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Contract management functions:
- Recognizing demand for contract;
- Planning contract requirements;
- Selecting providers (contractors);
- Requesting and receiving business offers;
- Evaluation and consideration the offers;
- Negotiating and contracting;
- Considering the approaches:
- Risk management;
- Compliance management;
- Clause management;
- Change management;
- Deploying Obligations (service, products) delivery management;
To ensure that the service or products are being delivered as agreed, meting the required level of performance & quality.
- Deploying Relationship management;
To build and maintain the relationships between the two parties in a positive and constructive manner promoting early identifying of problems and resolving any tensions.
- Deploying Contract administration;
It is used to handle the formal governance over the contract and applying changes to the contract documentation when required.
Contract management requirements:
- Clearly, consistently and credibly composed body of the contract;
Including distinct contract scope, statement and specification of the contracted work/service (complete and valid project plan or specification should be attached), general and specified commitments and obligations of the both parties.
- Clearly resolved price management mechanisms, including milestone payments, incentives, rewards, retentions, and (usually in a long-term contracts) price variation mechanisms;
- The definite roles and responsibilities assigned to competent contacts, so that all possible issues can be properly addressed (see outline of the roles in the following section);
- The procedure for problem escalation and generating resolutions in a case of disagreement and unsatisfactory performance;
- The procedure for handling contract changes – cases to initiate, discussion, authorization and implementation practice, mechanisms to define if the change is within the contract’s scope, etc;
- The strategy for synchronizing the contractual obligations with documents related to sub-contractors and suppliers if required (for ensuring consistency across documents);
- Identified, determined and rated contract risks and procedures of their treatments (avoidance and mitigation);
- Protected proprietary information of the both parties. Precisely specified terms and conditions for usage of business technologies and assets;
- Clear and definite acceptance procedures including specified quality and compliance criteria;
- Provisions for contract timeframe extensions;
- Ensure that the contract manager possesses the required level of skills and experience;
- Ensure that the contract manager possesses appropriate level of understanding of the contract and of the relevant subject matters (arrange special training if required);
- Ensure clear flowcharting of the contract-related business processes;
- Prepared standard template that can be used for drafting the basis for the contractual agreement as appropriate;
- Try using software that can be used as a dashboard to uphold data on contractual obligations and to track how the contracts are functioning and to be aware if some of them are coming up to expiry;
For example you may use VIP Task Manager as a tool for planning contracts, controlling their statuses and milestones, setting up automatic notifications to remind of necessity to re-new or prolong some expiring contracts to take relevant actions prior to business event.
- Prepare a corporate manual to explain the contract baseline and nuances to contract stakeholders and managers;
Contract management roles and responsibilities:
- Contract manager (customer side);
Management responsibilities on smaller contracts can be undertaken by a single individual (for bigger contracts the special team can be formed). His duties include representing the customer’s interests to the provider at contract level, acting as a single point for contact and for all formal & legal correspondence, monitoring contract performance, escalating contract problems if necessary, etc.
- Contract manager (provider side);
He represents the provider’s interests to the customer, tracks the interpretation of the business requirements, monitors and maintains contract performance and reports service/business outcome level as appropriate, determine and take remedial actions by agreement with the customer, serves as single point for contact and claims.
- Relationship managers (customer and provider sides);
They encourage an atmosphere of trust & openness, maintain positive manner of communications, and promote a collaboration-based approach to shared objectives, proactively research ways to improve the existing relationships, make sure that all contract stakeholders are properly involved, establish and manage a communication framework and control if it is used appropriately.
- People who use the service/product;
They utilize/use the service(s) or product(s) which is/are agreed in the contract, report on important incidents, significant problems and issues promptly and accurately, they represent customer-exposed aspects of service/product’s quality, and escalate problems.
Ongoing contract management:
- Establishing metrics to check and evaluate compliance of deliverables, terms & conditions, contractual commitments, and other contract performance metrics;
- Creating the matrix of the contract’s performance/success/risk factors and indicators to report, control, rate and evaluate their deliverance and status;
- Ensuring that quality, level, and other traits of services/products which are contracted to be provided are delivered as specified in quantitative and factual terms;
- Capturing and tracking the rebates, discounts, and incentives bargained in the contract;
- If contract payments are connected to ongoing satisfactory contract performance, then setting up and timely launching appropriate procedures when contract performance is unsatisfactory;
- Checking if supporting documents and invoices meet contract requirements and are appropriate to use and pay;
- Checking if all variations to the contract were agreed on value for money grounds. Subjecting contract amendments to formal contract variations and keeping records on them;
- Addressing disputes as agreed, n a timely manner and making efforts to resolve them;
- Approving and documenting all the actions taken in the cases of non-meeting the agreed degree of performance according to contract;
- Approving and documenting cases when it was decided not to take any of such actions;
- Periodic reviewing the contract according to procedure (for long-term contracts);
Contract closure:
- Ensure that the provider and customer have delivered all their outcomes and obligations as agreed and documented;
- Ensure that the contractor have returned all materials, equipment, or other resources taken into operation or generated during the life of the contract;
- Ensure that all payments and clauses were properly addressed, resolved, closed and terminated (so that no outstanding issues remain);
- Ensure that all contract evaluation and analysis procedures were undertaken properly, so that obtained experience will be considered for future contracting efforts;
- Ensure that the contractor’s performance have been objectively evaluated, properly documented and appropriately addressed;
Feedback is provided to the contractor (if requested) and if you are going to keep collaborating with this organization, make sure that all your suggestions and past issues were properly learnt by them and conclusions will be inbuilt into their future practice.
- Ensure all formal procedures for finalizing and closing the contract, and ensure its accurate archiving in repository of organizational contracts;
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