Contract management
Explore the fundamentals of contract management
What is contract management?
Contract management is the process of creating, implementing, and reviewing contracts. Whether this is between a business and supplier, or partner, contract management is an essential part of your business. As your business grows, contract management can become complex. Therefore, the need for effective strategies and processes is important.
How does contract management work?
Whether your business is a start-up or a much bigger organisation, contract management works in the same way.
Contract management can be split into two key stages:
- Pre-award stage
- Post-award stage
Pre-award stage
The pre-award stage is any work that takes place prior to a contract being signed. During this stage, it’s important to ask yourself:
- Why is the contract being established?
- Will the supplier be able to deliver?
- How will the contract work once it’s been awarded?
Keeping in mind these questions will help you form a successful contract.
Post-award stage
The post-award stage is where contract management and maintenance come in. This can be divided into three stages:
- Service Delivery: Ensuring service is delivered with the agreed performance and quality levels.
- Supplier Relationship: Maintaining and developing an open and constructive relationship
- Contract Administration: Formal management of the contract
It’s important to carefully consider both the pre-award and post-award stages of contract management. Particularly with large scale contracts that are high value, there is a lot more risk. A bad contract can cause your business to lose money, but a good contract can create strong business relationships and add value.
How to form a contract management strategy
When a contract management strategy is successful, you’ll maximise value and minimise risk. This will improve co-operation and delivery with your supplier, zero contract disputes and improved communication, so strategy is key.
When putting together your contract management strategy you should ensure:
- Arrangements for service delivery is agreeable by both parties
- Business benefits and value for money can be delivered
- The supplier is co-operative and responsive
- The business understands its obligations under the contract
- There are no disputes or surprises
- Professional communication over any changes and issues
We have lots of useful tools that will help you on your way to form a successful contract management strategy.
Contract implementation stages
The implementation of new contracts includes four stages, as illustrated in the model:
- Transition
- Start-up
- Operations
- Management
To ensure the contract's mobilisation, implementation and management are successful, the four stages should be followed.
Contract management best practices
If you’re looking to revitalise your existing contract management process, it’s important to get to grips with some best practices. It’s key to continue to look for ways to maximise performance throughout your contract management process. Explore how to increase your performance here.
Risk:
Do your homework. The pre-award stage is just as important, so spend time planning and getting the terms right to minimise risk.
Skills:
Make sure contract managers have good soft skills. These skills will help develop long-standing standing relationships that will deliver value to your business.
Time:
Not all contracts require proactive management. Make sure the time spent is relative to the importance of the contract.
Renewal:
Missing vital dates can have a huge impact on your business and revenue. Always remember to set reminders, particularly for evergreen contracts that are automatically renewed.
Contract management key themes
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