Contract Management – what is it really!?

Employed effectively contract management is a real deliverer of value, but it’s not always well understood.  Here’s a brief explanation…

by Dave Nellist, ArcBlue Regional Manager New Zealand

One thing we’re not talking about here is contract administration – i.e. knowing what contracts you have, when they expire, and so on.  Contract management encapsulates the management activity that happens after a contract is awarded.  This can include aspects of operational performance management, supplier relationship management, and risk management.  It’s fundamentally about ensuring that the contract is performing as it should, but also going beyond that to examine how buyer and supplier can work together to deliver even greater value over the course of the contract, and even beyond it.

A lack of focus on contract management can lead to dissatisfied customers and stakeholders, operational disruption in the business, uncontrolled costs, risk exposure and damaged relationships.

The nature of an individual contract – i.e. product specification, extent of standardisation, supply complexity, value, length of tenure – will be determining factors in terms of how much resource is placed on contract management.  These considerations should all form part of category management strategies with contract management approaches being a part of a holistic, intentional, structured approach to the overall procurement strategy.  Lessons learned can inform other, and subsequent, contracts and market approaches.

Contract management can provide a great return for the time and effort made – it’s well worth understanding the part it can play in organisations.

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