Contract Management Made Simple
Posted On June 29, 2019
What is a contract? A contract is simply a legal agreement between two entities or parties. These entities can be corporations, small businesses, and even individuals.
So why do companies need to manage contracts and agreements? They need to be distributed to make sure what is agreed upon in the contract is completed and that all the provisions of the contract are adhered to. These provisions include but are not limited to, the contract budget, work specifications, the quality of the work to be accomplished, and the due dates.
Some provisions can be extremely complex, such as in meeting government compliance requirements. Contract Management is very similar to Project Management. Just like in project management, you need to make sure all items are done correctly, done on time, and within budget. Thus, the need for managing contracts.
As previously mentioned, a contract is simply an agreement between two parties. Party A agrees to build an addition onto an office building for Party B.
They agree that this will be completed in three months for $75,000. They also agree that the new addition will be able to hold ten office worker cubicles and have a supply closet and bathroom. The new office must match the interior and exterior colours and materials of the existing building, and it must meet all the government-building codes. So how do we make contract management simple?
First, the contract itself needs to spell out precisely what is to be accomplished and detail all the provisions and specifications of the work. In contract terms, these are known as “deliverables.” You should be able to quickly go through a contract and identify all of the deliverables within the contract.
A deliverable is what needs to be tracked and managed. You then make a detailed list of all the deliverables in the arrangement. At a minimum, this list should contain each deliverable, the specific requirements, and provisions of the deliverable, and the date the deliverable is required to be completed.
Once you have this list put together, you can monitor the items on the list to make sure they are completed by the specified due dates as well as meet all the requirements and specifications. Once the work is completed, the deliverables are inspected, and if acceptable, are accepted by the party who issued the contract. The contractor is paid, and the deal is closed. It is that simple.
Now I have done a lot of consulting in my career, to include contract management organizations, and I have seen many organizations make the contract management process more complicated than it needs to be. In many cases, this comes from the “overcomplexity” of the contracts themselves.
In many cases, the people who write contracts, usually lawyers, tend to be extremely repetitive. Instead of spelling it out in simple terms, they dig out the dictionary and attempt to use every word that has fifteen letters or more in it. This, also, is a reason why there are so many lawsuits over contracts.
Over complex agreements make it very easy to find things to go to court on. So to keep the contract simple. This will help you to keep the contract management process simple. My rule-of-thumb is to follow the “KISS” principle: Keep It Short and Simple!
Another tool to help you keep contract management simple is to use a reliable and intuitive Contracts Management System software package, such as Contract Analyst. In a sound system, you can quickly enter in all the deliverables, specifications, and due dates, and it will do most of the tracking for you.
It will tell you when something is coming due. It will tell you the requirements and specifications of a deliverable, so when you inspect it for acceptance, you will know if it meets all the requirements. A sound Contracts Management System will have built-in workflow management for coordination and approvals of all contract elements. It will also have compliance requirement tracking for those pesky, complex government requirements.
A sound system will be flexible enough to manage the different types of contracts, such as service contracts, building contracts, government contracts, and equipment and materials purchase agreements. In addition to flexibility, a system should be extremely intuitive, so users don’t get frustrated when using it. All windows within the system should have a similar flow to each other, so the users don’t have to figure out how each window works. A sound system will make your life a lot easier.