Contract Management in the Netherlands

Development of a maturity model

Author: C.A.A. Kleiren

Supervisors WUR: prof. dr. ir. A.F. van Wagenberg

dr. W.J.J. Bijman

Course code: MST 80430

Date: June 2008

Document: Master thesis report
Student: Cornelius A.A. Kleiren
820731 441 010
Cornelius.Kleiren@wur.nl
Supervisors: prof. dr. ir. A.F. van Wagenberg
dr. W.J.J. Bijman
Company: Capgemini Nederland B.V.
Address: Papendorpseweg 100
3528 BJ Utrecht
Supervisors: mr. W. L. Lee
way.linlee@capgemini.com
030 6892225
ing. J.G. Tersteeg (MBA)
jim.tersteeg@capgemini.com
030 9892225
University: Wageningen University & Research centre
Chair: Management Studies
Course code: MST 80430 – 30 ects

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Preface

Utrecht, May 2008

“After having been a student for over five years, I realized it was time to start studying”

This thesis represents the final result of my time as an academic student and also represents the start of
a new era focused on work and career. The start of this new era however wouldn’t be possible without
the help of many people who assisted me in writing the document in front of you.

Therefore I would first like to thank my Capgemini supervisors: Way Lin Lee and Jim Tersteeg. I’m not the
easiest person on the world and relations might have started as a little struggle. This relation however
managed to flourish and resulted into a productive cooperation. Way Lin and Jim, thank you for all the
feedback, coaching and given trust. Another thanks goes to all other Capgemini colleagues of the Finance
Transformation practise and the GRC cluster for their support and advice but also the lunch conversations
and the necessary fun and distraction while working on my research.

Next I would like to thank my supervisors of the Wageningen University: Dries van Wagenberg en Jos
Bijman, for their support, scientific feedback and flexibility in letting me do my internship and thesis on
the same subject at the same organization.

A thanks goes to all participants of the interviews for their enthusiasm and showed interest in my
research and often providing me with new insights on the subject.

I would also like to thank my girlfriend for continuously motivating me and helping me design a front
cover for this thesis.

A special thanks goes to my parents in trusting me on my decisions and supporting me everywhere I

decide to go.

I hope you will enjoy reading this thesis document. Read it if you’re interested and want to know more
about contract management. Read it if you’re already skilled in the profession and interested in the
newest contract management insights.

Kind regards,

Kees

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Management summary

Managing contracts is becoming a corporate priority these days. Businesses are focusing on their core
competences to reduce costs and are outsourcing more business activities to either specialized
organizations or low-wage countries. These developments lead to more and more complex contracts.
Another development is the growth of legislations such as the Sarbanes-Oxley act (SOX) and the
Tabaksblat code, or Dutch corporate governance code, which oblige boards of large companies to make
processes auditable, traceable and give account to their stockholders. As a result of these legislations
contract management processes in an organization need to be traceable and auditable as well. This again
leads to the fact that contracts need more extensive and structured management in organizations these
days.

This research originated as an initiative of Capgemini Netherlands B.V.. Capgemini is a global player in the
field of IT, consulting and outsourcing activities. The consulting department of Capgemini Netherlands
B.V. noticed an increase in activity in and attention to contract management among their Dutch clients
and other large Dutch companies. As Capgemini is a consulting company, this led to the question how
and by what instruments companies can be guided in their development path to professional contract
management.

In the literature study of this thesis a difference is identified between the American definition of contract
management and the Dutch definition of contract management. The American definition comprises sales
and procurement contracts, whereas the Dutch definition only takes procurement contracts in scope.
Another difference is the beginning and end of the contract management process. According to the
Dutch definition contract management starts with the creation of the contract, whereas, according to the
American definition, contract management starts with identifying the initial need, or pre-sales activities.
Several maturity models have been developed for the American definition and the cause for this research
is the lack of a maturity model for the Dutch definition. In the literature study a conceptual version for
the maturity model is developed that has been tested in the empirical research together with the Dutch
definition of contract management found in literature.

In the empirical research a case study approach is used and a sample of fifteen companies has been
selected. The selected companies have been interviewed with the help of a questionnaire in order to test
the findings of the literature study. In the empirical research the conceptual model is tested and the
definitions for contract management used in the participating companies are assessed. After each case
the conceptual model was reviewed and adaptations were made on the model and the questionnaire in
an iterative process after every interview. The model and the questionnaire have evolved during the case
studies and interviews and new insights on the subject of contract management have been developed.

The result and conclusion of this empirical research is the confirmation that the key elements of the
Dutch definition in literature are also in the definitions used in large Dutch companies. Next to that a
contribution is made to the Dutch definition of contract management by identifying two organizational
levels in contract management; a tactical level i.e. managing risks and relations per individual contract
and an operational level i.e. monitoring performances and providing overview in all contracts. The final
conclusion of the empirical research is that a maturity model for contract management does not apply. A
maturity model implies that a company should always try to grow and strive for the highest level of
maturity. The conclusion after the empirical research is that there is an optimum in the professional level

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of contract management and striving for the highest level is not necessarily profitable. Growing in
contract management maturity with higher transaction costs as a result doesn’t always repay itself and
therefore the conceptual model, a maturity model for contract management based on literature, has
been rejected.

In the discussion of this research the subject is continued and the information of the literature research,
the conceptual model and the interviews are used to come up with an alternative model which can be
used to identify the optimal level. This model consists out of a model for the identified tactical level in
contract management and a model for the identified operational level in contract management. These
two models can help an organization to determine their “as is” situation and, with the help of the found
factors of influence on the optimal level, their “to be” situation.

According to this research, certain factors are of influence on the optimal level in contract management.
Some of these factors have been identified in the discussion, for example amount of contracts, total
spend under contract, the threat of a possible merger or the position in the “Kraljic” matrix identifying
the business impact and the supply risk. These factors all have a relation with the opportunity costs in
contract management and influence the optimal level.

Finally in the recommendations to Capgemini and the participating companies, a list of best practices in
contract management found among the participating companies, expected future trends and suggestions
for future research are stated.

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Table of contents

PREFACE 3

MANAGEMENT SUMMARY 4

TABLE OF CONTENTS 6

ABBREVIATIONS 9

1. INTRODUCTION 10

1.1 RESEARCH BACKGROUND 10

1.1.1 INTRODUCTION TO CAPGEMINI 10
1.1.2 INTRODUCTION TO RESEARCH 10
1.1.3 PROBLEM ANALYSIS 12
1.2 CONCEPTUAL RESEARCH DESIGN 12
1.2.1 RESEARCH OBJECTIVES 12
1.2.2 RESEARCH FRAMEWORK 13
1.2.3 RESEARCH ISSUE 14
1.3 TECHNICAL RESEARCH DESIGN 14
1.3.1 RESEARCH MATERIAL 14
1.3.2 RESEARCH STRATEGY 15
1.3.3 RELIABILITY AND VALIDITY 16
1.4 STRUCTURE OF THE REPORT 16

2. THE CONTRACT 18

2.1 AGENCY THEORY 18

2.2 TRANSACTION COSTS THEORY 19
2.3 CONVENTION THEORY 19

3. CONTRACT MANAGEMENT 21

3.1 TRANSACTION MANAGEMENT 21

3.2 CONTRACT MANAGEMENT 22

4. THE CONTRACT MANAGEMENT MATURITY MODEL 26

4.1 INPUT FOR THE CONCEPTUAL MODEL 27

4.1.1 THE CAPABILITY MATURITY MODEL 27
4.1.2 THE CMMM© 29

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4.1.3 THE CONTRACTING CAPABILITY MATURITY MODEL 30
4.1.4 STEPS FOR DEVELOPMENT IN CONTRACT MANAGEMENT 31
4.1.5 THE ABERDEENGROUP 31
4.2 THE CONCEPTUAL MODEL 32

5. THE EMPIRICAL RESEARCH 34

5.1 RESEARCH METHODOLOGY 34

5.1.1 SELECTION OF CASES 34
5.1.2 THE INTERVIEW QUESTIONNAIRE 35
5.2 CASE STUDIES 35
RABOBANK 36
KPN 36
PHILIPS 37
HEINEKEN 37
ING 37
ABN AMRO 38
AKZO NOBEL 38
PRORAIL 39
ESSENT 39
FRIESLAND FOODS 39
NUON 40
CAMPINA 40
ENECO 41
5.3 CASE ANALYSES 41
5.4 VALIDATION OF RESULTS 41

6. RESULTS AND CONCLUSIONS 43

6.1 CONTRACT MANAGEMENT ACTIVITY 43

6.2 DEFINITION OF CONTRACT MANAGEMENT 44
6.2.1 A MULTI-LEVEL ACTIVITY 45
6.2.2 THE CONTRACT MANAGEMENT PROCESS 47
6.2.3 MULTIPLE STAKEHOLDERS 48
6.3 CONTRACT MANAGEMENT AND THE MATURITY MODEL 50

7. DISCUSSION 51

7.1 TRANSACTION COSTS VS. OPPORTUNITY COSTS 51

7.2 FACTORS OF INFLUENCE ON THE OPTIMAL LEVEL 52
7.2.1 AMOUNT OF CONTRACTS 53
7.2.2 TOTAL SPEND UNDER CONTRACT 53
7.2.3 A NATIONAL ORGANIZATION VS. AN INTERNATIONAL ORGANIZATION 53
7.2.4 THREAT OF A MERGER, ACQUISITION OR OTHER MAJOR REORGANIZATION 53

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7.2.5 INTERFACE WITH PRIMARY BUSINESS PROCESS 53
7.2.6 POSITION IN THE “KRALJIC MATRIX” 54
7.2.7 OTHER FACTORS OF INFLUENCE 55
7.3 THE CONTRACT MANAGEMENT DEVELOPMENT MODELS 55
7.3.1 OPERATIONAL LEVEL 56
7.3.2 TACTICAL LEVEL 58
7.4 LIMITATIONS 60

8. RECOMMENDATIONS 61

8.1 BEST PRACTICES 61

8.1.1 PROCESS 61
8.1.2 PEOPLE 62
8.1.3 SYSTEM 63
8.2 FUTURE TRENDS 64
8.3 FUTURE RESEARCH 64

REFERENCES 65

LITERATURE: 65
WEBSITES: 67

APPENDIX I: INITIAL QUESTIONNAIRE 68

APPENDIX II: FINAL QUESTIONNAIRE 70

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Abbreviations

CCMM Contracting Capability Maturity Model

CLM Contract Lifecycle Management

CMM Capability Maturity Model

CMMM Contract Management Maturity Model

ECM Enterprise Contract Management

FTE Full Time Equivalent

GRC Governance, Risk and Compliance

IACCM International Association for Commercial and Contract Management

KPI Key Performance Indicator

NCMA National Contract Management Association

NEVI Nederlandse Vereniging voor Inkoopmanagement

SEI Software Engineering Institute

SLA Service Level Agreement

SOX Sarbanes Oxley Act

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1. Introduction

This research originated as an initiative of Capgemini Netherlands B.V. and ultimately led to the writing of
this master thesis. In the following sections more will be explained of Capgemini Netherlands B.V., the
cause of this research, the objectives, issues and how the research is build up in this report.

1.1 Research background

1.1.1 Introduction to Capgemini

Capgemini S.A. is a global leader in consulting, technology, outsourcing and local professional services.
Capgemini is headquartered in Paris, France and operates in more than 30 countries. Capgemini has had
a 7.7 billion in revenues with a 293 million net income in 2006 and almost 68.000 people were employed
at Capgemini in 2006. Capgemini Netherlands B.V. together with Belgium and Luxembourg (the Benelux)
form Capgemini N.V. and are part of the strategic business unit Continental Europe & Asia-Pacific of
Capgemini S.A. 6.000 of the 68.000 people worldwide are employed at Capgemini Netherlands B.V.
Capgemini Netherlands B.V. is split in three departments: Consulting, technology and outsourcing. The
writing of this thesis was performed at the consulting department within the practise Finance
Transformation. The practise Finance Transformation is split in five clusters: Facility management, cost
and economic value management, corporate performance management, financial transaction processing
and governance risk and compliance (GRC). The contract management project is an initiative of the GRC
cluster.

1.1.2 Introduction to research

Making agreements and putting them in contracts is seen as a normal process in doing business.
Companies manage these contracts in order to monitor contract compliance, make savings on
procurement and maintain insight in their contractual agreements, rights and obligations. Nowadays
more focus in companies is put on professional outsourcing with more and more complex contracts as a
result. Therefore a bigger challenge lies in managing these contracts. To support this bigger challenge in
contract management different kinds of information technology applications are available which provide
handy tools in assisting contract management. Still it is not uncommon to find organizations with
thousands of contracts in place with little more than manual efforts, desk drawers and file cabinets to
manage their contractual agreements. Nor is it uncommon to find contracts long expired but that are still
being paid for or are not compliantly executed. In many organizations contract administration and
management is often an afterthought. Contracts are often not easily found, not well maintained and
different contracts are made with the same supplier. They are often only put attention to in case of a due
diligence investigation in a merger or acquisition situation. Contracts are living documents, this means
that mutations occur. Contract mutations require structure in contract management.

