Contract management and contract administration are frequently confused or used interchangeably, but they represent different stages of the overall contracting process. To put it simply, contract administration is the work done before a contract is signed into effect, whereas contract management is everything done after the contract is signed to ensure that deliverables and deadlines are met as specified in the agreement. Below is a more detailed explanation of the distinctions between contract administration and contract management, as well as helpful hints for succeeding in both phases of the contracting process.
What is Contract Administration?
Contract administration professionals are responsible for the planning and execution of contracts within a company. The planning process frequently includes identifying potential contracting partners, such as by issuing requests for proposals. Contract administrators also assist in ironing out the details of the contract arrangement, and negotiating contract issues such as price, delivery schedules, and performance expectations with prospective partners.
Although the term administration implies that this aspect of the contracting cycle is primarily administrative in nature, it necessitates a great deal of strategy and business savvy. Entering into legally sound, mutually beneficial contracts is critical to the financial success of many businesses, so finding the right partners is critical.
Best Practices for Contract Administration Planning
Creating and adhering to a solid contract administration plan positions your team to successfully manage each new contract throughout the agreement’s lifecycle. This formal document should describe in explicit detail what is expected of both parties during the term of the agreement in order to limit potential contract breaches or other issues that lead to either party failing to fulfill their contractual obligations.
When creating a contract administration plan, keep these five best practices in mind.
- Establish the scope and deliverables
The first step in ensuring a successful contracting process is to clearly define the scope and deliverables. Scope creep is a common issue that can derail any contract, so specifying what the contract does and does not cover in writing will help keep the contract on track. - Include a comprehensive timeline.Contract administration plans should include a detailed timeline that accounts for every important milestone throughout the contract’s life cycle, including project start and end dates, deadlines for deliverables, and progress updates.
- Organize your financesTo avoid contract disputes and maintain positive relationships between both parties, everyone involved in the contract administration process should be aware of the financial terms of the agreement, including the contract’s value, payment intervals, and the process for dealing with any additional expenses (depending on the type of contract).
- Make a work planTo ensure transparency and accountability, the plan should include specifics on how the contract deliverables will be carried out, as well as the individuals who will be working on each component of the agreement (including both internal and third-party personnel, if applicable). Having a plan for measuring success throughout the contract’s life cycle will keep both parties on track and allow for course correction if necessary.
- Prepare for potential hazards.Every contract carries risks, but planning for those risks can help prevent the contract from failing. Outline the most likely risks for each agreement, as well as the steps that should be taken if those events occur. Allowing for some wiggle room in timelines and budgets will allow minor, unexpected delays or problems to be dealt with, preventing the contract (and potentially the relationship) from suffering significantly.According to one study published in the Journal of Contract Management, 71% of businesses were unable to locate at least 10% of their contracts. However, losing track of a contract can cause serious issues, especially when it comes to satisfying regulators during an investigation. And if you can’t produce a critical contract during a merger or acquisition, the deal may be slowed or even canceled entirely.
Contracts that are not regulated
While some employees may be tempted to use old templates to create new contracts, a contract may not be legally compliant or enforceable if the template is out of date with the most recent regulatory requirements.
Every contract carries risks, but planning for those risks can help prevent the contract from failing. Outline the most likely risks for each agreement, as well as the steps that should be taken if those events occur. Allowing for some wiggle room in timelines and budgets will allow minor, unexpected delays or problems to be dealt with, preventing the contract (and potentially the relationship) from suffering significantly. To learn more about the services offered by EffiGO along the lines of Contract Management, dive deep into the products and services distributed, on the website.
