CONTRACT MANAGEMENT

Introduction

A contract a written or spoken agreement, especially one concerning employment,

sales, or tenancy that is intended to be enforceable by law. In business, contracts
are important because they outline expectations for both parties, protect both
parties if those expectations aren't met and lock in the price that will be paid for
services. Contracts can be divided into:

 Express and Implied Contracts:

An express contract has terms that are stated expressly, or openly, in either
writing or orally, Implied contracts, on the other hand, have terms that must be
inferred by actions, facts, and circumstances that would indicate a mutual intent
to form a contract.

 Unilateral and Bilateral Contracts: Unilateral contracts involve only one

party promising to take an action or provide something of value. These are
also known as one-sided contracts, while bilateral contracts involve both
parties agreeing to exchange items or services of value. These are also
known as two-sided contracts
 Unconscionable Contracts: they are contracts that are considered unjust by
being unfairly weighted to give advantage to one side over the other.
Example;
 a limit on the damages a party may receive for breach of contract.
 a limit on the rights of a party to seek satisfaction in court
  Adhesion Contracts: An adhesion contract is one that is drafted by a party
with a great deal more bargaining power than the other party, meaning that
the weaker party may only accept the contract or not.
 Aleatory Contracts: Aleatory contracts are agreements that are not
triggered until an outside event occurs. Insurance policies would be
examples of this, as they are agreements involving fiscal protection in the
face of unpredictable events
 Option Contracts: Option contracts allow a party to enter another contract
with another party at a later time. Entering into a second contract is called
exercising the option, and a good example of this is in real estate, where a
prospective buyer will pay a seller to take a property off the market, then, at
a later date, have a new contract made to buy the property outright, should
they choose to do so.

 Fixed Price Contracts: Fixed price contracts involve a buyer and seller
agreeing on a fixed price to be paid for a project. Also known as lump sum
contracts, these contracts entail a great deal of risk for the seller, since if the
project takes longer or is more extensive than anticipated, they will still only
be paid the agreed-upon price.

OVERVIEW OF CONTRACT MANAGEMENT

The maximization of operational and financial performance and the minimization

of risk as the ultimate goals of contract management. Accomplishing these goals
requires the development of a contract strategy and structured contract
management procedures that adhere to and ensure the fulfillment of procurement
goals. While contract management procedures include a number of important
objectives, value, quality and compliance are the primary contract management
objectives. Contract management is similar to project management, as each
contract is a mini-project, it has a unique goal, consumes resources, has a
beginning and end date, and requires coordination and planning of relevant
activities, as well as documentation in a contract file throughout the process.
Contract management includes monitoring and documenting performance,
depending on the organization and goods or services procured, daily/regular
monitoring of the contract may be primarily the responsibility of the requisitioner.

In all situations, the procurement officer is responsible for following up and

ensuring that the actions of the supplier and the organization are in line with the
contractual responsibilities, that the contract is amended to reflect agreed changes
in circumstances, and that any claim or dispute is resolved amicably according to
the terms of the contract.

Contract management is the process of systematically and efficiently managing

contract creation, execution, and analysis for the purpose of maximizing financial
and operational performance and minimizing risk. This includes negotiating the
terms and conditions in contracts and ensuring compliance with the terms and
conditions, as well as documenting and agreeing on any changes or amendments
that may arise during its implementation or execution.

OBJECTIVES OF CONTRACT MANAGEMENT

The purpose of contract management is to ensure that all parties to the contract
fully meet their respective obligations as efficiently and effectively as possible,
delivering the business and operational outputs required from the contract and
providing value for money. It also protects the rights of the parties and ensures
required performance when circumstances change. To set standards for an
efficient, effective process that allows both the supplier and the business to meet
sales and purchase obligations. The process starts with procurement planning and
doesn’t end until a purchase contract is complete.

PHASES OF CONTRACT MANAGEMENT

Business can’t get by today without contracts, whether it’s a contract for leasing
office space, or any contract of various description. Left to run at its own pace,
contract management can easily stall or bring challenges to the contracting parties,
but a proper administration which will aid to prevent any hitches which is caused
by negligence to contract management.

Contract management can be divided into three phases:

 Pre- Contract Phase

This is the time where an offer of services is solicited, developed and agreed upon;
Activities during the upstream or pre-award stage focus mainly on setting quality
standard specifications for products and services, service level agreements and on
review of incoming bids.

 Award / Contract Execution Phase

At this point in the three phases of contract management, the buyer / contract
manager will usually have multiple offers to consider and the agreed-upon offer
goes into negotiation and ratification, the length of this phase will depend on both
the number of responses and the complexity of the requirements and the contract.
Following verification, contract managers narrow a list of qualified choices to
those providing the greatest value for the money and award the purchase contract
to the supplier or service provider who best meets contract management objectives.
Signing contracts is not necessarily a straightforward process, especially when
dealing with large, international companies. Legal and compliance teams on both
sides of the contract must know who the right signatories are for the deal size, and
must manage getting those signatures in a timely and efficient manner.

