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27th Apr 2021
This guide will equip you with the fundamental knowledge to get started in overseeing contracts for your organisation.
Contract management involves managing contracts for employees, vendors, contractors or any other party your business works with. As a project manager, contract management is one of the key project management skills you’ll need in your toolbox.
Effective contract management can be time-consuming and it’s often only large organisations that employ dedicated contract managers. However, its role in reducing cost and improving performance makes it a vital part of modern business.
As a project manager, you may be responsible for overseeing the contract process from beginning to end – establishing a business case, then creating, executing, and optimising the contracts your organisation enters into.
When embarking on a new contract, the first step is to put a strategy in place, so that everyone involved understands the goals of the process. A successful strategy should cover:
The strategy is high-level and should be focussed on achieving efficiency and cost-effectiveness. For the nitty-gritty details specific to the contract you’re working on, you’ll want to also put in place a contract management plan.
The contract management plan lays out the way forward with your contract creation, negotiation, fulfilment and, ultimately, renewal. Having a plan laid out will help to keep you in control of the process. Expect to refer back to your plan through out the project.
Your contract management plan should ensure that the goals and expectations laid out in your strategy can be met. Some of the key steps of your planning phase should be:
Start your plan by laying out the scope and deliverables of the contract. Clearly identifying and documenting exactly what a contract needs to cover (and what it doesn’t) helps keep your work focused and avoids scope creep.
As with managing any project or work, it’s important to know what success looks like. What are you trying to achieve with this contract and how will you measure that achievement? This helps you effectively communicate the value you’ve generated back to the business.
Establish an inventory of what resources are available to you to complete your contract work. This might include team members who can assist with their skills and time, but ensure that if you are allocating work, those team members have capacity and capability to meet your deadlines.
Early in the process, establish who will be responsible for various deliverables and different parts of the contract process. Determining this not only keeps everyone accountable and on track, but it helps to maintain positive relationships, as everyone is clear on the input and results, they can expect from others and themselves.
Any plan should include a timeline of critical dates and milestones that must be met in order to meet your final deadline and keep the work progressing. This might include deadlines for specific deliverables, and timelines and dates for progress updates to stakeholders.
Every contract comes with some level of risk attached. Make sure you conduct a project risk assessment to anticipate the most likely and most critical problems your contract may run into. Define your risk management strategies at the same time, which could include building flexibility into your timeline or budget to account for delays and other issues. Don’t forget to consider any governance that may need to be observed.
The contract management process includes activities both before, during and after a contract is in place and being completed. At various stages throughout, you’ll be responsible for managing:
There are a few key stages that you’ll need to work through in order to meet your deadline and goals. Breaking the work up like this can help you better manage your contract, no matter its complexity.
Depending on your role in the business and the project, you may or may not be responsible for this stage, in which stakeholders:
Contract management software can be as simple or as sophisticated as your needs dictate and your budget allows. You might choose dedicated contract management software or use your own spreadsheet and calendar system. The important thing is making sure that whatever you’re using allows for:
Contract management is an integral part of managing projects and requires many of the same skills you need to be a successful project manager. Some key skills to develop in order to thrive in this area include:
For more resources to help you manage your contracts, stick to reputable sources, such as government departments. The Department of Finance has a contract management guide that may assist you, plus you can always check your state government website for resources.
For legal resources, check out the Association of Corporate Counsel.
With this core contract management knowledge under your belt, you’ll be able to confidently navigate the agreements which are vital to making your projects a success. Mastered this? Check out more of the key skills you need as a project manager.
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