The drafting of a contract is often carried out at the same time as the negotiation phase, because draft contracts are often drawn up during the negotiations. It is recommended to use your own templates as this benefits the quality (your own conditions as a starting point) and completeness.
This phase contains all activities within the approval process, from the approval of draft contracts to the actual authorization by the budget holder. A distinction must be made between the decision to enter into a contract and the signing of the contract. It is important here that both the internal and the external procurements are taken into account.
This phase includes the official signing of the contract by both parties.
This process step includes the registration of the actual contract data. It is important here what purpose is intended with the registration and the entered data. By specifying this well in advance, it can be determined which contract data should be entered and no catch-up steps need to be made later. The place of registration (central or decentralized) also plays an important role. Finally, the choice of the method of registration used is important; make sure that the requirements for a contract management solution is carefully setup (must haves and nice to haves) and do not look for the sheep with the 5 legs (do not over-specify, the result is that you end up with a contract management solution being very complex and / or (usually both) is very expensive… .. with the knowledge that after 1 year less than 50% of the functionality is used).
The archiving phase includes all activities to physically archive the original contract (legal standard concerns 7 years after the contract expires). This can also be done centrally or locally. In addition, the contract can be digitally archived by scanning and including it in any application, a reference in the contract management system to the physical archive location is recommended. In addition to various practical aspects, it is important to ensure that the contracts are protected in such a way that employees can only consult those contracts to which they are authorized, but ensure a workable structure of the powers, only use powers (who does / does not have access to certain contracts) if necessary
3. Contract implementation
Implementing a contract results in activating a contract into operational mode.
This allows the concerned departments to work according to the agreed terms in the contract.
4. Contract Management
Contract management is the recording of all contract details and contracts in a contract management system, such as; contract number, description, contract party, internal departments and contacts, start date, end date notice period, value, status of the contract, scan of the signed contract, type of contract, KPIs, reports, etc. By making contracts transparent, the organization has a good picture which suppliers, products, services, terms and expectations have been recorded. Contract management creates an overview of all contracts from the effective date to the end date, including all renewals and features. Contract management can possibly use a system or process with working contracts. This lays the foundation for contract administration and supplier management.
Monitoring and surveillance
By this we mean monitoring and protecting the contracts. If the implementation is not in accordance with the contracts, consultations and adjustments must be made with the counterparty. This can lead to renewed contracts with the internal customer and / or counterparty.
Regular evaluation (benchmarking against current market situation, reports, etc.) of contracts is essential. As a result, the predetermined objectives will be best achieved. Well before the cancellation period (depending on the complexity of the products / services stipulated in the contract) it should be discussed whether and what the next contract period will look like (Lessons Learned, changed wishes / requirements, etc.)