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Essential Contract Management

Monday January 26th, 2015
Paul  Wright (PASS Consultant)

Paul Wright (PASS Consultant)

Contract management is one of the under-valued elements of business success. As soon as the procurement process is complete, and the contract has been awarded, the contract management process takes over. Yet in many organisations what actually happens is that the contract is locked in a filing cabinet, and never looked at again until the contract expires. Some organisations do not even have a contract register that allows them to know what contracts they actually have and when they expire.

As soon as the contract is awarded it often starts to be amended. Some suppliers base their bidding approach on this, assuming that they can win business by under-pricing and make a profit on any changes and variations. Sometimes these variations are not recorded and linked to the original contract, and the contract as actually executed can be significantly different from what was originally envisaged. This may give the incumbent supplier a huge advantage in rebidding when they know what is actually required, rather than what was specified.

In other cases it causes major problems for suppliers who have priced their work on one basis, before being asked to do different work that is not covered by the original contract as agreed, and for which they may struggle to be compensated if held to the original agreement.

Without asking everyone to carry around with them the full formal contract it is essential for both parties, and for all stakeholders, that the contracts, variations, extensions and re-tenderings are documented, authorised and agreed – and known as such when in the future the contract is reviewed, possibly by different people from those involved in the original contract formation.

If we do this well, and efficiently, we are much more likely to have successful outcomes and fewer legal challenges than if we lock the document away and leave it to chance.

Contracts are often living documents, and the circumstances of their creation frequently change during their duration. To meet our legal obligations to our stakeholders and suppliers (and their competitors) we have to manage that process actively, not passively.

Words:  Paul Wright

 

Gov Opps training partner, PASS  (Procurement Advice & Support Service), runs training events in Contract Management, plus relevant procurement training events for the public and private sector. These include Impact of the EU Directive on the UK Regulations, Preparing Perfect Tenders and an Introduction to Public Procurement.  To view the brand new schedule of events, click HERE.

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