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Contract Management Best Practices Tip #3: Select the Right Management Approach

     

This is the third blog post in a series highlighting contract management best practices. Part one can be read here. Part two is available here.

Perhaps one of the most difficult aspects of contract management is figuring out how best to manage the company portfolio, especially when there are tons of different contracts relating to one or more company departments. There really isn’t a one size fits all approach when it comes to overseeing a company’s contracts.

 

More than likely, the goal for most contract managers is to simply make their contract management system as efficient as possible. Here are several things to consider when determining how to manage a contract portfolio:

Type and Scope

There is no doubt that all contracts are important since most impose several or many responsibilities upon the parties to them. However, there are some contracts that warrant a bit more attention than others. For example, contracts that involve the payment of significant sums of money in exchange for the provision of a substantial good or service over a long period of time must be monitored with care.

 

On the other hand, simpler more straightforward contracts, such as those that involve the licensing of software or an app probably do not need to be reviewed with quite the same level of diligence. These sort of agreements, as well as a lot of others, which are often considered boilerplate contracts, are fairly standard and unchanging.

 

When deciding how to manage contracts, it is important to examine the type and scope of each contract to assess its significance. In essence, contracts can be arranged according to their level of priority. This categorization can then guide the manner in which the overall portfolio can or should be managed.

Objectives

For some companies, contracting plays a huge role in fulfilling company objectives. Depending on the nature of a company’s contracts, the contract portfolio may need to be managed based on if and how it ties into the company’s overall strategic plan. This is obviously very specific to different sectors and individual companies, but it is something that any company engaged in contracting might want to consider.

 

Leaders often overlook the importance and impact of contracts on company operations and budgeting. But, contract management is one of many business processes that really should be factored into a company’s plan, and an organized management approach can improve operational efficiency and even cut some costs.

Deadlines and Timeframes

In some industries, contracts include language stating that “time is of the essence.” Even if this specific phrase isn’t directly written into a contract, it is often implied. And, many contracts outline concrete deadlines or a specific schedule for the occurrence of some action. This may include delivery dates, payment dates, performance deadlines, and so forth.

 

Companies engaged in this sort of contracting may benefit from implementing a time-focused management approach. For example, companies may want to adopt a style that focuses on project management, supply or product-specific management, or milestone management.

Level of Risk and Possible Consequences

Some contracts are riskier than others. For example, contracts associated with investments or research and development in life sciences or biotech often come with a decent amount of uncertainty and risk. In general, these contracts require diligent oversight.

 

This is necessary because there is usually quite a bit at stake, including money, intellectual property, and, of course, potential legal issues. Companies with a number of risky contracts within their portfolio must implement a detailed and rigorous contract management system.

 

Contract managers may need to test several contract management approaches before determining which one makes the most sense for their companies’ needs. Regardless of which approach a company selects, utilizing a practical and affordable contract management service will facilitate the process.

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