10
Most businesses and industries focus on the negotiation, getting the contract and closing a profitable
deal. An often forgotten part however is actually putting the contract to good use in the operational
purchasing process. Catching the identified savings and turning them into “in the pocket” savings, linking
the contract to the operational process, which is equally vital to business success (Garrett, 2007)

Contract management is becoming a corporate priority. In a research of the AberdeenGroup (2003) a

result was that 53% of the organizations considered contract management to be a critical success factor
and 84% of the organizations considered contract management as of great importance to their business.
A growing trend is shown by Capgemini research (2006). This research conducted a survey to understand
what issues CPO’s of large corporate procurement functions are planning to address in the coming years.
This SRM study clearly reported contract management and contract management related issues are of
top priority for CPO’s.

This growing focus on contract management is a result of several trends:

• Globalization

More companies are expanding their business abroad with more international contracts as a result. Due
to a wider geographical spread of contracts and international regulations maintaining visibility in these
contracts is more of an issue. Another aspect is the growth in amount of contracts when companies go
global, more contracts need more management.

• Focus on core competences

Companies are more focusing on their core competences in order to reduce costs. More outsourcing
contracts and licensing contracts are a result of this trend. A motive behind this trend is the re-definition
of organizations of core and non-core activities. Only competitively distinguishing activities important for
the continuity of the company are seen as core activities nowadays. New non-core activities are more
and more identified and outsourced. In the past most organizations limited their outsourcing to just
catering or security (Ghijsen Cohen, 2006).

• New legislations

Another development is the growth of legislations such as the Sarbanes-Oxley act (SOX) and the
Tabaksblat code, or Dutch corporate governance code, which oblige boards of large companies to give
account to their stockholders. As a result of these legislations contract management processes in an
organization need to be traceable and auditable. This again leads to the fact that contracts need more
extensive and structured management.

As a result of this trend in more outsourcing, more and more complex contracts are made. Collins (2003)
states that the number of active contracts in a typical fortune 1,000 company reaches between 20,000
and 40,000. Conclusion; management of contracts is taking place at an ever larger scale which begs the
question of how it is done and who’s or what practise may be considered to be excellent?

11
 1.1.3 Problem analysis

Two divergent definitions of contract management are used in different literature, websites and
companies. The first is a definition often found in American literature and used by American research
companies. This definition entails a broad scope in managing contracts, sell-side or buy-side, starting at
the initial need or pre-sales activity to the contract termination. Stated below is a good example of an
American definition of contract management of Garrett and Rendon (2005).

“The management of the contract management process.” “With the contract management process
including sales contracts and ranging from the procurement planning or pre-sales activities to the
contract administration and close-out.” (Garrett and Rendon, 2005)

For this definition of contract management a maturity model is developed by Garrett and Rendon, the
contract management maturity model or CMMM© (Garrett and Rendon, 2005). Another maturity model
for this definition of contract management is being developed by the International Association for
Commercial and Contract Management (IACCM). This maturity model is called the Contracting Capability
Maturity Model (CCMM) and is still under development by this association.

In Dutch literature, websites and among Dutch companies however a different definition for contract
management is in use. This definition starts when the contract is created in the procurement process and
excludes sales contracts. Stated below is the definition of contract management of the Dutch professor
Harink.

“The linking pin between the tactical purchasing process and the operational purchasing process.
Managing the registration and further execution of the contract after it has been signed” (Translated
from Harink, 2004)

For this definition of contract management however no maturity model is available. No maturity model
based on scientific research for contract management for the Dutch definition has yet been developed.

1.2 Conceptual research design

This section deals with the initial aims, structure and content of this report. What are the goals and how
are they planned to be achieved?

1.2.1 Research objectives

The objective of this research is to develop and test a maturity model for Dutch companies for the Dutch
definition of contract management and by that helping and assisting Capgemini Netherlands B.V. and the
participating large Dutch companies. The complete research objective is:

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Key objective:

• Development and testing of a contract management maturity model to make a contribution to

the consulting activities of Capgemini Netherlands B.V. and contribute to the professional
contract management development of large Dutch companies.

1.2.2 Research framework

The theoretical foundation for this research has been based on the theories shown in Figure 1. Next,
several existing maturity models have been studied as the Capability Maturity Model (CMM) the
CMMM© and the CCMM. This literature study and multiple consultations with supervisors and experts of
Capgeminii has resulted in a literature overview of used Dutch definitions of contract management and a
matching maturity model for the Dutch definition of contract management which is the conceptual
model of this research. This definition and model has been analyzed,
analyzed, tested and adjusted in an iterative
process during a series of twenty interviews with fifteen Dutch companies. This has resulted in an
adjusted and tested model and a contribution to the Dutch definition of contract management which has
again been validated
dated by a panel consisting out of Capgemini experts and the participating companies.

Figure: 1 the research framework

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 1.2.3 Research issue

This research consists out of three main research questions:

• What is the definition used in large Dutch companies for contract management?

• How does contract management of large Dutch companies mature?

• How can a maturity model contribute to the professional development of contract management
in large Dutch companies?

1.3 Technical research design

1.3.1 Research material

As to derive from the research framework in Figure 1 this research consists of four phases. The first phase
is the literature research, followed by an empirical and analytical phase, a validation of the business
results and finally the writing of the final results, conclusions and recommendations.

Phase (A) Literature research

In the first phase, a literature study is performed on contract related theories as: agency theory,
transactions costs theory, procurement theory and convention theory. In order to get more insight in the
foundations of contract management a parallel is drawn with transaction management and further
research is performed on the different definitions and aspects of contract management. Next to that
several existing maturity models have been looked into to form the basis of a draft version of a maturity
model for contract management, or the conceptual model, based on the Dutch definition formulated in
the literature research. Supervisors and Capgemini experts have provided input in the form of several
informal conversations for the conceptual model as well. This conceptual model has been tested in the
next empirical phase.

Phase (B) Empirical and analytical part

In this phase companies have been selected and contacted to participate in the research. People
responsible for managing contracts in these organizations have been interviewed with the assistance of a
questionnaire. Every interview is analyzed afterwards and has led to an adjustment of the conceptual
model and interview questionnaire. During every interview the maturity model has again been tested and
has become more applicable, underpinned and validated.

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Phase (C) Validation

After all twenty interviews the fifteen participating companies have been invited for a presentation.
During this presentation the research results, conclusions and recommendations have been presented.
The organizations have provided feedback and rated the model as a contribution to their professional
development of contract management.

Phase (D) Writing

This is the final phase where the report has to be finished and all the findings have to be written down.
The conclusions and recommendations for Capgemini and further research will be given.

1.3.2 Research strategy

Following the classification of Verschuren and Doorewaard (2001) the research strategy “case study” is
most suited for this research. Case studies have the following features that apply to the research
question and objectives for this research:

- A small sample of research units; fifteen companies will be interviewed for this research.
- A labor-intensive approach.
- More depth than width; Contract management is only a small part of a business’ processes.
Specifically developing a maturity model for this business process will need depth rather than
width.
- A selective or strategic research sample.
- Qualitative data and research methods; the research method used is interviewing. This is a
qualitative research method and will gain qualitative research data.
- An open observation on location. By visiting companies and performing interviews with these
companies, field observations are made.

Method: Structured interviews

This research has chosen interviews as research method primarily because this was the wish of
Capgemini. Twenty interviews are performed with fifteen companies. Further this research chose to use
structured interviews with a predetermined questionnaire. This choice is made because these types of
interviews are conducted when it is known at the outset what information is needed. Sometimes,
however, based on the exigencies of the situation, the interviewers have taken a lead from the
respondent’s answer and have asked other relevant questions not on the interview protocol. In spite of
the deviation in some of the interviews these are still considered to be a structured interviews. (Sekaran,
2003).

At the start of this research two pilot interviews are performed with Fortis and Ahold. These interviews
were performed to test the questionnaire and get better familiarized with jargon and expressions used in
this field of management.

Before the interviews desk research is performed on the companies to have better insight in the
organization’s business and as preparation for the interviews.

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Research population: Large Dutch companies

In order to draw valid conclusions the research population is limited to large Dutch companies which are
stock market listed or companies which have over a 1000 employees. This research has chosen for large
companies because of the assumption that larger companies have more contracts. The object of research
“contract management” is therefore most likely to be “more” present at large companies. This research
has chosen Dutch companies because the research is executed in the Netherlands and the research
objective clearly states assistance in contract management for Dutch companies.

1.3.3 Reliability and validity

o The interviews have not been recorded.

o Eighteen of the twenty interview were conducted together with a supervisor of Capgemini, both
making notes providing input for the interview report.

o After every interview the interview reports have been sent back to the interviewed for validation and
possible additions.

o Analyses of the interviews and adjustments to the conceptual model or questionnaire are the
interpretation of the researcher.

1.4 Structure of the report

The remainder of this report is structured as follows. Chapter two, three and four are the literature
research and further the empirical research, results, conclusions, discussion and recommendations are
described:

In chapter 2, The Contract, theories related to contracts have been described such as the agency theory,
transaction costs theory and the convention theory in order to form a theoretical foundation for this
research.

In chapter 3, Contract management, a parallel is drawn with transaction management and contract
management. Next to that an overview is given of the different definitions of contract management used
in the Dutch and American literature.

In chapter 4, The Contract Management Maturity Model, an overview of different maturity models and
other contract management related models have been stated. This has provided the input for the
maturity model used as the conceptual model for this research and is stated in Section 4.2. This
conceptual model has again been tested in the empirical research.

In chapter 5, The Empirical research, the process of selecting the cases for the research sample is
described. These selected cases, or organizations, are interviewed by the use of a questionnaire. During
the interviews this questionnaire evolved in an iterative process together with the conceptual model due

16
to new insights on the subject. In Section 5.2 short summaries of the cases and the interviews are
described. Next, the results and conclusions found in this iterative process of interviewing and analyzing
are validated by Capgemini experts and the participating cases during a presentation of the researcher.

In chapter 6, Results and conclusions, the results and conclusions of the empirical research are described.
A contribution is made to the definition of contract management and two organizational levels, tactical
and operational, are identified. The final conclusion is that a maturity model does not apply in helping
organizations in developing their contract management and the conceptual model has been rejected. A
maturity model implies that one must always strive for the highest level in maturity. This is however not
the case, there is an optimum in the professional level of contract management.

In chapter 7, Discussion, based on the conclusion two new models are presented based on the
information from the literature research, the conceptual model and the empirical research. One model
for both the organizational levels in contract management. Next to that the factors of influence on the
optimal level of contract management identified in this research are described.

Finally in chapter 8, Recommendations, the recommendations to Capgemini and the participating

companies is stated. This consists out of a list of best practices in contract management found among the
participating companies, expected future trends and suggestions for future research.

17
The following chapters two, three and four give an overview of the literature research performed for this
thesis divided over three chapters. Theoretical aspects related to the contract are explained with the help
of several theories in chapter two. Chapter three attempts to deliver a definition of contract
management that can be used for this research. Finally chapter four goes into the maturity model. The
final result of this literature research is a literature based contract management maturity model,
presented in section 4.2, to be used as the concept model for this research.

2. The Contract

According to the dictionary a “contract” is a written or verbal agreement between two or more parties
who make an undertaking with one another (van Dale, 2005). A legally binding exchange of promises or
agreement between parties that the law will enforce (Wikipedia, 2008). The binding exchange of
promises or agreement between parties can be verbal or written in both these definitions. The definition
of “contract” used in this research however will refer to the written agreement between two or more
parties. The reason for this is the written form that contracts are required to take to be enforceable.

In neo-classical economy perfect information is assumed and prices coordinate the market and economy.
Perfect information for both parties however is often not available. Different economics have thought
about this and came up with different theories and papers about issues related to imperfect information.

2.1 Agency theory

The agency theory describes two actors: The principal and the agent, where the principal hires the agent
to perform a certain action. The agency theory describes the issues in the relationship between actors in
the economical process. The theory is founded on two presumptions: In the relationship between
principal and agent there is a conflict of interest, wherein the agent has different interests than the
principal. The second presumption is that the principal is not able to see the agent’s actions, so there is a
lack of information. The fact is that the agent is closer on the subject and therefore has an information
advantage. The result of this incomplete and asymmetrical information is inefficiency. Both have different
interests and have different information which will lead to inefficiency. The challenge is to design a
contract on the basis of different interests and incomplete information which would give the right
incentives to the right agent to do exactly what the principal would want him to do and this way stop his
opportunistic behavior (Sources: Anderlini and Felli, 1998, www.wikipedia.org and www.economische-
begrippen.nl)

The agency theory and the information asymmetry problem is applicable in many cases: In an employer-
employee relationship, in an owner - manager relationship but also in a buyer - supplier relationship. In
the paper "The Market for Lemons: Quality Uncertainty and the Market Mechanism" (Akerlof, 1970) the
interaction between quality heterogeneity and asymmetrical information is described. This can lead to
the disappearance of a market if information about the quality is not clearly defined and available.
According to Akerlof incentives exist for the seller to deliver a low-quality good as a higher-quality due to
the asymmetry of information about the goods. The buyer, however, takes this incentive into

18
consideration and assumes the quality is uncertain. To overcome this issue the buyer will consider the
quality of the good to be average, which in turn will lead to the side effect that goods that are of a high
quality will be driven out of the market. If this mechanism is repeated, a no-trade equilibrium is reached
and the market will no longer exist.

