There are many reasons for implementing an efficient and automated contract management system on your next engineering or construction project. First and foremost, “Effective contract management can ultimately create a powerful business relationship and pave the road to greater profitability over the long-term.” 1 Relationships aside, there are some important business issues that need to be addressed too. Hiring experienced professionals isn’t enough to ensure the proper handling of contracts. Employees need processes and software to satisfy increasing compliance and reporting requirements. When a contract management strategy is successfully implemented, project managers can expect to:
- Spend less time and money on claims and litigation
- Ensure regulatory and policy compliance measures are being met
- Measure contractor and project performance
- Pay contractors on time
- Avoid contract leakage
- Track correspondence
- Monitor contractor behaviour
Gone are the days of managing contracts manually on paper and in filing cabinets (at least, I hope for your sake they’re gone). I don’t need to tell you that doing things “old-school” is riddled with inefficiencies that only detract from a company’s or project’s overall efficiency. Integrating with an automated contract management solution will free up project managers and their contractors to focus on actually getting the job done.
But don’t just take my word for it, The Chartered Institute of Purchasing & Supply (CIPS) says, “The growing recognition of the need to automate and improve contractual processes and satisfy increasing compliance and analytical needs has also led to an increase in the adoption of more formal and structured contract management procedures and an increase in the availability of software applications designed to address these needs.”
The CIPS’ Contract Management Guide goes on to say that the foundation for successful post-award contract management depends on a comprehensive and thorough implementation of the pre-award (upstream) activities. During the pre-award stage, employees should focus on the reason for establishing the contract and if the supplier can fulfil the terms of the agreement. Pre-award activities include:
- Developing a bid or pre-qualification list
- Drafting the specifications and requirements
- Responding to and negotiating bids
- Evaluating contractor tenders
- Awarding the contract
CIPS groups post-award (downstream) activities into three fundamental segments:
- The management of service delivery – are performance and quality levels being met?
- The management of the relationship with the supplier – is everyone happy?
- Contract administration – cue in that automated contract management solution we were just talking about.
Smooth running of post-award contract management is essential, and it should be resourced appropriately. According to CIPS, one of the main areas critical to successful contract administration is contract maintenance and change management. Contract changes are inevitable, especially in complex engineering and construction projects. Managing these changes is a particularly important activity. As already mentioned, formal change control procedures should be designed and set out in the original contract documentation to avoid misunderstanding and ambiguity about roles and responsibilities. The change control strategy should include procedures to keep all contract documentation up to date and consistent so all parties have a common view of the agreed changes. This can easily be done with a formal document management system. [CIPS]
Don’t sweat! There are lots of tools available to help you manage your contracts more effectively. Just be sure you look for a solution that will manage your pre-award as well as your post-award activities seamlessly. Coreworx Contract Management (CCM) is a contract communications platform that supports the management and execution of all pre-award and post-award contract information and processes – from the outsourcing decision and development of the contracting plan to the close out of the last contract. Powerful integration tools keep everyone in the loop by enabling the exchange of information and contract data with other applications in your project ecosystem, such as scheduling, change management, request for information (RFI), deliverables management, document control, and financial/accounting systems. Each Coreworx solution runs on an enterprise-class platform that includes a document management system, workflow engine, and web-based collaboration tools – all of which are set-up based on industry best practices for specific work processes, but can be easily configured to meet the unique needs of any project. With CCM, you can move from adversarial relationships to partnerships collectively aligned to a single source of truth.