Contract management is the process of managing contract creation, execution, and analysis to maximize operational and financial performance at an organization, all while reducing financial and delivery risk.  

The fundamentals of contract management

When two companies wish to do business with each other, a contract specifies the activities entered into by both organisations and the terms through which they will each fulfil their parts of the agreement. Contracts affect project delivery and outcomes through costs, revenues and quality of delivered products or services.

Effective contract management can ultimately create a effective relationship, but only when managed correctly. It’s a good idea to include a legal department or a lawyer in contract management discussions. The precise wording of contracts is crucial to contract management.

Framework

The focus of the framework is on the activities to be undertaken during the operational phase of the  contract, i.e. after the contract has been awarded and once the service is up and running.
This fits within the ‘contract management’ domain of our commercial relationships audit framework published in November 2016. This good practice framework defines the four blocks – structure and resources, delivery, development, and strategy – comprising 11 areas (Figure 1) that organisations should consider when planning and delivering contract management. It outlines, the key activities that fall under each of the 11 areas.
 

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