In order to overcome this problem contracts are put up to make clear agreements about the trade and
the levels of quality. Price and quality negotiations, finding information and putting up long contracts
which include all the right incentives to prevent opportunistic behavior however cost money for both
principal and agent (transaction costs). It is in the interest of both principal and agent to reduce the
transaction costs as much as possible and come to a mutual agreement quickly. However there is also the
importance of clear agreements, good prices and giving the right incentives to overcome opportunistic
behavior.

2.2 Transaction costs theory

The transaction costs theory by Williamson (1975) begins by seeing agents as boundedly rational and
opportunistic. He emphasizes that bounded rationality is particularly problematic for organizations when
they try to put up contracts or make agreements with each other. Next to bounded rationality there is
also opportunism what plays a role in contracting. Some actors behave opportunistically within the
system. They don’t play by the rules, they lie and they cheat. In a world of perfect information, you don’t
have to worry about opportunism because it is already within the bounds of rational behavior. Not being
perfectly rational, actors cannot anticipate all the circumstances that, over time, a contract may be
subject to. If actors were always truthful they could commit themselves to be fair to the signed
agreement. But, agents can be opportunistic and, with the right incentives, seek their self-interest with
fraud. This way hazards can arise from contracts. Williamson’s suggestion (1985) to help solve these
problems is integration within the supply chain. In order to gain information, get incentives aligned and
reduce negotiation costs a company can get everything in house. Negotiations, lack of information and
non-aligned incentives cause major company costs and many savings could be made in that area.

2.3 Convention theory

In the convention theory other means of coordination, non-price means, are described. Convention
theory deals with what it calls “radical uncertainty” which means that one is not able to assign a
probability distribution to future events. This means that it is impossible to write a contract because the
information needed is always incomplete. It is not possible to assign probabilities to all future
contingencies. How does the economy get coordinated in this face of such uncertainty? In the paper “The
market for lemons” of Akerlof (1970) asymmetrical information is assumed to be the reason of the failure
of the standard neo classical theory, in which perfect information is assumed. The convention theory
assumes that the neo classical theory fails because of the way people reason about their trading partner.
People tend to attribute their own original intentions and attitude to their trading partner resulting in a “I
know that you know that I know…” kind of infinite reasoning. If each does this, with no reference to an
outside standard behavior, the market fails since no one will commit. The combination of “radical
uncertainty” and self-referencing on the other actor’s actions will make action impossible. The

19
convention theory however assumes that actors are not perfectly rational but boundedly rational.
Standardized decision rules and standard operating procedures are developed and in existence. This way
the actor does not deal with all the possible results expected from a decision. Principally the validity or
efficiency of the rule allowed him to reach a decision, a justifiable or reasonable decision rather than a
rational decision (Chevassus-Loza and Valceschini, 1994.). This theory allows the existence of collective
rules that interpose themselves in bilateral contracting agreements.

20
3. Contract Management
anagement

Summarizing the previous chapter: Many challenges, difficulties

difficulties and multiple interests exist in
purchasing. For that reason contracts are put up to make agreements clear and enforceable.
enforceable The
challenge in managing those contracts lies in finding the t right balance between anticipating on
opportunistic behaviorr and making as less transaction costs as possible. It is impossible to cover all
possible things that can happen during a transaction in a contract and therefore
therefore standardized rules and
procedures are in existence to help find this balance.

The following sections of this chapter describe a parallel on contract management with transaction
management and next the contract management definition issue is discussed.

3.1 Transaction management

Managing a contract can be regarded as managing one or multiple transactions. Rooks (2002) refers to
the management of this transaction as “transaction management”. He distinguishes three dimensions in
transaction management: phase, content and effort. In short this means that the transaction can be
managed in a certain phase of the transaction on a certain aspect which will take a certain amount of
effort (transaction costs).

The period of a transaction is characterized by two phases (Macaulay, 1963; Williamson

liamson 1985); an ex ante
period preliminary to the transaction and an a ex post period during and after the transaction. The
objective of the ex ante period is to prevent any possible problems in advance, the ex post period is to
solve problems during or after
ter the transaction.

The content of both the ex ante phase and ex post phase show parallels with the tactical purchasing
process and the operational purchasing process in the identified phases in purchasing in the model of Van
Weele (2001) en in the procurement
urement model of Capgemini (see Figure 3). Van Weele identifies a tactical
purchasing process wherein the needs of the company are specified, a supplier is selected and the
contract is put up. This could also be referred to as the ex ante phase in transaction
transact management
because in this phase in purchasing possible problems are also prevented by putting up a contractual
agreement. Van Weele also identifies an operational purchasing process wherein the contract is put to
use, monitored and feedback is provided
provided to the supplier in the aftercare phase. This could be referred to
as the ex post phase in transaction management wherein the transaction is executed, monitored and
possible problems are attempted to be solved in the aftercare phase. See Figure 2.

Figure
re 2: Phases in purchasing (Van Weele, 2001)

21
Two phases again are identified in the ex ante phase in transaction management. The first one is
searching, screening and selecting a possible transaction partner. This could again be referred to as the
selecting phase in tactical purchasing focusing both on possible differences between the possible
suppliers in the area of reliability and competences (Blumberg, 1997). Selection of a reliable and
competent supplier leads to less risks (Milgrom and Roberts, 1992) and less risks lead to less transaction
costs. Making a selection can be done by, among other things, previous experience with the same
supplier. One could measure its previous performances by pre-set key performance indicators or by
measuring to which level a service agreement is fulfilled. These are called key performance indicators
(KPI’s) and service level agreements (SLA’s).

The second phase in ex ante transaction management is the contractual planning of the transaction, or
making agreements for possible circumstances during the execution of the contract. This again shows
great resemblance with the “contract” phase in tactical purchasing which entails contracting the supplier
including negotiating the contract terms (Van Weele, 2001)

Ex post transaction management starts after the agreement has been closed and is focused on managing
possible problems during the execution of the transaction (Rooks, 2002). Ordering, monitoring the pre-
set KPI’s and SLA’s and aftercare could therefore be referred to as ex post transaction management.

The last dimension of transaction management is the effort of the transaction. This could again be related
to transaction costs. The relation between transaction costs and opportunity costs are discussed in the
previous chapter.

3.2 Contract management

The oldest information on contract management found in this research dates back to the founding of an
American association, the National Contract Management Association (NCMA) in 1959. Until the 1990’s
however contract management did not get much attention. After that, the attention on contract
management increased and also became an international issue and the International Association for
Contract and Commercial Management (IACCM) was founded in 1993.

Contract management is closely related to the concept “contract administration” and they are often
confused and can have very similar definitions in literature. In most literature however, the concept of
contract management refers to the processes of managing the entire contract lifecycle of contracts,
rather than the management of implementation of contracts, which is an often used definition for
contract administration. The objective of contract management is full realization of the potential of
contracts (Keskitalo, 2006)

As stated before, contract management could be referred to as the management of the contract lifecycle,
also often referred to as Contract Lifecycle Management (CLM) or Enterprise Contract Management
(ECM). The problem however is which part of the contract lifecycle? Where does the contract lifecycle
start and stop? What type of contracts are in- and excluded? American and Dutch definitions diverge and
are stated below.

22
American literature differs in scope in contract management compared to Dutch literature. American
literature includes sales and procurement contracts and start earlier in the purchasing or selling process.
Garrett describes his definition of contract management in an article:

“The management of the contract management process.” “With the contract management process
including sales contracts and ranging from the procurement planning or pre-sales activities to the
contract administration and close-out.” (Garrett and Rendon, 2005)

A definition found on the Dutch website of the virtual platform “Keten&Netwerken”, which is a platform
for creating mutual knowledge, is translated and defines contract management as:

“The process that ensures that the right information is at the right place at the right time in order to
support the entire contracting process. So it includes not only concluding the contracts but also
administering, monitoring and controlling afterwards. After conclusion of the contract these processes are
often forgotten or insufficient executed.”

The definition of “Keten&Netwerken” does not mention “including sales contracts” and starts with
“concluding the contracts.” It also shows similarities with the definition of contact administration in a
publication of NPPP (2004) of a workgroup of NEVI.

“Contract administration is the process that makes sure that the right information is at the right place at
the right time in order to support the entire contracting management process” (translated from NEVI,
2004)

Their definition of contract management in the same publication is:

“Contract management is the process whereby, on the basis of given input, signed and altered contracts
are uniformly documented, controlled and monitored, in order to fully utilize those contracts” (translated
from NEVI, 2004)

In the NEVI definition conclusion of the contract is not in scope. The “given input” can be interpreted as a
already concluded contract. The objective of fully utilizing the contracts is again in line with Keskitalo
(2006) stated before. Another approach is used by the Dutch professor Harink (2004) who defines
contract management as the linking pin between the purchase department who concludes and
administers corporate contracts (tactical purchasing) and the operational procurement process
(operational purchasing).

“The linking pin between the tactical purchasing process and the operational purchasing process.
Managing the registration and further execution of the contract after it has been signed” (translated from
Harink, 2004)

In the previous chapter parallels were described between transaction management and contract
management. So, according to Harink, contract management can also be described as “the linking pin”
between the ex ante phase in contract management and the ex post phase. It sees to the fact that the
contractual agreement made to prevent any possible problems in advance is executed compliantly.

This is also in line with the definition drawn in the procurement model of Capgemini (2006), in Figure 3.

23
Figure 3. Capgemini procurement model (2006)

In the Capgemini procurement model in Figure 3, contract management is the linking pin between the
strategic sourcing cycle and the procurement order cycle. Managing
anaging the registration and further
execution of the contract after it has been signed, capturing the in the sky identified savings from the
strategic sourcing cycle in the procurement order cycle
In order to clarify all concepts and key concepts and the interrelationship with the term contract
management, the marking of concepts of Van Weele (2001) has been presented in Figure 4, in order to
describe and reflect many key concepts used in this research area. The interpretation of contract
management and the interrelationship with other concepts in this figure is the interpretation and
interrelation used in this research.

Figure: 4. Marking of concepts

(source: Van Weele, 2001)

24
The arrow representing contract management in Figure 4 has been added by the researcher in the
marking of concepts of Van Weele. This shows the interrelationship and the beginning and end of
contract management as defined by Capgemini, 2006 and Harink, 2004.

25
4. The Contract Management Maturity Model

Garret and Rendon (2005) have defined all aspects related to the contract management maturity model.
These are stated below followed by an introduction to the capability maturity model what was the first
maturity model to be used. After that a build up will be made towards the contract management
maturity model that will be tested and validated after this internship.

Maturity

Maturity refers to a measure of effectiveness or capability in any specific process and is usually described
in terms of levels of effectiveness or capability (Garrett and Rendon, 2005).

Maturity level

A maturity level is a level of organizational capability created by one or more parts of an organization’s
processes. Maturity levels are used in an organization’s reach for improvement from ad hoc practises to a
state of continuous improvement (Garrett and Rendon, 2005).

Maturity Model

A maturity model is a structured collection of indicators that describe the maturity of an organization. A
maturity model provides: a place to start, prior experiences, a framework for prioritizing actions and a
path for improvement. Organizations use maturity models to asses, measure and improve their critical
core processes (Garrett and Rendon, 2005)

Contract Management Maturity

Contract Management Maturity is the measure of effectiveness of an organization’s contract

management processes and an indicator of the level of professionalism. These measures of contract
management process effectiveness can be described in terms of maturity levels reflecting an
organization’s contract management maturity (Garrett and Rendon, 2005)

Contract Management Maturity Model

The contract management maturity model is a maturity model as described earlier, applied to the
contract management process in an organization. It is a method for assessing and improving an
organization’s contract management process capability. It should describe an evolutionary roadmap an
organization would pursue in improving its contract management from an ad hoc (immature) process to a
continuously improved, or, optimized (mature) process (Garrett and Rendon, 2005)

26
4.1 Input for the conceptual model

In the next section the different inputs for the draft version of the maturity model that will be tested in
the empirical part of this research are stated. In short the inputs are provided by: the CMM, the
CMMM©, the CCMM and preliminary research of the AberdeenGroup.

4.1.1 The capability maturity model

The Capability Maturity Model (CMM) is a framework that describes an improvement path from an ad-
hoc, immature process to a mature, disciplined process focused on continuous improvement (Humprey,
1989). In creating a maturity model for contract management the CMM can be used as input. The CMM
was developed by the Software Engineering Institute (SEI) at Carnegie Mellon University in Pittsburgh and
defines the state or level of maturity of a process. The CMM has been used to assess the maturity levels
of organization areas as project management, risk management, information technology or personnel
management. The CMM consists of a continuum of five process maturity levels, enabling process owners
to rate the state, or maturity, of a given process as: Initial, repeatable, defined, managed or optimizing.
The CMM applies to any process within an organization and, when applied effectively, improves the
ability of organizations to meet goals for cost, schedule, functionality and quality. The different stages
used in the CMM can be adapted and transformed and used to help create a contract management
maturity model. The CMM identifies the following levels of maturity:

• Level 1: Initial stage

This is an ad hoc or chaotic state wherein control is not a priority. No stable environment is provided and
success depends on individuals, not on the use of proven processes. Still organizations or processes in
maturity level 1 often work, they only exceed budget and schedule frequently.

