What is Contract Management
We deal with contracts on a daily basis, in both our personal and professional lives. Contracts are the spine that holds our society together, but do we really what is the definition of Contract Management? At eContractHub we want to make it easier for you.
Contract Management “is the process of systematically and efficiently managing contract creation, execution and analysis for maximising operational and financial performance and minimising risk”. There are a number of other definitions of What is Contract Management, the majority of which refer to post-award activities. Successful contract management, however, is most effective if upstream or pre-award activities are properly carried out.
The importance of Contract Management
Organisations in both the public and private sectors are facing increasing pressure to reduce costs and improve financial and operational performance. New regulatory requirements, globalisation, increases in contract volumes and complexity have resulted in an increasing recognition of the importance and benefits of effective contract management.
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.
Contract management increases financial value
You should always explain the financial benefits of contract management. Otherwise, contract management looks like expensive busywork. Arguments based on ideas like “compliance is important” or “maintaining the contracting process is important” are too abstract when it comes to a specific number as a line item in a budget.
Contract management “moves the needle”
When it comes to allocating budgets across the organization, executives hear demands from every quarter. It is rare for a manager to volunteer for a smaller budget or less staff. How do executives respond to conflicting demands for limited budgetary resources? Business leaders want to make investments that “move the needle” (a budget, after all, is just a capital allocation).
Contract management controls risk in the contract portfolio
Risk is about uncertainty. If we cannot produce data like the following, then we probably have an unacceptable level of risk in our contract portfolio: