What is contract management? A simple question with a simple and a complex answer. Simply put contract management is the administration of contracts between a company and its vendors.
What is Contract Management – 7 Fundamental Criteria.
- Creation: Whilst many companies work from standard contracts, they do have to be created in the first place and they often need to be changed as negotiations progress.
- Negotiation: Of the contracts to ensure that, the best possible contract is available to both parties.
- Adherence: To the contracts and all of its sections and aims.
- Service Level Agreements: (SLA) and Key Performance Indicators (KPI) are set to manage the day-to-day performance of the vendor.
- Managing Changes: that may be required as the relationship changes and problems arise.
- Documenting: Any changes that may have been agreed.
- Analyzing: The benefits that accrue or may be available from the contract.
To really understand contract management and administration, get the "Quick Guide to Contract Management & Administration" by entering your contact details on the right. It will tell you the process from starting to the end.
What is contract management - why manage a contract?
The answer to this question is that contracts need to be methodically managed in order to ensure that financial and operational risk is minimized and vendor performance maximized.
What is contract management – 3 Distinct Areas of Vendor Relations:
You need to look at three distinct areas of vendor relationship:
- Contract Administration: This is the formal “nuts and bolts”, small print management of the physical contract and the adherence to the sections and aim of the contract.
- Service Delivery: This is the management of the delivery of the products by the vendor. It ensures that they meet the service performance and quality that is required. Service delivery is managed by adherence to several Service Level Agreements that are defined during contract negotiation.
- Relationship Management: This ensures that the relationship between the company and vendor is mutually constructive and problem free.
What is contract management - how do you manage the contract?
Once the contract is fairly negotiated and signed by both companies you need to set up a number of Service Level Agreements that measure service performance and let the vendor know what is expected of them.
Most procurement software programs allow you to manage the financial aspects and relationship management. Contract management can be managed by your legal team when problems arise or performance dips.
So what is contract management after all?
The answer is - a suite of management activities that ensure your vendor relationships are efficient and profitable.
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