• Level 2: Repeatable stage

In this state documented processes provide the foundation for consistent and repeatable successes.
Process discipline helps ensure that existing practises are retained during times of stress. Output
measures are tracked and monitored, creating an environment that is more stable and disciplined. The
reliance on people remains however and there is still a significant risk of exceeding costs and time
estimates.

• Level 3: Defined stage

The organization’s set of standard processes, which are the basis for level 3, are established and
improved over time. The process is well documented; policies, process and standards are defined and
institutionalized through the whole organization and tailored from the organization’s set of standard
processes to suit a particular project or organizational unit.

• Level 4: Managed stage

The managed stage is characterized by the use of precise measures, effective control and monitoring. The
process is both stable and measured, but an exceptional circumstance may occur. At maturity level 4, the
performance of processes is controlled using statistical and other quantitative techniques, and is
quantitatively predictable. At maturity level 3, processes are only qualitatively predictable.

27
 • Level 5: Optimizing
Maturity level 5 focuses on continually improving process performance through both incremental and
innovative technological improvements. Both the defined processes and the organization’s set of
standard processes are targets of measurable improvement activities. As process activities are executed,
the process is continuously improved by quantitative feedback and from implementing innovative
approaches. At the optimizing Stage, there is a strong focus on continuous process improvement for
controls enterprise-wide

In Figure 5 the CMM is demonstrated. On the Y-axis the different capability maturity stages are shown
from immature (initial) up to a more mature state (optimizing). Next to that a short description is given
about the key features of theses capability maturity stages.

Figure: 5 The Capability Maturity Model

Source: www.knowledgeleader.com

(CMM information derived from: Herbsleb et al. 1997, www.wikipedia.org, www.knowledgeleader.com).

28
 4.1.2 The CMMM©

One contract management maturity model (the CMMM©, see Figure: 6), also based on the CMM, is
already in use. It is created by Garrett and Rendon (2005) and identifies five different levels of maturity as
well. For this maturity model buyer and seller contracts and the different phases in their definition of
contract management are taken into account.

Figure: 6 The CMMM© of Garrett and Rendon (2005)

(Source: Garret and Rendon, 2005)

The contract management process areas in this maturity model exists of six chronological process steps in
managing contracts. It is build up out of five levels of maturity ranging from an ad-hoc level (1), a basic,
disciplined process capability (2), a fully established and institutionalized processes capability (3), a level
characterized by processes integrated with other corporate processes resulting in synergistic corporate
benefits (4) and at level 5 in which processes are focused on continuous improvement and adoption of
lessons learned and best practises.

• Ad hoc
The organization at this initial level of maturity acknowledges that contract management processes exist.
The organization’s management understands the benefit and value of using contract management
processes, some established contract management processes exist but these processes are applied only
on an ad-hoc and sporadic basis to various contracts. There is only informal documentation of contract
management processes existing within the organization.

• Basic
Organizations at this level of maturity have some basic contract management processes and standards
within the organization. These processes however only account for the “important” contracts. The
organization does not apply these contract management processes or standards through the entire
organization. Finally, at this maturity level, there is no organizational policy requiring the use of contract
management processes and standards on other than the required “most important” contracts.

• Structured
At this level of maturity, contract management processes and standards are established, institutionalized
and mandated throughout the entire organization. Formal documentation has been developed for the
contract management processes and standards and some processes may even be automated. Senior
organizational management is involved in providing guidance, direction, and even approval of key

29
contracting strategy, decisions, related contract terms and conditions and contract management
documents.

• Integrated
Organizations at this level of maturity have contract management processes that are fully integrated with
other organizational core processes. The contract’s end-user is also an integral member of the buying or
selling contracts team. The organization’s management periodically uses metrics to measure various
aspects of the contract management process and to make contracts-related decisions.

• Optimized
The final and highest level of maturity reflects an organization whose management systematically uses
performance metrics to measure the quality and evaluate the efficiency and effectiveness of the contract
management processes. At this level, continuous process improvement efforts are also implemented to
improve the contract management processes. Furthermore, the organization has established ‘lessons
learned’ and best practises programs to improve contract management processes, standards, and
documentation.

In the CMMM© all key process areas are described for the American definition of contract management
used in their model. Two of the key process areas in their model overlap the definition of contract
management used for this research: contract administration and contract closeout. Those can be used for
input for the development of the maturity model of this research. The following maturity indicators of
the CMMM© are selected to possibly provide input for the maturity model of this research:

• A team approach for monitoring the supplier’s performance to ensure the fulfillment of contractual
obligations by all parties of the contract.
• An established process for managing and controlling contract changes to cost, schedule, and
performance requirements.
• An established process for ensuring that only authorized individuals negotiate or agree to contract
changes.
• An established process for managing invoices and payments.
• An established process for conducting periodic and integrated cost, schedule, and performance
evaluations, such as earned value management, is used as part of the contract administration
process.
• Encouragement of contract disputes to be resolved using alternate disputes resolution methods.
• The contract closeout process involves checklists, templates, and forms for ensuring proper documen-
tation of closed-out contracts.

4.1.3 The contracting capability maturity model

Another maturity model for contract management, the contracting capability maturity model (CCMM), is
still under development and initiated by the IACCM mentioned at the beginning of section 3.1. Their
definition of contract management also includes sales contracts and includes the same scope as the
definition used in the CMMM©. The CCMM also defines five stages of maturity just like the CMM and the
CMMM© but has identified different key process areas. These are not the chronological process steps in
the contract management process but ten areas of engagement as: Leadership, vendor experience,
execution and delivery, information systems, risk management, strategy etc. Since the CCMM is still

30
under development and has not yet been officially released, not much focus will be put on this maturity
model as input for the maturity model for this research.

4.1.4 Steps for development in contract management

Another input for the maturity model of this research are the steps for development in contract
management issued by van der Kolk (2004). He describes five stadia for development with an increasing
potential value and an increasing effort on the other hand. These steps are of special value for input due
to the fact that van der Kolk used a similar definition for contract management than that has been used
in this research.

4.1.5 The AberdeenGroup

Research reports of the AberdeenGroup (2003, 2006-I, 2006-II and 2007) describe the results of
researches under ‘best in class’ companies in the field of contract management and present a benchmark
report on contract management, benchmarking these companies. In order to assess the maturity level of
contract management in those researches several indicators for the level of maturity in contract
management were used:

• To what level standardized contract management processes and methods are used
• The level of automation of the contact management process
• Presence of a central contract management organization, responsible for all contracts
• Presence of a central electronic repository for all contracts
• The level of access to aggregated and detailed data extracted from contracts
• The capability to generate analysis reports on portfolio of contracts
• The implementation of a contract management IT solution provider
• Ability to analyze contract performance and risks
• The amount of systems and databases that vary across the organization
• Degree of policies and executive support
• Degree of internal stakeholder compliance
• Degree of contract visibility and compliance-tracking (monitoring)
• The place of contract management responsibility
• The organization maintains a lessons-learned and best practises database for use in future
projects and contracts.

All this input from literature, together with the help and input of Capgemini consultants and supervisors,
have resulted in a conceptual model. This conceptual model, or maturity model, will be tested in the
empirical part of this research. The conceptual model that will be tested in the empirical part is explained
in the next section.

31
4.2 The conceptual model

Just like the CMM, the CMMM© and the CCMS the maturity model of this research will also contain five
levels of maturity.
In consultation with Capgemini supervisors and using the input and feedback from experienced
Capgemini experts on the subject the following conceptual model is developed. It is also build up out of
five levels in maturity which are described below and consists out of five key process areas. The five
identified key process area are: Knowledge & data, process, system, monitoring and organization &
responsibility. The maturity model is shown in Figure 7 and below the key features of the five identified
levels in maturity are described, inspired by the provided input from the previous chapters of part II.

• Aware
An organization with this type of contract management is aware of the existence of contract management
processes and contract management supporting information technologies. Although there are no organization-
wide established basic contract management processes, some processes do exist and are used within the
organization. The processes however differ per department and are not transparent to other departments. Also
there is no special reason as to which contracts these processes are applied. Mostly informal processes are in
use. Organizational managers are not held responsible for any contracts and the management of contracts
mostly relies on individual performance.

• Visible
An organization with this type of contract management has established some basic contract management
processes. These processes however are only required on selected complex, critical or high-visibility contracts
meeting a certain amount (‘big contracts’). The contract management processes are not established throughout
the entire organization for every contract. Different contract management processes are used throughout the
organization but are transparent to other departments. There is no policy requiring the consistent use of
standard contract management processes other than the ‘big contracts’. Standard templates and central
depositories however are used throughout the organization; there is insight in the contracts and different
processes used.

• Control
In this type of contract management processes are implemented throughout the entire organization. Policies to
ensure internal, external and regulatory compliance are institutionalized. Standard procedures for corrective
action are implemented and operational. At this level senior management is responsible for the contract
management process.

• Integrated
In this type of contract management processes and systems are fully integrated with other organizational
processes and systems. Also sale contracts are integrated in the contract management system. Board is directly
involved in the integration and management of all systems and processes.

• Business optimization
An organization with this type of contract management is continuously improving all its processes which are
fully integrated. Also an organization with this type of contract management is always searching for
opportunities in the market. It can easily adapt and shift its contract in order to react to market opportunities.

32
Figure: 7 Conceptual model
1. Ad hoc
• Little or no standard
templates for contracts
A. Knowledge & data
• No central repository
• Little or no visibility or
overview
• Processes exist
• Ad hoc appliance
B. Process
• Individual performance,
no integrated process
• No or little form of
automation
C. System
• Some manual systems in
use.
• No internal compliancy
policies
D. Monitoring
• Monitoring is not a
priority
• Much ‘maverick buying’
• No one responsible
• De-central organization
E. Organization &
• Unstable situation relies
responsibility on ‘heroes’
2. Visible
• Standard contract
templates
• A central repository
• Access and insight in
contract information
• Uniform contracts
• Processes limited to
visibility
• Standard processes for
monitoring for “big”
contracts only
• Little automation
• manual systems
• Monitoring “big” contracts
only
• Operational management
responsible
• Clustered organization
3. Control
• A digital central repository
• Ability to cross-report
through a portfolio of
contracts
• Implementing standards
• Standard processes for
corrective action
• Automated system in use
• Integrated with other
business systems
• Internal and external
compliancy policies
• Corrective action
• Intensive monitoring
• Senior management
responsible
• Centrally organized
4. Compliant
• Digital repository
integrated with sales
contracts
• An up to date repository
• Process fully operational
and meeting or exceeding
expectations
• Integration with sales
contracts
• Compliant with all policies,
agreements and
regulations in purchase
and sales contracts
• Board level responsibility
5. Business optimization
• Easily and quickly to access
and alter contracts in order
to react to evolving market
conditions
• Quick alterations easily
made in process in order to
react to new market
conditions
• A non-stop up to date
system
• Market conditions and
business are being
monitored for contract
management opportunities
• Board level responsibility
33
5. The Empirical Research

This chapter describes the empirical research performed in order to test the definition of contract
management and the conceptual model, developed on the basis of the literature in chapter two, three
and four.

5.1 Research methodology

As stated in the introduction in chapter one, the strategy of this research is “case studies” by making use
of the research method “structured interviews”. Because of the fact that a case study strategy is most
suited for this research a sample of fifteen “cases” is selected. The qualitative research method of
structured interviewing is chosen in order to get more depth rather than width.

5.1.1 Selection of cases

For a case study approach, first the cases will have to be determined. As stated in the research strategy in
chapter one the research population is stock market listed or companies which have over a 1000
employees. In order to further specify this research population, the top 50 of largest Dutch companies
stated in the top 500 list on the www.FEMbusiness.nl (September, 2007) website are taken into account.

An ideal research population would be the entire top 50 list of large Dutch companies. Because of limited
time and the dependency of the willingness to participate of companies not all these fifty companies can
be interviewed. For that reason the list of the top 50 Dutch companies is compared with a list of
Capgemini clients. Since this research is conducted at Capgemini it is assumed that companies would be
more and more easily willing to cooperate with the support and help of Capgemini. Twenty clients of
Capgemini overlapped on the list of the top fifty potential companies to approach. With the help of
Capgemini account managers these companies are approached and fourteen indicated to be willing to
participate in the research. An exception however is made for ProRail which is number 84 on the
FEMbusiness list and was still included to the research population.

From the research sample four companies are in the utility sector (Eneco, Essent, KPN, Nuon) four in the
financial services (ABN Amro, Fortis, ING, Rabobank) and six in the product sector (Ahold, Akzo Nobel,
Campina, Friesland Foods, Heineken, Philips) and one in the travelling sector (ProRail). In this research
sample are three cooperative organizations, four semi-public companies and eight stock market listed
companies.

Assumed is that the list of participating companies is a representative sample of “large Dutch companies”
due to the diversity in company sectors and organizational structures.

34
 5.1.2 The interview questionnaire

The selected cases are researched on the subject contract management by using structured interviews. A
questionnaire is developed in order to provide structure to the interviews and to test the conceptual
model. The conceptual model provided much of the input needed for the first initial questionnaire and
resulted in the list of questions stated in Appendix I.

