Recall the last few contract agreements you entered into with a vendor or supplier. Did it all go according to plan or otherwise?
If things went otherwise, I would like to hear about your experience, what went wrong and how did you handle it?
I wish I could say it's easy to manage contractors, but it does require some work and a huge dollop of patience. I am shaking my head right now as several incidents come to mind. You know, those times when suppliers show you their true colours.
Can you relate?
A critical aspect of successful procurement projects is effective contract management. How the contract is managed from the outset will significantly impact the success or otherwise of the project.
Truth is, if you don't put a plan in place to manage your contract, the contract will find a way to manage you.
Simply put, contract management is the process of managing the agreements between an organization and its suppliers.
Even though contract management isn't "a walk in the park", the good news is that you can take the right steps to manage it successfully. Managing contracts successfully means that your contracted suppliers won't disappoint you at the last minute, thereby ensuring your business operations run smoothly.
To manage contracts successfully, here are 6 key areas to take into consideration:
📍Contract Creation: Prior to signing off a contract, negotiation discussions will be held with the supplier. It is surprisingly common to forget to include in the contract, some critical agreements reached during negotiations. Most often, contract price is the only update included, while crucial concessions conceded by the supplier are omitted from the contract document, often because the individuals involved in the negotiation are not the same individuals writing the contract. It's important therefore, to ensure that all agreed terms and conditions are clearly defined, included in the contract and fully understood by both parties.
📍Contract Administration: It is commonly said that contracts are prepared and placed in the drawer while the work goes on, only coming out where a conflict cannot be amicably resolved. This practice has led to neglectful approach to responsibilities and delayed projects. For successful contract management, the first step is to ensure all relevant parties have a good understanding of the contract especially their obligations and deliverables. Secondly, procurement should assign to an individual, the duty of monitoring contracts to ensure that they are being executed in accordance with the agreed terms and conditions stated in the contract.
📍Performance Management: For successful contract management, key performance indicators must be defined, agreed and included in the contract. The KPIs will specify how the project will achieve success and should be measurable and time-bound. Regular review meetings should be incorporated in the contract and held to assess the supplier's performance, ensuring that they are meeting the terms and conditions of the contract and the organization's expectations.
📍Risk Management: This involves identifying, and mitigating risks related to contract execution, such as scope creep, supplier performance issues or changes in market conditions. Risk management is a continuous process which allows parties determine the responsible party for each risk, track identified risks and put in place measures to reduce risks throughout the duration of the contract.
📍Communication and Collaboration: This includes maintaining regular communication with suppliers and other stakeholders, and fostering collaboration to resolve any issues that may arise during the contract period. Effective communication ensures that minor issues are identified and addressed well before they become major problems. In collaborating, both parties understand that they have a collective goal to ensure the contract is successfully executed and are willing to work together to achieve this goal.
📍Contract Closeout: This is the closing of the contract when it's no longer in use or when it has been fulfilled. Although often overlooked, this is an important aspect to ensure that all parties have fulfilled their obligations and that the contract is closed in an organized manner. It is also a good time to review lessons learned and document process changes to be made in future transactions.
By having a well-structured contract management process in place, not only will you minimize risks, but you'll also ensure compliance and optimize the performance of your suppliers.
Need more support to manage your contracts successfully? Then visit academy.efemini.com to enroll in a course or book a coaching session.
Comentários