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Basics of Contract Management

As with those of the personal variety, long lasting and mutually beneficial contractual relationships sometimes require a degree of compromise, patience, and empathy. The best results are achieved when your suppliers feel like equal partners rather than subordinates, but as the customer it is crucial that you maintain control. So how can you ensure that the relationship envisioned at the procurement stage is realised?

The process
The ultimate aim of contract management is to ensure that your suppliers live up to the arrangement that has been entered into 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 a variety of tools and processes, which can easily become overwhelming. 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. Ideally, you will have standard tools and processes in place to help you manage every contract and every supplier centrally to avoid confusion and duplication of effort.

The relationship
Ensuring operational efficiency and being able to exploit opportunities to achieve more value requires a consistent process of engagement and negotiation with your suppliers. Building personal rapport with your point(s) of contact is key: mutual respect is crucial in creating and maintaining robust and rewarding relationships. You’re the customer so you’re in charge, but although it’s not a partnership of equals, it should feel like one.

If a contractor has failed in some way to meet your expectations or their responsibilities, you do of course need to express your displeasure. However, you need to avoid letting difficult conversations undermine the broader relationship. Failure is usually a team effort and tensions between individuals do not benefit either party. Blunt words can be exchanged without being rude, and stark choices can be offered and made without a descent into drama.

Want to know more?
For an in-depth discussion of best practice in contract management you can access a free recording of our Basics of Contract Management webinar. The recording provides:
  • The basic elements of contract management.
  • How to create stable and mutually respectful relationships.
  • Managing conflict/difficult conversations.
  • Long term application of contract management theory.

Access recording