In this first questionnaire the five identified areas in contract management in the conceptual model:
Knowledge & data, process, system, monitoring and organization & responsibility are clustered in:
System, process and people. Further all necessary questions are asked per category to fill in or determine
the position of the company in the conceptual model. Finally two general questions are stated to provide
some extra input and leave room for discussion. This was the questionnaire for the first pilot interview at
Ahold. The interviews and questions however have evolved and are different over time due to new
insights, an increasing understanding of the matter and an increase in the clarity of the aim of the
research. The questionnaire has matured together with the research. In appendix II the questionnaire
used for the last interview is showed and one can see the maturation process. If these two are compared
one can easily notice the shift from an attempt to fill in the maturity model for a company to a more
general interview with more focus on different visions on contract management, the definition and the
model as a concept rather than an attempt to fill it in. After more and more interviews the research came
to the perception that in an one hour interview it is not possible to get a good picture of the total
maturity in contract management of a company. There are too many factors of influence and what is
mature for one company, could be considered immature for another. Therefore the questionnaire
evolved to a list of questions with increasing focus on the vision of the interviewed on the subject and
definition of contract management and how a professional development model should look like.

The difference in the participators of the interviews have contributed to deviation in the interview
reports as well. Some interviewed stated a clear personal vision on the subject in an enthusiastic manner
and provided the research with many new insights. On the other hand there was often not enough time
to answer all the questions due to this enthusiasm of the participant. Other participants answered the
questions and did not share a personal vision on the subject.

5.2 Case studies

In the next sections the companies, or cases, will be shortly illustrated in chronological order of
interviewing. In the sections a description of the person(s) interviewed, general company information
and, if applicable, striking or contributing quotes out of the interview will be given. The interview reports
cannot be found in the appendices since these are confidential. The interview reports are submitted to
the scientific supervisors of this thesis. The two pilot interviews with Fortis and Ahold will not be dealt
with in this chapter since these interviews were merely used to test the questionnaire and did not
provide added value to the research results and conclusions. These reports are still submitted to the
supervisors and have contributed to the recommendations.

35
 Rabobank

Interviewed:

• Manager Dienstketenmanagement
• Rabobank Nederland Shared Services & Facilities

• Category Manager Facilities

• Central procurement department (Rabo Concern Inkoop, RCI)

• Consultant

The Rabobank is a cooperative bank based on autonomous local banks in the Netherlands. Procurement
contracts over 50K€ are closed by the central procurement department RCI, this department is
responsible for about 1900 contracts. Due to the focus on core competences the Rabobank is increasingly
outsourcing and at the Shared Services & Facilities department more focus is put on contract
management. At the RCI however contract management is not a priority.

No clear definition for contract management is companywide implemented, but it roughly links the
tactical purchasing process to the operational purchasing process. According to interviewed nr. 1
procurement and contract management is not of much importance for a bank. “Contract management
needs to be optimized, not maximized”. According to interviewed nr. 3 on the other hand contract
management can always do better. One should always strive for the maximum in everything.

KPN

Interviewed:

• Senior controller
• Corporate Procurement Office Finance

KPN is a former public organization and is now a stock market listed company in the telephone, internet
and television services and products business. Recently procurement has been centralized in the
Corporate Procurement Office (CPO) and is set up with its own finance department. CPO is responsible
for contract management and has a total spend of € 2.6 billion divided over eight categories. In the
definition of the interviewed for contract management strategic purchasing is excluded, vendor rating
and ordering are included in the contract management scope. According to the interviewed contract
management is mature when all contracts are fully utilized. The level of maturity and what needs
monitoring is however dependent of the business a company is in. In some businesses availability is
important, in other businesses quality or price.

36
 Philips

Interviewed:

• Contract Filer Manager

• Corporate Legal Department

Royal Philips Electronics is a stock market listed organization in the electronic products business. Philips
has approximately 123.800 employees in over more than 60 countries and a generated turnover of € 27
billion in 2007. The corporate legal department is responsible for about 50.000 contracts. The
interviewed states that it is important that contracts are prioritized. Some contracts need more attention
than, for example, the routine contracts. Contract management improvement is always possible but
should not be the only objective. For mature contract management it is important to find a balance
between costs, revenues and risks.

Heineken

Interviewed:

• Manager contract management

• Heineken Nederland Supply

Heineken is a stock market listed company in the product sector and the largest brewery of the
Netherlands. In the past no one was responsible for managing contracts but since the beginning of 2007
Heineken has been reorganizing the buying and supplying activities. Heineken Nederland Supply now has
its own contract management department responsible for managing the contracts. According to the
interviewed focus is on three main pillars at Heineken Nederland Supply: Availability, supplier
performance and cost savings. In total six people, together with the interviewed are fulltime equipped
with managing all procurement contracts for packing material.

ING

Interviewed:

• Head of contract services

• Operations & IT banking – Vendor management office

ING is a global stock market listed organization in the financial service sector. At ING Operations & IT
banking about 1000 contracts with a 1.8 billion spend are in scope of contract management. Until two or
three years ago contracts were not monitored or managed at ING, contracts were considered to be of
minor importance. The interviewed states that contract management is performed on two organizational
levels. A tactical level in contract management and an operational level. Contract management on a
tactical level would e.g. imply managing contract risks and relations. Operational contract management
would imply the implementation or transition in the business. The interviewed also states that companies
in the product sector should be leaders in purchasing, banks are followers since it is not part of their core
business.

37
 ABN Amro

Interviewed:

• Regional Head of Procurement Operations

• Global procurement – Amsterdam London

ABN AMRO is a Dutch international bank with total assets of euro 1,025.2 billion (as at 31 December
2007). ABN AMRO was acquired by the Consortium of RBS, Fortis and Santander in October 2007 and its
various businesses are being divided among the three banks in line with their strategic priorities.
Procurement is geographical divided in four regions and these procurement regions are again divided in
department. One of these departments under procurement is operations and procurement which is
responsible for managing the contracts. Contracts are administered, implemented and monitored in
centrally, monitoring performance however is performed in the business. According to the interviewed,
in a business as usual situation “good” contract management is sufficient. In a merger or acquisition
situation a higher state of maturity is necessary.

Akzo Nobel

Interviewed:

• Director Global ICT Sourcing

• Global Information management group

Akzo Nobel is a stock market listed company in the products sector producing and supplying a wide range
of paints, coatings and specialty chemicals. Akzo Nobel has approximately 60.000 employees in eighty
countries and generated a € 14,4 billion revenue in 2007. The interviewed clearly states that contract
management is a multi level activity, contracts are not managed on one central level. On a strategic or
tactical level mostly master agreements are managed focusing on supplier relationship management and
new internal or external developments. Monitoring SLA’s however is done in the business on an
operational level. All these layers in contract management are in scope of contract management. “There
certainly is an optimum in contract management” according to the interviewed. This optimum should be
determined for every contract type. Contracts with a high business risk should be managed differently
than contracts for commodities. Contracts with high risk or business impact need more attention than
other contracts.

38
 ProRail

Interviewed:

• Contract manager
• ICT Services

• Contracting Process leader

• Outsourcing, cost management & procurement (AKI)

ProRail is a former public organization responsible for the capacity, reliability and safety of all rail tracks
in the Netherlands. The interviewed nr. 1 is a contract manager for the ICT services and is responsible for
about 40 to 50 contracts. The interviewed nr. 2 is a process leader at AKI and AKI is responsible for all
contracts of the NS and ProRail which are about 300 contracts with a yearly spend of € 900 million. All
contracts are physically stored at AKI in hard-copy, no digital copies are made. All projects over € 50K
need to be tendered nationally and all projects over € 422K need to be tendered out on a European base
at ProRail.

Essent

Interviewed:

• Contract manager
• Corporate Legal Department

Essent is a Dutch semi-public organization in the utility sector. Since the interviewed is with the legal
department, his role in the contract management process is keeping insight in all contractual rights and
obligations. The corporate legal department is responsible for about 4.000 contracts. Multiple contract
repositories exist at Essent and all have different systems, processes and procedures. Essent is occupied
with implementing a new document management tool to support the contract management process. The
implementation stagnated before because of a threat of a merger with Nuon at the time. Now the
merger is off, the implementation of the tool continues.

Friesland Foods

Interviewed:

• Manager Corporate Supply Chain

• Corporate staff

Friesland Foods is a cooperative organization in the product sector and in possible merger process with
Campina. Friesland Foods processes approximately 6.9 billion kilograms of milk annually. In the
Netherlands, Friesland Foods purchased 5.3 billion kilograms of milk from 9,417 dairy farms owned by
members of Dairy cooperation Friesland Foods in 2007. The interviewed is the manager corporate supply
chain and is responsible for the full global procurement of Friesland Foods which is fully centralized. The
total spend under contract is € 3.3 billion. According to the interviewed the future for contract

39
management is a total cost of ownership approach integrating procurement and sales in the supply chain.
Also according to the interviewed, in contract management there is an optimum in the level of
management per product category.

Nuon

Interviewed:

• General Council – Legal

• Energy Sourcing

Nuon is a Dutch semi-public organization in the utility sector providing energy to over 2.5 million people
in the Netherlands, Belgium and Germany with a turnover of € 5.6 billion. Nuon energy sourcing is
responsible for about 1000 contracts and has 50 people to manage those contracts. A new document
management tool is now being implemented. The interviewed believes that there is an optimum in
contract management but in the future he foresees a total integration of the entire supply chain and
integration of procurement and sales contracts.

Campina

Interviewed:

• Secretary
• Legal department

Campina is a cooperative dairy organization in the product sector and is now in a possible merger process
with Friesland Foods. The definition of contract management at Campina is managing the contract
management process, starting at signing the contracts and it stops when the contract ends. In the in the
legal department approximately 1000 contracts are stored and managed, this are all contract with
exception of the milk contracts with the farmers and members of the Campina cooperation. According to
the interviewed it is important, from a legal department point of view, that contracts are traceable, can
be retrieved and are put in a well organized system.

40
 Eneco

Interviewed:

• Lean six sigma Black Belt – Project manager

• Management

Eneco is a semi-public Dutch organization in the utility sector providing energy to 2 million customers.
Eneco is currently implementing a new contract management tool application of SAP in order to manage
the 600 or 700 procurement contracts at Eneco. Eneco uses a narrow scope in what it calls contract
management and excludes contract creation and monitoring of the contracts. This results in the fact that
three fte are sufficient to manage and register all contracts. According to the interviewed mature
contract management however starts at the initial need in the company. Mature contract management
will always repay itself, the only problem is that you’ll never be able to quantify the opportunity costs
since you will never know what savings are made by mature contract management and really
demonstrate this. Contract mismanagement can however result in major costs.

5.3 Case analyses

After every interview, every case and every expert consultation this research came to new insights. This is
an iterative analytical process in the researcher’s head, not possible to draw up in a formal schedule or
framework. Much is dependent on the researcher’s interpretation of all new information. All new insights
have however again been consulted with other experts every time and many adjustments and small steps
are made. This analytical iterative process finally resulted in the results, conclusions and
recommendations stated in next chapters. These results, conclusions and recommendations have again
been validated by the participants of the interviews, or research sample, in a presentation of the results
by the researcher, see next section.

5.4 Validation of results

After all the interviews a business lunch was organized where all participants of the interviews and all
consulted Capgemini experts were invited to reflect on the findings of this research. During this lunch the
researcher presented the results and conclusions of the research. During and after the presentation the
participants could reflect and comment on the presented research results. The feedback during and after
the presentation is briefly stated below and taken into account in the next chapters.

• There is indeed an optimum in the level of maturity in contract management and one should
make a business case to make the investment decision. You cannot rely on figures in reports, you
need to quantify the possible costs and cost savings.
• The total transaction costs go up as the maturity of contract management go up, but this is not a
linear relation. The slope decreases in the last phases.
• Next to a good system, discipline is crucial. A system does not work without discipline.

41
 • It’s good to have a central database. But the management of the contracts should be as closely
to the business as possible. Sometimes however it pays to have local databases for contracts,e.g.
in case of a divestment of a business unit.
• Contracts should be lifted to their individual optimal level of management
• One can easily improve its contract management without having to implement a new system.
Optimizing people and process can also help improve one’s level of maturity in contract
management
• It is better to have one system for all your contracts
• The environment expects that the maturity of contract management at large corporate
companies is taken good care off. Good contract management contributes to the agility and
fitness of a company with quick decision making, efficiency and more profit as result.

Besides these remarks all participants were enthusiastic about the results and they all agreed upon and
recognized the research findings and conclusion.

After the presentation also two propositions were stated:

1. Contract management should be on corporate level.

2. An optimal level in contract management results directly in higher profits.

These propositions did not result in long discussions. All participants quickly agreed.

1. Contract management is a multi level activity and not a corporate activity. Every contract should
be managed on the appropriate level and as closely to the business as possible.
2. An optimal level does result in higher profits and less risks. But a good quantitative business case
is necessary to decide what the optimal level is, what steps need to be taken and calculate
possible profits.

42
6. Results and Conclusions

In this chapter the results and conclusions in relationship to the definition of contract management, the
maturity model and the contribution of the maturity model will be drawn. Next to that other findings of
this research will we stated in this chapter that are of importance to the cause of this research.

