Contract management

Contract management or contract administration is the management of contracts made with customers, vendors, partners, or employees. Contract management includes negotiating the terms and conditions in contracts and ensuring compliance with the terms and conditions, as well as documenting and agreeing on any changes or amendments that may arise during its implementation or execution. It can be summarized as the process of systematically and efficiently managing contract creation, execution, and analysis for the purpose of maximizing financial and operational performance and minimizing risk.^[1]

Common commercial contracts include employment letters, sales invoices, purchase orders, and utility contracts. Complex contracts are often necessary for construction projects, goods or services that are highly regulated, goods or services with detailed technical specifications, intellectual property (IP) agreements, and international trade.

A study has found that for "42% of enterprises...the top driver for improvements in the management of contracts is the pressure to better assess and mitigate risks" and additionally,"nearly 65% of enterprises report that contract lifecycle management (CLM) has improved exposure to financial and legal risk."^[2]

Contracts

A contract is a written or oral legally-binding agreement between the parties identified in the agreement to fulfill the terms and conditions outlined in the agreement. A prerequisite requirement for the enforcement of a contract, amongst other things, is the condition that the parties to the contract accept the terms of the claimed contract. Historically, this was most commonly achieved through signature or performance, but in many jurisdictions - especially with the advance of electronic commerce - the forms of acceptance have expanded to include various forms of electronic signature.

Contracts can be of many types, e.g. sales contracts (including leases), purchasing contracts, partnership agreements, trade agreements, and intellectual property agreements.

• A sales contract is a contract between a company (the seller) and a customer where the company agrees to sell products and/or services and the customer in return is obligated to pay for the product/services bought.
• A purchasing contract is a contract between a company (the buyer) and a supplier who is promising to sell products and/or services within agreed terms and conditions. The company (buyer) in return is obligated to acknowledge the goods / or service and pay for liability created.
• A partnership agreement may be a contract which formally establishes the terms of a partnership between two legal entities such that they regard each other as 'partners' in a commercial arrangement. However, such expressions may also be merely a means to reflect the desire of the contracting parties to act 'as if' both are in a partnership with common goals. Therefore, it might not be the common law arrangement of a partnership which by definition creates fiduciary duties and which also has 'joint and several' liabilities.

Areas of Contract Management

The business-standard contract management model, as employed by many organizations in the United States, typically exercises purview over the following business disciplines:

• Authoring and negotiation
• Baseline management
• Commitment management
• Communication management
• Contract visibility and awareness
• Document management
• Growth (for Sales-side contracts)

Contract management software implementation

Contracts are often treated as static documents, and not changing, dynamic, “business building blocks”. Companies that take a file-and-forget approach to contracts lose the ability to leverage contract insights to structure more profitable deals, assess the value of their contractual relationships as a whole, improve contract terms, and avoid penalties from lack of compliance. Contract management software can be used to manage the contract life-cycle, from identification of a need, through negotiation, agreement, monitoring, and close-out. The Customer Contract Management business scenario enables you to manage your customer service contract, with capabilities to handle service entitlements and managed services. It provides functions to control recurring service delivery and periodic billing cycles etc.

Contract Management Certification

Candidates who meet rigorous standards, including experience, education, training, and knowledge can be awarded certifications. There are two main certifying associations, the NCMA (National Contract Management Association - a US Government focused association) offers a Certified Professional Contracts Manager (CPCM), Certified Federal Contracts Manager (CFCM) or Certified Commercial Contracts Manager (CCCM). IACCM (International Association for Contract & Commercial Management - an international body focusing on commercial contracts), offers three levels of certification: Certified Contract Manager Associate (CCMA), Certified Contract Manager Practitioner (CCMA), Certified Contract Manager Expert(CCMA) ^[3] Several Universities in the US and UK are also offering their versions of training and certification, Saint Louis University,^[4] Villanova University,^[5] University of California at Los Angeles^[6] and the University of Virginia^[7] provide certificates in contract management.

Change management

There may be occasions where what is agreed in a contract needs to be changed later on. A number of bases may be used to support a subsequent change, so that the whole contract remains enforceable under the new arrangement.

A change may be based on:

• A mutual agreement of both parties to vary the contract, outside the framework of the existing contract. This would be an independent basis for changing the contract.
• A unilateral decision to vary the contract, contemplated and allowed for by the existing contract. This would normally have notice periods for fairness and often the right of the other, especially in consumer contracts, to cease the contractual relationship. Be careful that any one-way imposition of change is contractually justified, otherwise it may be interpreted as a repudiation of the original contract, enabling the other party to terminate the contract and seek damages.
• A bilateral decision to vary the contracting, within the variation or change control process outlined in the existing contract. These are often called change control provisions.

Phases of Contract Management

Contract Management can be divided into four phases ^[8] namely:

- Initial Phase - Bid Phase - Development Phase - Manage Phase

See also

• Document automation
• Government contract
• Group purchasing organization
• Office of Federal Contract Compliance Programs - for contracts with the United States government
• Uniform Commercial Code - United States
• United Nations Convention on Contracts for the International Sale of Goods

References

• Pratique du Contract Management by Grégory Leveau,

External links

National Contract Management Association (NCMA)

• [http://www.iaccm.com, IACCM, International Association for Contract & Commercial Management
• ISM, Institute for Supply Management
• e²cm, Ecole Européenne de Contract Management
• Contract Management Software Solution