10 Tips for Your Contract Management Process

In most cases, a contract is signed then filed away and only referred to if a problem occurs. Yet, if a contract fails to be appropriately managed, the consequences can be severe. Therefore, resources and time must be adequately allocated from the start to help prevent this. A contract is essentially a living document. It explains to all parties their roles, requirements, and responsibilities, as well as overall deliverables. Contracts are also prone to frequent change and are rarely fixed entities. However, when changes occur, they must be managed within rigid guidelines and with safety in mind.

Tips for How to Successfully Oversee Large Contracts

1. Never Treat Contract Management as an Afterthought

Contract management always comes before procurement, so it should never be treated as a last-minute item. Resources should be arranged before the project starts. An appropriate budget should be set for contract management which is usually around 8% of the total contract spend. Proper planning is essential to ensure all parties remain engaged throughout the process, and the project can be appropriately handed over once completed. Hand over is particularly important, considering some stakeholders leave the process before the project is complete. Using contract management software will help you with this process.

2. Ensure Robust Systems are in Place for Document Sharing and Storage

Make systems are in place for version control and document identification. Once a contract has been signed, all essential documentation relating to it needs to be correctly stored away. This includes the contract, and all of its attachments, the winning bid tender, requirements documentation and final evaluation records, logs, minutes, plans, and any further communications. While a paper trail must exist, sensitive documents need to be kept secure. However, they also need to be readily available for potential sharing with other parties.

3. Information Should Flow Between Both Parties After Signing

During the procurement stage, obligations should be set to ensure accuracy, visibility, and granularity on all information needed for effective contract management. For example, open-book accounting is often necessary for larger contracts. This, in turn, can cause issues with opacity, i.e. when the client begins to dispute individual costs and figures. This can be easily avoided by things such as setting very clear overheads and outlining all hidden costs. Additionally, set intervals when clients can review accounts rather than allowing them to dictate this frequency to you.

4. Be Sure to Design Invoices Carefully

Make sure that all invoices are accurate yet transparent. Clients will not appreciate having to deal with ambiguity and complexity plus the extra expense this can cause. Furthermore, clients have more productive things to do than needing to waste thousands of additional hours doing this potentially unnecessary work. If you believe there could be any factors affecting invoice amounts, either known or predicted, make the client aware.

5. Make Sure to Use the Correct Tools, Processes and Provisions

Throughout the project, it is crucial to ensure the right processes, tools and provisions are made available. Moreover, the complexity of the deliverables and scope of the project needs to be appropriate to the level of contract management being provided. So, if a particular area of the project demands more in-depth attention, this should potentially be outsourced. It’s good to get legal or procurement advisors to check how well the contract is being monitored and to put things in place if things move away from what was initially outlined in the original agreement.

6. Develop a User Guide for the Contract so People Understand it Better

Your legal team will be able to produce this for you. In this guide, terms should be outlined for ongoing contract management, and ways to navigate information contained in it should be explained. All service credit regimens, KPI’s and SLA’s should be appropriately explained. Ultimately, contracts can be complicated to understand, so consider creating a simplified version. Within this, everyone’s roles and responsibilities can be clearly outlined, and the handover of the project is more likely to be seamless.

7. Maintain and Develop a Timeline of Main Decisions Made

Before putting the contract together, establish information on roles and responsibilities, substructures, contract governance and meeting attendees, updating along the way if necessary. Creating and maintaining a calendar can be useful to track meetings, progress, and reporting. It allows more effective planning and management of resources, particularly for things like contract breakpoints which need to be arranged well in advance. Document all processes clearly. You never know when someone will leave the contract before it ends, and they are replaced with someone new who needs briefing.

8. Discover and Fix Issues Early in the Process

If you are working with a client who is obsessed with things like KPI’s, figures and stats, you will need to manage this as best as possible. You don’t want to be dealing with persistent problems that will probably only get worse with time. The same rules also apply to relationships with other stakeholders and to contract delivery.

9. Guidelines Need to be Set for the Escalation of Issues

Personality clashes can be frequent in contract management. Nevertheless, always try to create a professional working relationship with someone. If this doesn’t exist, it becomes much more challenging to achieve the desired outcome. Develop escalation mechanisms such as the ability to replace members of staff that are being unproductive or uncooperative. Having trust and mutual respect for everyone is a crucial part of the client-provider relationship.

10. Use a Consistent Approach

Make sure you know all the obligations of the provider as specified in the contract. Make sure they are abiding by them throughout the project. One particularly detrimental thing that happens in contracts quite often is the informal allowing of material concessions. These instances need to be recorded, including the duration and any other circumstances that caused it. Be sure to have the appropriate change controls in place. Scope creep can occur, which can cost money. Anything extra requested outside the scope of the original contract needs to be considered carefully.

Make Your Next Contract a Successful One by Using These Hints and Tips

Contracts should never be treated as documents that simply mark the start of a project or something to check over if issues occur. They need to be maintained and updated throughout the project to meet the changing requirements of all parties or circumstances so that the project always remains on schedule. We believe that if you follow the ten tips provided here, your project will get started on the best track. All parties will be unified and work towards one common goal, and the project is more likely to be a success.