Which tools should be used to successfully manage contracts?

Which tools should be used to successfully manage contracts?

Below are the key tools* you should use:

• Stakeholder Matrix

• Contract Management Plan

• Contract Kick-off Meeting

• Risk Management Plan

• Performance Meetings

• Checklists

• Change Request Form

• Contract Closure Report

*Note that some tools may be consolidated into an overall contract management plan.

The first tool is the Stakeholder Matrix, essential for managing the contract and should be prepared before the contract kick-off to determine who should be invited to the contract kick-off meeting. RACI matrices can be effectively used here, familiar from Project Management:

• R - Responsible:

Identifying who is responsible for specific contract-related activities (e.g., receiving deliveries, accepting deliverables, or raising complaints about or rejecting deliveries).

• A - Accountable:

Determining who is ultimately accountable for ensuring these activities are performed, such as the person in the business who owns the contract in terms of budget responsibility for the services.

• C - Consulted:

Identifying those who need to be consulted regarding these activities, such as a contract manager, legal advisor, procurement consultant, or manager who needs to approve changes, payments, penalties, etc.

• I - Informed:

Identifying those who need to be informed about the contract's execution, such as business stakeholders needing to know about engaging a new supplier or management needing regular updates on progress.

Once the RACI matrix is established, it's advisable to create a contract management plan, either for a portfolio of contracts or for larger contracts of significant risk and value. This plan will evolve as more information becomes available.

The contract management plan outlines (like a project plan): business objectives, timelines, deliveries, payment schedules, risk management, etc., and how these will be managed to completion, including regular performance meetings, delivery statistics, etc. The contract management plan should be shared with all parties involved in managing the contract.

The contract management plan should be followed up with a contract kick-off meeting that clarifies and aligns the elements mentioned above, so everyone is on the same side regarding the plan. This meeting should focus on defining each party's respective responsibilities, communication channels, reporting, etc.

It's often beneficial to involve suppliers in the contract kick-off meeting, especially for complex service deliveries where contract deliverables require further development or similar.

A risk management plan addresses the contract's major risks, such as delays, incomplete deliveries, and failures, and how to handle them. This plan also considers legal risks, such as the extent of penalties and how they are to be managed between customer and supplier. This plan is typically part of the contract management plan and should be adjusted as needed.

Once the contract moves into execution, regular performance meetings, status updates, milestone reviews, or similar meetings are crucial for monitoring progress. If there are deviations from the plan, it's important to analyze the causes promptly to steer the contract back on course. Coordination and communication are ongoing necessities.

These meetings should be followed by status reports where all parties agree on the status and actions needed to correct any issues. If the parties disagree (e.g. on status or required actions), it is essentially a conflict that must be resolved using agreed conflict resolution models established prior to contract kick-off.

The parts of the organization involved in contract management can benefit from using checklists to easily understand the activities expected of them and the processes to follow, including dos and don'ts.

Contract changes may also be necessary, and it's important to use standardized change request forms to document the specifics of changes, including any procurement-related consequences.

Finally, at contract closure, documenting achieved results in a contract closure report is essential. Sharing the gained insights - ensures future contracts can benefit from organizational experience.

Knowledge and insights should also be shared as needed for immediate action.

In NSCCM's courses and training programs, you can learn more about managing your contracts using tools, including how to tailor these tools to your organization's specific needs.

Read more about our 2-day course here: Basic Contract Management – English edition

Read more about the international certification here: CCM Practitioner – English edition