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Contract Management

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  • Contract Management

    Contract management is a strategic management discipline employed by both buyers and sellers whose objectives are to manage customer and supplier expectations and relationships, control risk and cost, and contribute to organizational profitability/success.

    For successful service contract administration, the buyer needs to have a realistic degree of control over the supplier's performance. Crucial to success in this area is the timely availability of accurate data including the contractor's plan of performance and the contractor's actual progress.

    Sources: D.W., & Burt, D.N. (1996). Purchasing and Supply Management. (6th ed.). New York: McGraw Hill.
    Last edited by bernievn; 04-19-2007, 09:38 AM.
    Is profit made when you buy or when you sell?

  • #2
    Re: Contract Management

    The rpofit is made when you buy not when you sell. Because, you should assess the market price and predict your sale price before buying.


    • #3
      Re: Contract Management

      Good contract management increases the probability of successful transactions and projects.

      Best practice contract management provides a strategic tool to oversee the quality and integrity of business operations – defining and testing the alignment of your business with that of your trading partners, driving sustainable innovation and change.

      Best practice contract management has two constructs:

      "Commitment Management" represents the organizational construct for corporate delivery - the governance framework for interactions

      Lean Contracting provides the method and insights to achieve balance, through quality and innovation - the construction and management of business relationships

      Within the "Commitment Management" construct there are 10 best practices that need to be employed:
      1. Ownership and accountability for contracting process*
      2. Terms and structure audit and update*
      3. Integration with Product Lifecycle Management
      4. Portfolio risk management
      5. Value chain focus
      6. An electronic contracting strategy
      7. Self-help skills assessment and development tools
      8. Strategically aligned measurements and reporting
      9. Pro-active change management*
      10. Differentiation and sources of value: awareness and marketing

      Employing these 10 practices will allow an organisation to attain the 'Lean Model".

      Source: International Association for Contract and Commercial Management |


      • #4
        Re: Contract Management

        My concern on this subject is the maintanance agreement.What should in it and what to look out for.Loopholes.


        • #5
          Re: Contract Management

          Hi, here are three good articles that deal with Contract Management and specifically loopholes....

          Finding a cure for "BAD" contracts and outsourcing deals?

          Do’s and don’ts when developing Office Automation tenders

          Printer, Fax and Photocopier Rentals: What clauses to look out for!
          Is profit made when you buy or when you sell?


          • #6
            Re: Contract Management

            Hi Mzu.

            Usually the best source of cost drivers comes from within…from the maintenance stakeholders who have all the past maintenance records. It is best to source the capital equipment at the same time the maintenance is sourced. The bidders can bid on the equipment, or the maintenance, or both. Failure to do so will probably lead to a cheap price on the equipment, but high prices on the services. Both the equipment agreement and the maintenance agreement templates usually come from the customer to ensure the total contracting coverage is integrated.

            My experience is this equipment requirements need to be clearly defined with specifications to be sure of getting what is needed.

            In terms of loopholes - the biggest concern here is when the maitenance agreement is poorly constructed in that it does not cover all the various facets (parituclarly cost drivers) concerning maintenance of the equipment over the course of its lifecycle. Failure to define and analyse these specifications usually will result in unforseen costs.

            Of course drafting a wonderful maintenance agreement is one thing, it is then critical to manage according to the agreement, which is where many organisations then start to fall short.

            Hopefully this helps.