 Post Award Phase

 This last phase of contract management deals with the monitoring of the
performances of the contractor by the compliance team. A signature does not
signal the end of compliance’s involvement in contract management; a contract
must be continuously evaluated for risk and performance. The compliance team
must ensure that contractual terms and conditions are being met, that both parties
are aware of expectations and maintaining communications, and that the contract
performance is of the expected quality. It’s important to note that a signed contract
does not mean the end of negotiation; often, contracts will need to go through a
change management process if, say, unforeseen circumstances mean additional
work must be undertaken, or the shape of the final deliverable or deadline changes
in some way.

STAGES OF CONTRACT MANAGEMENT

Contract management has taken on a bigger role in day-to-day tasks as businesses

work towards increasing productivity without increasing their employee numbers.

Negotiate the
Contract Preparation Author the Contract
Contract
 Keep Up With
Get Approval Before
Amendments and Execute the Contract
Finalizing the Contract
Revisions

As the amount of contracts in business transactions grow, it’s imperative that

contracts save time, not consume more of it.
Manage After the
If the contract management process isn’t automated, having a comprehensive
Signature—
Obligations, Auditing,
understanding
and Renewalsof the contract management process can minimize time spent
working on administrative tasks and maximize strategy.

Stage One: Contract Preparation

Contracts are legally binding documents that should not be approached lightly. It’s
important to be organized and prepared with the right resources. Properly
identifying the needs, reasons, and ultimate goals that require a contract makes any
decisions down the line much easier. They should seek to mitigate and define risks
and also looking ahead into any scenario that could occur overtime. For example
the terms of a contract should seek to address if a client goes out of business or
goes bankrupt during the course of the business or if any other contingencies arise.

Stage Two: Author the Contract

At this stage it involves drafting out your contract ,consulting a lawyer is wise or
better yet using an already prepared format drafted by your legal team to ensure
that all necessary information are up to date and all required clauses and term for
which the contract is to be issued is automatically included. During this stage it is
imperative to pay attention to specific wording, because any uncertainties leaves
the contract up for interpretation. Laws of different Geo-graphic locations are also
taken into account.
Stage Three: Negotiate the Contract

This stage involves the discussion aimed at reaching an agreement between the
parties involved. No matter how much research and preparation put into the
drafting of a contract, negotiations must follow and it should begin with
transparency and trust. Researching and anticipating each party’s needs before the
negotiations begins is key and helps in simplifying it and make room for lasting
relationships.

The easiest contract management platform used during this process is called
Redlining.

This involves the editing process during a contract negotiation where contributor
mark text and track changes made to the contract collaboratively. Example: one
party receives the document and makes additions or annotations, and the redlined
text will appear in a special color so the other party (or parties) can easily track
changes without needing to spend time searching for modifications.

Stage Four: Get Approval Before Finalizing The Contract

The signing should be the simplest part of a contract: both parties agree, the
wording is exact, and the next step is simply making it official. Once the contract
has been signed then the contractor can go ahead to start the project. However,
many businesses make agreements across the country or even the globe, and
getting signatures isn’t as straightforward as meeting in person. Especially if
deadlines are tight or time zones are incompatible, overnight mail or even email
may not be the best way to get signatures faster. A legally binding electronic
signature can solve all these problems, allowing you to move faster, accelerating
signatures and revenue.

Stage five: Execute the contract

This stage involves the contractor or the buyer executing or carrying out the
details at which the contract has been awarded.Thiis stage also includes
mornitoring to ensure the contractor set out in the proper manner so as to
prevent any issues as regards the details in the contract.

Stage Six: Keep Up With Amendments And Revisions

Contracts are rarely stagnant. Revisions and amendments are a common part of the
lifecycle of a contract. Tracking changes and the effects for each party can be
confusing; however, this is another reason to implement a reliable process, such as
a contract lifecycle management platform, to easily record edits and add
amendments. It’s important to stay ahead of the changes and make sure both
parties are fully aware and in agreement on any revisions.

Stage Seven: Manage After The Signature

Contract management doesn’t stop once the ink dries. Performing regular audits
will ensure obligations are met and value is realized. Alerts should be set for
deadlines and renewals. Missed renewals mean lost opportunities to continue a
relationship, and most importantly for a company, lost revenue. Being aware and
making contact well before the renewal time shows reliability and care for the
relationship, and will continue to build trust and loyalty.

Conclusion
Contract management can be a time-consuming task, but if properly managed,
can be one of the most lucrative areas for building business relationships and
generating revenue. Contract managers play a critical role for an organization as
they direct and oversee contracts throughout their lifecycle. Serving as the liaison
between companies, employees, customers, vendors, and independent
contractors means contract managers serve as the main facilitators for
negotiations, recommendations, record keeping, monitoring, change
management, and more. These are three key roles of a contract manager along
with some best practices on how to keep everything organized so contract
management is a smooth, streamlined process. To successfully oversee contracts
from drafting all the way to execution, contract managers need to be skilled in
numerous areas including legal compliance, negotiation, and relationship
management. Contract managers often serve as the key point of contact between
a business and third parties to ensure timely review and approval of any
variations. They also provide recommendations and negotiate directly with
customer attorneys or purchasing staff to craft a final document that is
satisfactory to all parties. Streamlining communication and monitoring processes
are very important for success in an organization, and having a tool that will
automate processes and keep all conversations and edits in one place is key for a
contract’s lifecycle and a contract manager’s efficiency.