Results and conclusions are put into one chapter because of the iterative process of interviewing and
analyzing used in this research. No clear line can be distinguished in what are exactly results and what are
conclusions. Organizations have been interviewed and after these interviews the results have
immediately been analyzed. After ever analyses after every interview the questionnaire and the
conceptual model have again been slightly modified. So results were analyzed, conclusions were drawn
and again tested in the next interview in an iterative process. This is a process of many steps which
contributes to the final result but makes it impossible to describe every step.

This chapter attempts to answer the following questions which were stated in section 1.2.3.

• What is the definition used in large Dutch companies for contract management?

• How does contract management of large Dutch companies mature?

• How can a maturity model contribute to the professional development of contract management
in large Dutch companies?

The chapter will start with the found activity in contract management. A high level of activity in contract
management was predicted in preliminary research and was one of the main causes for this research.

6.1 Contract management activity

“Contract management is on top of the CPO’s wish list for 2007”, this was the conclusion of a research
performed by Capgemini in 2006. This is in line with preceding research of the AberdeenGroup (2003)
who stated that 53% of the organizations consider contract management as a critical success factor to
the success of the organization and 84% of the companies find contract management very important or
critical to the success of their organization.

Those reports are again in line with the findings of this research. More than half of the companies
interviewed consider improvement of their contract management to be of high priority or are already in
process of improving their contract management, 13% recently finished improving, see Figure 8.

Identified reasons for recently improving contract management or giving contract management a high
priority in this research population are:

• Sudden awareness of lack in visibility and control

• Unwished-for tacit extension of a contract with relatively high business impact
• Recent threat of a merger, acquisition or big reorganisation.

43
 • Demand from legal for more insight in rights and obligations

Figure: 8, % of companies improving their contract management (n=15)

Recently improved

High priority or in process

No priority

0 10 20 30 40 50 60

Companies giving contract management a low or no priority declared to be laggers in the range of
procurement and contract management. Procurement and contract management is not a primary
business process, it has low risks and low business impact.

6.2 Definition of contract management

Defining contract management is a challenging task. The challenge lies within the issue that it can be
considered from multiple point of views, involves multiple stakeholders, is performed on multiple levels
in the organization
zation and can be argued on scope. For that reason many different definitions of contract
management exist in different literature, different business cultures and within different organizations.
organizations

In the literature research in section 3.2 different Dutch and

and American definitions are stated. The most
important differences between the two types of definitions were on scope. The American definition takes
sales and procurement contracts in scope where the Dutch definition merely focuses on procurement
contracts.. Another difference was on the beginning in the contract management process where in the
Dutch definition the contract management process begins with contract creation and the American
definition starts earlier in scope.

The key elements distinguishing the Dutch definition from the American definition are confirmed in the
empirical research. The two key elements distinguishing the Dutch definition from the American
definition are: The difference between sales and procurement contracts against only procurement
procur
contracts in the Dutch definition and the beginning of the contract management process. The
T two key
elements distinguishing the Dutch definition from the American definition were found in thirteen of the
fifteen participating cases.

44
 tract management entailed a focus on the availability of materials as well which can be
In one case contract
considered as an element of the American definition. In the second case a more American scope was
used ass well, including sales contracts, but still different repositories for sales and procurement contracts
were used.

The found definitions in literature do not cover all aspects

ts of contract management and are therefore not
complete. The participating organizations were asked what their definition of and point of o view on
contract management was. In n the next sections other contributing points of viewv on contract
management found in this research are stated.

6.2.1 A multi-level
level activity

Contracts are managed on different levels within the organization, contract management
m can be
interpreted as a multi-level
level activity. Some examples of translated interview quotes are:

“Contract
Contract Management is executed on a tactical level as well as on an operational level. Tactical level in
contract management entails managing risk profiles, milestones and financial
inancial risks, operational contract
management entails the transition in the business”
business

“contract
contract management differs per level. Management of a master agreement aims at relation
management and keeping up with internal and external developments. Management of a SLA is
operational. All these levels however are within the scope of contract management”

Based on the interviews it is concluded that the the monitoring of KPI’s and SLA’s is performed in the
business on an operational level.
el. Steering
Steering on the basis of contracts, providing feedback to the supplier on
performances, managing risks and makingmaking the end/extend decision are made on a tactical level in
contract management. The core of contract management
management and a key feature of professional contract
management is to have good communication and a good information flow between these two
organizational levels in contract management, see Figure 9.

Figure: 9 The information flows between the operational and tactical level in contract management

45
 ract management process involves:
The operational level in the contract involves

• Maintaining overview and insight by registering the contracts in a database.

• Using the contracts, ordering
• Monitoring the agreed SLA’s and KPI’s in the contract.
• Maintaining overview in contract spends
• Identifying and communicating the upcoming needs of the business. For example monitoring
monitor the
expiration dates in contracts before it terminates.

This information is communicated to the tactical organizational level in contract management which can
use the information to steer and react to contract performances. The tactical organizational level in
contract management provides the operational level with contracts, makesmake new agreements or makes
make
the end/extend decision on an existing contract. This involves
in the following aspects:

• Contract creation/implementation, not only creating the contract but also communicating the
existence of a new contract or new agreements to the operational level.
• Supplier relationship management, rating vendors and providing
providin feedback.
• Managing risks related to contracts
• End/extend contract decision making
• Specifying needs, needs are identified on the operational level but specified on a tactical level in
contract management.

In this point of view, the

he core of contract management is the communication between the tactical and
operational level. Replacing the oval representing contract management in the procurement model of
Capgemini in Figure 3 in chapter 3.2 with Figure 9 makes a more complete picture of the information
flows in contract management and the definition of contract management as a whole. See
S Figure 10.

Figure 10. Contract management

46
 6.2.2 The contract management process

Several steps in contract management are identified in the different cases, some of them however are
still arguable and differ in different definitions and scopes:

• Creation

The creation of the contract is arguable to have in scope of contract management. In some definitions
and in some organizations, contract creation is part of the tactical purchasing process. For this research
contract creation is in scope in the definition of contract management. Uniformly created contracts and
the use of standard clauses contribute to the visibility and quick overview in contracts.

• Approval

The contract must be signed and approved by the right authorized people in the organization

• Registration

From the tactical level in contract management the contract is implemented and registered in a database
or repository in the operational level in contract management.

• Implementation / order

Ordering of the contract is arguable to have in scope of contract management. Implementation is in

scope of contract management but the actual ordering and using the contract is sometimes also seen as
part of the procurement order cycle.

• Monitor

While ordering from the contracts the contracts are also being monitored. Contracts can be monitored
on several aspects but most important are the SLA’s KPI’s and spend.

• End/extend

With the help of the information delivered by monitoring the contract an termination or extension of the
contract decision is made.
In Figure 11 the steps in the contract management process are visualized, again as the linking pin
between the strategic sourcing cycle and the procurement order cycle.

47
Figure: 11 The contract management process cycle linking the strategic and operational procurement
cycle

The two organizational levels in contract management can also slightly be distinguished in this contract
management process
rocess cycle. The three steps on the left side of the circle: End/extend,
End/extend creation and
approval can be seen as the tactical level in contract management
management and the three steps on the right of the
circle:: Registration, implementation and monitor can ca be seen as the operational level in contract
management. The bridge between approval and registration is then the communication of the contract
and the bridge between monitor and extend/terminate can be interpreted as the communication of
contract performance
mance and needs etc. wherefrom the end/extend decision will follow.
follow

6.2.3 Multiple stakeholders

When thinking and writing about the definition of contract management it is also important to keep in
mind the different stakeholders in an organization. All these different stakeholders are related to and
benefit from professional contract management. This research identified several
al stakeholders involved in
contract management in and out of the organization. Ranging from the organization’s board, board to a
supplier, to the business they can all benefit from professional or mature contract management. The
benefits of mature contract management for several stakeholders are listed below and visualized in
Figure 12:

• The board

The board can profit by mature contract management if central visibility in all contracts is provided. Good
insight and transparency in roles, responsibilities and value of all contracts gives the organization more
agility and readiness to respond. Another benefit for the CFO is that it can easily
easily monitor all its costs by
good insight in all contract spends and moreover out of contract spend.

• Supplier

Suppliers benefit by good contract management because agreements are made clear, good feedback is
provided and all payments are on time.

48
 • Stockholders and press

With mature contract management it is less likely to make mistakes and the organization is more in
control. This is good for the organization’s reputation, will satisfy stockholders and generate positive
news in the media.

• Legal department

The legal department befits by mature contract management by always having insight in the most
current versions of contracts and better insight in upcoming rights and obligations.
• The business

The business benefits by mature contract management by clear insight in all made agreements due to
well implemented contracts.

• Purchasing department

The purchasing departments is provided with clear information about the performances of all contracts
and suppliers.

Figure 12: Contract management involves multiple stakeholders

49
6.3 Contract management and the maturity model

After answering the first research question in the previous section, this section focuses on the next two
research questions.

• How does contract management of large Dutch companies mature?

• How can a maturity model contribute to the professional development of contract management
in large Dutch companies?

To answer these research questions, the conceptual research model presented in section 4.2 was tested
in the empirical part of this research. In order to give some key determining elements of the empirical
research, several quotes from the interviews have been selected, translated and stated below.

“Every product category needs a different approach, another level of maturity”

“There is a point where more maturation is not profitable any more”

“A good contract management system is expensive. It is difficult to foresee the prevented costs by a good
contract system, but probably is doesn’t always repay itself”

“For mature contract management it is important to find a balance between costs, revenues and risks”

On the other hand, one interviewed clearly stated:

“Good contract management will always repay itself”

Concluding from the interviews in the empirical research, the answer to the last two research questions
of this research is that contract management does not mature as a maturity model implies, as was
assumed at the beginning of this research. The interviews in the empirical research clearly state that
there is an optimum in contract management. A maturity model was presented as the conceptual model
of this research. But a maturity model implies that maturing is always better and a good maturity model
can help an organization get to the highest level of maturity. See the definition of Garret and Rendon
(2005).

“It should describe an evolutionary roadmap an organization would pursue in improving its contract
management from an ad hoc (immature) process to a continuously improved, or, optimized (mature)
process” (Garrett and Rendon, 2005)

The conclusion of this research is that it is not always better to be more mature and for that reason a
maturity model does not apply. There is an optimal level in contract management.

50
7. Discussion

Since the conclusion is that a maturity model does not apply, the discussion will attempt to come up with
an alternative model and will attempts to still reach the second part of the objective stated in section
1.2.1.

• Make a contribution to the consulting activities of Capgemini Netherlands B.V. and contribute to
the professional contract management development of large Dutch companies.

From all the information gathered in the empirical research in combination with the literature research
and the conceptual model this research can still make a contribution to the professional contract
management development of large Dutch companies. Reaching back to the literature the optimal level
can possibly be found in the transaction costs theory with the help of quality management theory which
was not discussed in the literature part. This is demonstrated in section 7.1. Next, the identified factors of
influence on the optimal level, identified in the empirical part of this research, are stated and shortly
explained in section 7.2. Finally in section 7.3 two possible models to help identify the optimal level in
contract management are demonstrated for both the previously identified organizational levels in
contract management.

7.1 Transaction costs vs. opportunity costs

In neo-classical economy perfect information is assumed and prices coordinate the market and economy.
Perfect information for both parties however is often not available. Different economics have thought
about this and came up with different theories and papers about issues related to imperfect information.

The agency theory describes two actors: The principal and the agent, the principal hires the agent to
perform a certain action. The theory is founded on two presumptions: In the relationship between
principal and agent there is a conflict of interest, wherein the agent has different interests than the
principal. The second presumption is that the principal is not able to see the agent’s actions, so there is a
lack of information. The agent is closer on the subject and therefore has an information advantage. The
result of this incomplete and asymmetrical information distribution is inefficiency. Both have different
interests and have different information which will lead to inefficiency. The challenge to overcome this
problem is to design a contract on the basis of different interests and incomplete information which
would give the right incentives to the right agent to do exactly what the principal would want him to do
and this way stop his opportunistic behavior (Anderlini and Felli, 1998).

In order to overcome this problem contracts are put up to make clear agreements about the trade and
the levels of quality, performance and service. Price and quality negotiations, putting up long contracts to
prevent opportunistic behavior and monitoring all these agreements cost time and effort for both the
principal and the agent (transaction costs). It is in the interest of both principal and agent to reduce the
transaction costs as much as possible and come to a mutual agreement quickly. On the other hand there
is also the importance of making clear agreements and monitoring those agreements to overcome
opportunistic behavior by the agent (opportunity costs).

This theory is also applicable in contract management. An optimal level in maturity can be identified
where the opportunity costs meet the transaction costs in contract management. This same principle is

51
demonstrated by Juran et el. (1962) in the quality control handbook
handbook wherein he plots the costs of
product quality against the costs that can arise when quality fails. He doesn’t strive for full 100 % quality
but defines an optimum level of quality where the costs of quality and the costs that can arise from
failure meet.. This same principal is applied in Figure 13 for the transaction costs and opportunity costs.
costs
Opportunity costs arise in contract management due to the opportunistic behavior of the supplier and
people inside the organization: e.g. maverick buying, tacit continuation of contracts and non-compliance
non
to SLA’s or KPI’s. Transaction costs however arise due to extensive monitoring of agreements, keeping
overview and insight in all contractual agreements, supplier relationship management, training people in
contract
ract management and managing the involved risks. On the basis of the amount of opportunity costs
involved in managing contracts, an optimal level in maturity and the additional transaction
transa costs can be
determined, see Figure 13.

