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Top 10 Contract Management Tips

April 07, 2012 | Comments: 0 | Views: 121

Contract Management - Top Ten Tips

1. The right contract is Key. Lay good foundations by ensuring that the right contract is in place. Sounds obvious but the formal contract forms a framework around which a good relationship can grow. If the contract was poorly constructed, it will be much more difficult to make the relationship a success.

2. Actively manage the contract. Be prepared to manage all aspects of the contract. Contract management activities can be divided into three areas: service delivery management; relationship management; and contract administration. Equal focus should be given to all areas and each one managed by the right people. Inadequate resources will mean that full value will not be achieved.

3. Embed service levels into the contract or develop a Service Level Agreement as an addendum. This is where risks are managed and service continuity plans are put into place in case of failure. Establish what levels of service are required, and ensure they are maintained noting, however, that there are costs involved with each additional requirement.

4. Measure quality as well as quantity. This means creating and using measurements that allow the quality of a service to be measured which may include assessing aspects such as completeness, availability, capacity, reliability, flexibility and timeliness.

5. Ensuring value for money is about the balance between service quality and value received. Encourage innovation and continuous improvement from the supplier. All costs associated with the contract must be taken into consideration, including: set up costs, recurring costs, fixed costs, unit costs and the organisation's own overheads in managing the contract. Benchmarking can assist in providing price comparisons.

6. Manage your risks. Risk is defined as uncertainty of outcome, whether positive opportunity or negative threat in contract management. Managing risk means identifying and controlling factors that may have an impact on fulfilment of the contract. Identified risks should be formally recorded in a risk register, assigned to an individual owner and actively managed in accordance with good risk management practice.

7. Manage the relationship. The three key factors for success are:

• Mutual trust and understanding • Openness and excellent communications. • A joint approach to managing delivery

Good communication allows problems to be identified and resolved early. Understanding the business culture at the supplier helps to reduce tension and promotes harmony.

8. Deal with issues promptly. Problems ignored can fester and grow. A dispute resolution and escalation process should be defined in the contract to prevent crises. Aim to prevent problems as well as resolve them.

9. Administration of the contract is important. Contract administration is concerned with the mechanics of the relationship between the customer and provider. Its importance should not be underestimated. Clear administrative procedures ensure that all parties to the contract understand who does what, when and how. Put in an alert system to advise expiry dates.

10. Document everything. Establish procedures to keep contract documentation up to date and ensure that all documents relating to the contract are consistent and that all parties have the correct version. Changes must be controlled.

Elaine Porteous is an independent procurement specialist with a specific interest in procurement talent management. She is a business writer and editor for trade journals and industry websites. This article was first published in Bespoke Consulting newsletter in March 2012. Read more of her published articles at

Source: EzineArticles
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