Many people assume that managers of all levels are well-versed in effective contract management techniques. But contract management can actually be a career–there’s even an International Association for Contract & Commercial Management, the IACCM.
A Contract Management System (CMS), sometimes called Control Lifecycle Management, manages the production and management of contracts, Service Level Agreements (SLA) and Procurement Master Agreements. Contracts are core to any business’s procurement activities. They set out the prices, service levels, terms and supplier relationship and ensure that your company is regularly supplied with their direct and indirect supplies.
In the traditional system for the procurement of civil engineering works, it is normal for the client to employ an experienced consulting engineer to assist him with project development and implementation. The consultant is likely to play an important role in project appraisal and definition, to undertake the design and contract documentation, to oversee tendering by contractors, to supervise construction work on site and administer the construction contracts. A contractor or group of contractors completes the fabrication and construction of the works. Management of design and construction is therefore the responsibility of different organizations.
This well-established system is still widely used but many variations are adopted to meet the particular requirements of the client, particularly in the private sector. In general, these reflect alternatives used in the related process plant, offshore and building industries and frequently respond to pressure for quicker and timely completion to reduce the payback period. There is also increasing emphasis on effective project management and on the overall management of design and construction. A company’s Contract Management System not only sets out these important details but also controls a company’s risk of a vendor not performing correctly.
Any construction project unfolds in phases: conception, design, pre-construction, construction procurement (securing materials, equipment and work teams), building, and delivery/post-construction. Contracts cover pretty much all of them, and can be broken down into pre-award and post-award contract development. The pre-award, or bidding stage, is the more critical phase here. As expressed by the Chartered Institute of Purchasing and Supply, “The foundations for effective and successful post-award contract management rely upon careful, comprehensive and thorough implementation of the upstream or pre-award activities.”
In the construction field, solid strategies in construction management add value that can be measured in terms of reduced costs and time, lower risk and higher quality. Value is enhanced through innovative services that make for better projects and more creative solutions to challenges. Owners can also perceive value on a less tangible, more personal level. An example is when a skillful construction manager serves as the point person whom owners can rely on to act in their best interests. This not only gives the project more stability and security, it significantly reduces owner stress. Peace of mind is invaluable by anyone’s book.
Beginning in the early planning stages, the construction manager will work with the members of the project team to create a carefully conceived and well-defined construction plan (construction best practices). Construction managers (CMs) are responsible for integrating management of design, execution and costs, as well as monitoring progress estimates at design milestones, reviewing document progress and overseeing coordination.
Features of a good Contract Management System includes:
* Storage of the company’s standardized contracts.
* A core workflow management system to facilitate and manage the drawing up and execution of new contracts.
* Flexibility to cope with a vendor relationship and its interactions.
* Calendars that include milestones that the vendor should meet.
* Check lists to manage information and activities within the contract life cycle.
* Compliance monitoring.
* Alerts to indicate movements from expected behavior.
* Agreed delivery schedules and the ability to track them.
* Prices and budgeting for each product line and vendor.
* Document depositories to hold the live contracts and standard contracts for use by the company.
* Event management for any problems.
* Claims administration to cope with any non-adherence with the contract.
* Request for Proposal (RFP) management that includes: Template based creation, Interactive and dynamic workflow managed creation, Structured RFP management through its life cycle.
* Management information that will show which contracts have the greatest risk potential, are costly to manage, are the most valuable, are close to being renewed, take an excess amount of time to manage.