The terms ―contract management‖ and ―contract administration‖ are often used synonymously. However, ―contract management‖ is commonly understood as a broader and more strategic concept that covers the whole procurement cycle including planning, formation, execution, administration and close out of a contract and goes beyond the day to day ―administrative‖ activities in the procurement cycle. Because it is difficult to draw the line between the two terms and because the majority of the organizations commonly use ―contract management‖ when describing the contract administration phase, ―contract management‖ will be used.
The purpose of contract management is to ensure that all parties to the contract fully meet their respective obligations as efficiently and effectively as possible, delivering the business and operational outputs required from the contract and providing value for money. It also protects the rights of the parties and ensures required performance when circumstances change. Contract management is similar to project management. Each contract is a mini-project. It has a unique goal, consumes resources, has a beginning and end date, and requires coordination and planning of relevant activities, as well as documentation in a contract file throughout the
process.
Contract management includes monitoring and documenting performance. Depending on the organization and goods or services procured, daily/regular monitoring of the contract may be primarily the responsibility of the requisitioner. In all situations, the procurement officer is responsible for following up and ensuring that the actions of the supplier and the PE organization are in line with the contractual responsibilities, that the contract is amended to reflect agreed changes in circumstances, and that any claim or
dispute is resolved amicably according to the terms of the contract. Payment for the goods or services should be handled independently from the procurement function, while contract close out again is the responsibility of the procurement officer.
The stages of contract management are intended to ensure that the parties work together to achieve the objectives of the contract. Contract management is based on the idea that the contract is an agreement, a partnership with rights and obligations that must be met by both sides to achieve the goal. Contract management is aimed not at finding fault, but rather at identifying problems and finding solutions together with all contracting parties involved. Contract management includes activities such as progress monitoring, delivery follow-up, payment action, monitoring, exercise optional periods/quantity, etc. During this phase, various
activities may arise such as:
- Kick off‘ meeting (Meeting minutes)
- Task Authorizations
- Follow-up on the progress of the work
- Resolve disputes
- Amend the contract
Enabling contract management
In this phase the procurement officer ensures that there is a shared understanding, distribution of responsibilities and systems and procedures in place to monitor and control contract performance and effectively deal with potential changes and disputes. The supplier should be considered a member of the project team, with all members striving for success. Upon signature of the contract, several steps should be taken to ensure that roles, responsibilities and obligations are clearly allocated among the parties and proper systems and procedures are put in place to monitor performance and keep efforts well focused
