The aim of contract management is to ensure that your suppliers live up to the agreement and, more broadly, to achieve maximum value in your expenditure by continuously seeking further savings and added value. This has to be an ongoing effort throughout the contract lifecycle, involving consistent monitoring and reporting of Key Performance Indicators (KPI) as well as regular reviews, coordination, and negotiation with suppliers.
Achieving this requires a great deal of administration using tools to scale visibility and optimise the process, which can easily become overwhelming when you’re managing hundreds or thousands of contracts. With the need to maintain supplier and contract directories as well as monitoring and reporting on timelines and KPIs, organisations with large supplier bases and multiple concurrent contracts need to be on the ball if true value for money is to be achieved.
Doing additional work up front can really reduce risk and save time and money in the long run –by reducing the possibility of having to carry out a “rebid”. For example, well-written contracts, with clear specifications and scope of work, minimises the number of costly legal disputes and delays in service an agency has with contractors. They also save public agencies money when the scope and terms of a contract are clearly defined, including establishing baselines for cost and quantity. Chartering good communication between the central procurement department and customer agencies before, during, and after the contract has been awarded and signed is pivotal to the success of a contract.
It’s also important to consider, one area where maturity varies can be the integration of contracts with Procure-to-Pay (P2P) processes
. When organisations are struggling in this area, buyers cannot see approved contracts easily. However, when P2P integration is achieved, purchasers will make use of pre-negotiated agreements set up by the Procurement department to capture savings.