Figure 13 The optimal levell in contract management maturity

The dotted lines in Figure 13 represent the lowering opportunity costs due to more mature contract
management. The full black line represents the growing transactions costs plotted against the growing
level of maturity. These lines however are hypothetical and not quantified. It only helps to visualize
v the
research finding that different contracts and organizations have different optimal levels of maturity.
More mature is not always better.

7.2 Factors of influence on the optimal level

Different factors are of influence on the amount of opportunity

opportunity costs that can occur in contract
purchasing. These factors are therefore of influence on the optimal level of maturity in contract
management and the matching transaction costs.
costs. Described below are the factors of influence on the
optimal level of maturity
turity in contract management on the operational level in contract management and
on the tactical level in contract management in the organization identified in the empirical part of this
research.

52
 7.2.1 Amount of contracts

A growing amount of contracts makes it more challenging to maintain overview and compliance in all
contractual agreements, contract performances and internal compliance. This automatically makes
staying in control of your contracts and maintaining low opportunity costs more challenging. With more
contracts, more focus should be on implementing a good system, standard processes, transparency and
well trained people to help staying in control of your contracts. This again will lead to high total
transaction costs, but can eventually contribute to low transaction costs per contract.

7.2.2 Total spend under contract

The absolute amount of opportunity costs that can occur in contract purchasing are directly related to
the total spend under contract, because the savings are often in a percentage. With more spend under
contract a higher level in maturity in contract management will sooner be cost-effective.

7.2.3 A national organization vs. an international organization

Keeping overview in all contractual agreements in an international organization, with international

contracts and foreign business units, is much more challenging and more important compared to a
national organization. An international organization will much more perceive the effects of international
political instability in other countries. In those situations it is key to have quick insight in all contracts
related to that region of the world in order to reduce opportunity costs.

Another aspect of international organizations are the presence of international contracts. Monitoring
these types of contracts can ask for more effort in terms of different currencies and international law and
trading agreements. Not monitoring on these aspects in international contracts can cause major
opportunity costs.

7.2.4 Threat of a merger, acquisition or other major reorganization

During these types of threats it is more of interest to keep clear overview in all agreements, roles,
responsibilities and the value of contracts than it would be in a “business as usual” environment. Mature
contract management supports the decisiveness and agility of an organization to help get the most out of
a merger or acquisition situation. Stated below is a quote from one of the interviews:

“In a business as usual situation “good” contract management is sufficient. In a merger or acquisition
situation a higher state of maturity is necessary”

7.2.5 Interface with primary business process

Procurement contracts that directly relate to the primary business process experience a higher impact on
the core business of an organization. Cost savings can be made in the secondary business process, but the
biggest risks and impacts for the organization are in the primary business process. A more direct
relationship with this primary business process automatically implies higher opportunity costs. A more

53
mature level in contract management is therefore more cost-effective
cost effective in business segments where
procurement is more related to the primary business process.

7.2.6 Position in the “Kraljic matrix”

Closely related to the previous factor of influence is the place of the individual contract in the “Kraljic”
matrix. This factor is the primary factor of influence on the optimal level of maturity on the tactical level
in contract management. The Kraljic matrix
m is shown in Figure 14. It identifies four different types of
purchase categories: Commodities, leverage products, bottlenecks and strategic products with all
different levels of business impact and supply risk. As the business impact and the supply risk goes up,
the optimal level
el in contract management should go up.

Figure: 14 Growing maturity in tactical contract management in the “Kraljic” matrix

One individual procurement contract responsible for purchasing a commodity is is managed on another
level than a contract related to a large innovative project impacting the entire business.

Managing a commodity contract implies monitoring: SLA’s, KPI’s, spend and the expiration date of the
contract. The relation with the supplier however is a transactional relationship based on delivery
d and
financial transactions with perhaps a periodical vendor rating meeting. The maturity of the tactical level
in contract management is low, there is no risk management or extensive supplier relationship
management involved or necessary. The opportunity
opportunity costs are low and so are the maturity of tactical
management and the related transaction costs.

A contract related to a large innovative project, a strategic product, on the other hand needs operational
management as monitoring of SLA’s, KPI’s and spend as well but is much more personal rather than
transaction based. More personal involvement in a contract results in higher transaction costs, but is

54
cost-effective if opportunity costs are just as high. One strategic contract can easily be managed by ten
managers and one manager can easily manage a hundred commodity contracts.

The same goes for leverage products and bottlenecks. Higher opportunity costs make higher transaction
costs due to more mature contract management on a tactical level cost-effective.

7.2.7 Other factors of influence

Finding the optimal level of maturity in contract management can however not only be explained by the
preliminary factors. Maybe all factors are not identified in this research and other, less-rational, factors
also play a part in determining the optimal level in contract management. These non or less-rational
factors can be: company culture, structure or ambitions. These factors are sometimes less rational or
relatable to opportunity and transaction cost, but are still of major influence on the optimal level of
maturity in contract management. No general assumptions however can be made on the basis of these
factors.

7.3 The contract management development models

In this section the contract management models to help find the optimal level are issued. They will not be
called maturity models but contract management development models because a maturity model implies
one must grow to the highest level in maturity. Part of the objective of this research was to help large
Dutch companies in developing their contract management. These models can possibly help them with
their development in contract management and help them identify and develop towards the optimal
level. That is the reason why they will be called the operational and tactical contract management
development models.

In the first part the contract management development model for the operational level is explained and
in the second part the contract management development model for the tactical organizational level in
contract management is explained.

55
 7.3.1 Operational level

The model is shown in Figure: 15, key features of all levels are stated below.

• Aware

This is the lowest level of maturity. In this level of maturity the people in the organization are only aware
of the fact that contracts need management, but are not managing them. There are no standard
processes, no one is responsible and contracts are individually created and stored everywhere in the
organization without any overview in contractual agreements.

• Basic

In this level of maturity a start has been made in implementing standard processes. These processes
however are still fragmented and applied on an ad hoc basis. Responsibilities are still not clear and
transparent. Contracts are centrally stored in a paper format. Contracts are reported upon in a reactive
manner from signals from out the business.

• Visible

In this level of maturity a document management tool is implemented to keep overview in contracts. All
contracts are scanned and accessible by the right authorization, but can still be clustered through the
organization. Further in this level of maturity standard processes are implemented but not monitored
and always followed, mostly only in case of “big” contracts. Manual reports of contracts are made in a
proactive manner. Responsibilities are clear but not fully transparent throughout the organization.

• Control

The key difference with level three is that implemented standard processes are also monitored and
followed. Roles and responsibilities are trained, clear and transparent on all levels. One document
management tool is centrally implemented and can provide alerts on expiration dates for all contracts.
Reports are made up periodically on contracts on spend, KPI’s and SLA’s.

• Integrated

Key issue over control is the integration of all systems and processes in the supply chain in the contract
management process. For example sales, finance, stock management and production can be linked to the
contract management system and processes. A special contract management tool is implemented which
makes it possible to automatically report on spend KPI’s and SLA’s.

56
Figure: 15
1. Aware
Process No standard processes exist
Based on individual efforts and
performance
No monitoring of internal or
external compliance
No contract reporting
People No one responsible
Individual efforts, relies on heroes.
System No specific application for
registering contracts
Contracts are everywhere in the
organization
No visibility or overview
2. Basic
Diversity of fragmented processes
exist
Ad hoc appliance of standard
processes
Ad hoc monitoring based on
individual effort
Reactive reporting on signals from
out the business
Individual responsibilities,
functions and tasks are not
transparent
Unstable situation relies on
‘heroes’
Only central visibility in paper
contracts, no digital contracts
available
3. Visible
Standard procedures are
documented, but not always
followed
KPI’s and SLA’s implemented but
not always monitored, “big”
contracts only.
Policies for internal compliance
exist, but are not always
followed or monitored
Ad hoc pro active manual
reporting
Contract owners assigned,
Roles and responsibilities are
transparent, but not on all levels.
Tasks and responsibilities are
communicated but not trained
Contracts are scanned and put in
a document management tool.
Clustered contract databases
throughout the company
4. Control
Standard processes described ,
trained and followed
Consistent monitoring of all SLA’s
and KPI’s
Policies for internal compliance
are being monitored.
Proactive periodical manual
reporting on spend, KPI’s and
SLA’s
Clear roles and responsibilities
on all levels
Trainings implemented for
contract management roles and
tasks
A document management tool
with additional alerts on
expiration dates implemented
One contract database for the
entire company
5. Integrated
All processes in the supply chain
are linked , clear and integrated.
Automatic periodical reporting on
spend, budgets, KPI’s and SLA’s
Monitoring of internal compliance
automated
Senior management responsible.
Company wide web-based contract
management tool in use with
alerts on multiple milestones (e.g.
Spend, budgets) integrated with
other ERP systems in the
organization.
57
 7.3.2 Tactical level

There were little or no questions in the interviews related to the tactical contract management process in
the different companies, still the observations and remarks made related to the tactical contract
management process were noted. The model is build up the same way as the development model for
contract management on an operational level with again process, people and system as three different
aspects in contract management and five levels of maturity.

• Tacit

In this level of maturity little attention is paid to contracts. Most are tacitly extended and often lost in the
organization. New contracts are individually created and implemented.

• Reactive

Paper contracts are centrally stored and retraceable. Feedback to the supplier is reactive from signals
from the business and managed in the business. Contract implementation process is still fragmented and
not clear. Little use of standard templates for contract creation.

• Managed

When the contract expires the contract is evaluated on the basis of the contract and supplier
performances. Feedback is provided and there is a professional relationship with the supplier. For every
contract a contract owner is assigned. The system provides digital insight in all contracts. Standard
templates are available and used for some contract categories.

• Proactive

Contracts are proactively managed and standard procedures for contract implementation are trained and
followed. Best practises and lessons learned are being documented. The contract is managed by senior
management and there is a intensive relationship with the supplier. The system is providing a weighing
system for the evaluation of offers, supports making risk profiles and provides uniform standard
templates for contract creation.

• Integrated

There is a collaborative business partner relationship with the supplier and a cross functional team
approach together with the supplier for monitoring agreements. The system automatically reports on
contract performances, supports the bidding process and supports contract creation with the help of
(preapproved) clauses.

58
Figure: 16
1. Tacit 2. Reactive
Process Tacit extension of contract No serious new negotiations
No feedback to the supplier when contract expires
Contract implementation is an Reactive feedback to supplier on
individual effort. performance
Fragmented process for contract
implementation exists.
People No relationship with supplier Normal professional relationship
Contract not managed with supplier
Contract managed in the
business.
System No system Paper contract is retraceable
All contracts are made up Standard templates available for
individually some contract types, but not
always used
3. Managed
Contract is again negotiated on
the basis of contract performance
when contract expires
Feedback is provided to the
supplier
Standard procedure for contract
implementation exist, but not
always followed
Professional relationship with
supplier
Contract owner assigned
Contract managed by middle
management
Digital insight in contractual
agreements
Standard templates available and
used for some contract categories
4. Proactive
Proactive steering on supplier and
contract performance
Standard procedures for contract
implementation trained and followed
Documentation of best practises and
lessons learned
Intensive personal relationship with
supplier.
Contract managed by senior
management
Use of company risk profiles
Weighing system in use for evaluation
of offers
A system to help make risk profiles of
different suppliers
Uniform standard templates in use for
all contracts
5. Integrated
A team approach together with supplier in
monitoring contract obligations and
performances
Collaborative business partner
relationship with shared responsibilities
and risks
Cross functional contract management
teams
Automatic reporting on spend, KPI’s and
SLA’s
A paperless system to support the bidding
process
Standard clauses available in system.
Automatic contract creation
59
7.4 Limitations

The research sample used for this research were all clients of Capgemini. The measured high level of
activity in contract management could have a relation with being a Capgemini clients. In some of the
cases Capgemini recently consulted in implementing a new contract management system.

There is no formal model or framework used for analyzing the cases. This was an iterative process in the
head of the researcher and the interpretation of the researcher could have influenced the outcome. Also
none of the interviews were recorded which makes the results less traceable and reliable.

60
8. Recommendations

This chapter deals with the recommendations this research wants to make to Capgemini and large Dutch
companies. During the interviews in the empirical research many best practises of different organization
were identified. Best practises are used to describe the process of developing and following a standard
“best” way of doing things. These “best practices” on the other hand don’t automatically apply to every
organization and can be considered more as a tip from another organization. By sharing these best
practises organizations can help each other in their professional development in contract management.

In the other sections of this chapter expected future trends in contract management found in this
research are described. The last section deals with possible topics for future research.

8.1 Best practices

8.1.1 Process

– Prioritize what needs monitoring

Dependant of the risks involved and the business impact of a contract prioritize what needs more and
what needs less monitoring. Routine contracts for example need less monitoring compared to contracts
with a high business impact or supply risk. Some contracts can easily be managed in the business, others
need corporate involvement. Find the right organizational level for management in the company for every
contract.

– Good communication between the tactical level and the operational level in contract
management

Well implemented processes for communication are the core of mature contract management. Standard
processes need to be in place for implementing a contract in the operations and standard processes need
to be in place for providing feedback on the contract performances back to the tactical level in contract
management. If this is not done right the tactical level will not have any information to steer upon, and
the operational level will have no contracts or will not know that it has contracts.

– Use templates to streamline contracting cycles

Where possible, use templates to streamline contracting cycles, minimize risk and maximize compliance.
An example found in one of the companies interviewed is the use of a standard data sheet for
communicating a new contract to the business with only the relevant information needed in the
operations on it. Specially developed systems are developed to support this process.

– Transparency

Transparent communication, clear information and clear expectations between all business units and
regions of the company and also transparency towards the suppliers are important in mature contract
management.

61
 – Funnel towards catalogue or procurement department

Catalogues and e-ordering systems lead requesters directly to the right catalogue or otherwise to the
relevant procurer or procedure. The ease of ordering offered by catalogues is a very effective weapon. In
addition, employees are directed to the right channels (procurement) when products are not in the
catalogues.

– No purchase order, no pay

Return invoices without the right purchase order back to the supplier. This way suppliers will direct the
internal customers in the use of the right processes and the right contracts. This is considered to be an
effective weapon against maverick buying.

– Measure the savings made

Measure savings made by mature contract management and share the (positive) results with all
stakeholders involved. This will help create a platform for contract management processes and will help
discipline and motivation.

8.1.2 People

– Short lines in the internal organization

Since contract management is a multi level activity, short lines can help ensure clear and quick
communication between the relevant stakeholders which is necessary for good contract management.

– Clear roles and responsibilities

Uniform alignment of roles and responsibilities, supported by trainings, are crucial in contract
management. Every person involved in contract management must know his role and responsibility and
should be well trained. Appoint process owners and contract owners and make them responsible for good
execution of processes and contract implementation.

– Build towards a constructive relationship with suppliers

A constructive relationship with suppliers make communication lines shorter and feedback easier. This
helps steering and making you in control of your contracts.

– Provide trainings to help implement processes and systems

For clear roles and responsibilities it is important to train the people involved in their new role and for
using the system. Trainings are also a good way of communicating new procedures or systems.

– Discipline

Discipline is often mentioned as an important factor to keep the systems up to date and make contract
management work. Too often the system gets the blame, but it’s the people working with the system.
Also during the implementation phase of a new system, discipline is an important factor. KPI’s for internal
compliance and sanctions for non-compliance can be a solution.

62
 – Involve all relevant stakeholders

Early and frequent involvement of all cross-functional stakeholders is important for implementation of a
contract management system or process. It also helps define the right requirements for a system and it
speeds system rollout and adoption. Possible stakeholders are (board level) senior management,
procurement (categories), IT, finance, the business, legal etc.

– Ensure proper executive and stakeholder support

Organizations must secure executive support for a contract management project. You need to have senior
buy-in, or the rest of the organization won’t follow.

8.1.3 System

– Create a central database

Creation of a central database can provide you with a clear overview in all your current contracts.
Managing the contracts however should be a local activity and should be as closely to the business as
possible. On the other hand, for quick divestment of a business unit a local database is much easier to
hive of.

– A good and supportive system

Over a certain amount of contracts a good and well supporting system is vital for managing contracts.

– Uniform use of systems for good quality of information

A uniform use of the system is necessary to maintain a consistent quality of the information in the system.
One should prevent getting a “polluted” system with much irrelevant information in it.

– Keep it clear

Define detailed functional requirements for a contract management solution –and stick to them. Don’t
get carried away with all options a contract management tool can provide. Particularly in case of a large
global company with a global central repository containing ten thousands of contracts a simple reliable
system and simple but effective processes can be considered to be the best practise. In a local company
with 500 to a 1000 contracts for example a more sophisticated system with more options could be
beneficial.

– Create a compelling business case with both benefit and crisis

Audit internal contract management processes, systems, and controls before investing in a contract
management solution. A good business case should also help you find the optimal level of maturity in
contract management.

– Step-by-step build up into systems

By first setting up processes and then automating these step by step, employees become familiar with
new methods of working, without great changes.

63
8.2 Future trends

The spend under contract in organizations is continuously growing. Companies are focusing on their core
competences and many non core activities are more and more being outsourced to either low-wage
countries or specialized organizations. As a result of this form of globalization and outsourcing trend,
procurement and contract management will play an important role in future business and organizations.

An expected result of the increase in outsourcing is an increase in the use of preferred suppliers in a long
term relationship. The tiered relationships with preferred suppliers will result in a more integrated
organization of contract management. This will again have less but more complex contracts as a result.

A negative counter side of this development is that it will become more difficult for small suppliers to
survive.

Another result of further integration of organizations is further integration with the sell side in the
organization. Already in the U.S. contract management is as much managing procurement contracts as it
is managing sales contracts. Further streamlining of sales and procurement activities in the supply chain
and thinking in terms of total cost of ownership is an expected future development in the Netherlands.

8.3 Future research

For future research this research can give some suggestions:

• Testing the contract management development models as a new conceptual model.

• Test and work out the identified factors of influence.
• Possibly identifying more factors of influence on the optimal level of contract management.
• Quantifying the transaction costs and opportunity costs related to the optimal level in contract
management.
• Applying the contract management development models in a large Dutch organization in order to
identify the optimal level in contract management and quantify the related cost savings.

More research on contract management will be necessary in the future since contract management is
evolving in definition and will continue to grow in management priority.

64
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Appendix I: Initial questionnaire

System
kennis & data
Wordt er bij de contract creatie gebruik gemaakt van standaard contract templates?
* Standaard teksten
* Standaard vanuit IT applicatie
Waar is de opslag van contracten?
* Is deze centraal, decentraal of geclusterd?
Hoe is de opslag van contracten geregeld?
* Is deze volledig digitaal?
* Is de eventuele centrale opslag geïntegreerd met verkoop?
* Welke gegevens worden er eventueel digitaal opgeslagen?
In welke mate is er inzicht in de huidige lopende contracten?
* Zijn er overzichten van de lopende contracten (afloop, duur, omvang)?
* Is er voor iedereen inzicht, of slechts voor enkelen?
Hoe snel zijn contracten te vinden, wijzigen of implementeren?
* Zou ik zo ieder willekeurig contract in kunnen kijken?
Is er ook een database voor 'lessons learned' en/of 'best practises'?
In hoeverre geven systemen transparantie, inzicht en mogelijkheden om te
consolideren/rapporteren binnen een portfolio van contracten?
Process
monitoring
Hoe zijn de processen voor contract management binnen de organisatie?
* Zijn deze processen hetzelfde geregeld door het hele bedrijf?
* Zijn eventueel verschillende processen wel transparant naar anderen?
Hoe wordt contractinformatie gelinkt naar het operationele inkoopproces?
In welke mate is er sprake van automatisatie in het CM proces?
* Hoe wordt bekend wanneer een contract afloopt?
* Welke contractinformatie wordt gemonitord in het automatisch systeem
* Hoe worden milestones in contracten bewaakt? Kwaliteit, volledigheid, verantwoordelijkheid
* Welke systemen zijn er nu in gebruik binnen het inkoop/cm proces
Zijn er standaard processen voor CM geïmplementeerd?
* Welke systemen worden er gebruikt om inzicht te krijgen in SLA's, aflooptermijnen etc.
* Op welke wijze wordt er ingegrepen bij het niet nakomen van contract afspraken?
* Hoe verloopt de terugkoppeling naar de leverancier?
* Hoe worden bepaalde 'milestones' in contracten gecommuniceerd?
* Welke processen zijn gestandaardiseerd?
In welke mate worden alle contracten actief bewaakt?
Zijn de CM processen geïntegreerd met verkoop?
Bestaan er ook processen ter verbetering van het huidige CM proces?
People
organisatie & verantwoordelijkheid
Waar is CM aangebracht in de organisatie?
Wie is er na het tekenen verantwoordelijk voor de naleving van het contract?
Is het CM centraal geregeld?
Is er een organisatiebreed ingezet beleid voor interne contract compliance
* In welke mate houden interne betrokkenen zich aan intern beleid mbt contracten?

68
* Maken werknemers gebruik van de raam contracten? (maverick buying)
* Wordt er rekening gehouden met kortingen en bestelgroottes?

Worden er targets gesteld, is er een visie of een doel van bovenuit de organisatie?
Algemeen

Hoe is de organisatie door de jaren heen geëvolueerd op het gebied van CM

Best Practises

69
Appendix II: Final questionnaire

Algemeen

A. Wat is binnen uw organisatie precies contract management?

* Door welke afdelingen loopt contract management allemaal?
* Welke aspecten vallen er wel en niet onder?
* Welke aspecten van contract management vallen onder welke afdeling?

B. Hoe groot is contract management binnen uw organisatie?

* Hoeveel contracten? (afdeling, global)
* Hoeveel FTE?

System
kennis & data
1. Wordt er bij de contract creatie gebruik gemaakt van standaard contract templates?
* Standaard teksten (juridisch)
* Standaard templates vanuit een IT applicatie
* In welke mate zijn de contracten uniform?

2. Waar en hoe liggen de contracten opgeslagen?

* Is dit centraal, decentraal, per afdeling of per niveau?
* Hoe liggen de contracten opgeslagen? digitaal, tool, gescand?
* Welke meta-data worden er ingevoerd en gebruikt om over te rapporteren?

3. Hoe worden de contracten gemonitord / bewaakt?

* Zijn er allerts, rapportages, dumps? Hoe vaak?
* Op welke aspecten worden er allemaal gemonitord, gerapporteerd of allerts gegeven?
* Hoe worden de milestones, afspraken, prijzen, kpi's en sla's in contracten bewaakt?

4. In welke mate is er inzicht in de huidige lopende contracten?

* Wie hebben er wel/niet inzicht in de contracten?
* Is er voldoende inzicht in de juiste contractgegevens bij een wisselende omgeving? (fusies, koerswijzigingen, politieke instabiliteit)
* Welke dwarsdoorsnede zou u nog wel willen zien die er nu nog niet zijn?

5. Is het contract management systeem gekoppeld aan andere systemen of processen?

* In welke mate is contract management gekoppeld aan bijvoorbeeld finance?
* Is er een link met verkoop?
* Is het contract management nog gekoppeld aan andere it systemen?

6. In welke mate wordt er aan het versiebeheer van contracten gedaan?

* Zijn alle contracten actueel?
* Op welke manier heeft u dit ingeregeld?
* Wat gebeurd er met het contract na beëindiging?

7. Is er ook een database voor 'lessons learned' en/of 'best practises'?

* Zodat deze weer gebruikt kunnen worden bij het afsluiten van andere contracten in de toekomst

Process
monitoring
8. Zijn er standaard processen ingeregeld binnen het bedrijf voor contract management?
* Voor welke zaken zijn standaard processen? (contract beeindiging/conflict/sla's)
* Op welke wijze wordt er bijvoorbeeld ingegrepen bij het niet nakomen van contract afspraken?
* Hoe verloopt de terugkoppeling naar bijvoorbeeld een leverancier?
* Zijn deze processen hetzelfde geregeld door het hele bedrijf?
* Zijn deze eventueel verschillende processen wel transparant naar andere bedrijfsonderdelen?

9. Hoe wordt het contract management proces gevolgd en gemonitord?

* Zijn daarvoor KPI's gedefinieerd? Spend under contract?
* Vanaf welk niveau in de organisatie wordt er gemonitord?

70
10. Hoe wordt de informatie in het contract gelinkt naar het operationele inkoopproces?

11. Bestaan er ook contracten tussen de verschillende bedrijfsonderdelen?

* Worden deze ook gemonitord?
* Worden deze ook opgeslagen in hetzelfde systeem voor andere contracten?
* Wordt hier eenzelfde beleid op gevoerd?

12. Bestaan er ook processen ter continue verbetering van het CM proces?
People
organisatie & verantwoordelijkheid
13. Wie is er na het tekenen verantwoordelijk voor de naleving van het contract?
14. Is er een organisatiebreed ingezet beleid voor interne contract compliance
* In welke mate houden interne betrokkenen zich aan intern beleid mbt contracten?
* Maken werknemers gebruik van de raam contracten / preferred suppliers? (maverick buying)
* Hoe wordt mavirick buying tegen gegaan?
* Wordt er rekening gehouden met kortingen en bestelgroottes?

15. Worden er targets gesteld, is er een visie of een doel van bovenuit de organisatie?
* Wordt er gestuurd vanuit beleid?
* Wat zijn de gevolgen als je je niet houdt aan het beleid?
* Hoe wordt dit gecontroleerd?

Maturity model

C. Wat zijn volgens u de belangrijkste zaken die goed geregeld moeten zijn in een CM systeem of proces?
* Wat zijn voor u best practises of lessons learned in contract management?

D. Welke factoren maken voor u contract management meer of minder volwassen?

* Key maturity indicators
E. Hoe hoog schat u uw huidige volwassenheidsniveau in CM in?
* Hoe bent u op het huidige niveau van CM gekomen?

F. Wat is uw toekomstvisie voor contract management?

* Zijn er nog toekomstige ontwikkelingen relevant?

G. Gelooft u dat er een optimum is in contract management, of is volwassener altijd beter?

* Zijn er altijd meer kostenreducties te halen in cm, of wegen de kosten op een bepaald punt niet meer op tegen de baten?

Heeft u nog aanvullingen?

* Andere interessante mensen binnen het bedrijf?

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