Every aspect of business management in any organization, regardless of size, requires creating, negotiating, and managing contracts. However, contract management is a neglected branch of business management. Managers constantly have conversations and encounter issues with their staff members, and some of these naturally involve pay. Contract management will usually come up in some of these discussions. CM involves the process of overseeing contracts, from their establishment to the chosen party’s execution and final cancellation. In order to maximize operational and financial performance and to identify and reduce financial and reputational risk due to non-compliance with contract terms, key operations include performance analysis against the contract conditions. Hence, it is important to understand the basics of the contract management process and lifecycle. Read on to find out more, as we also explain the CM software as well as the defense contract management agency.
What Is Contract Management and Its Examples?
Contract management is the process of overseeing legally binding agreements from their inception to completion. Depending on who is in charge of what part, the tasks at hand may be administrative or strategic. Businesses can benefit greatly from better outcomes and greater value realization from their contracts if they are managed effectively.
Your company’s levels of visibility, control, and compliance will ultimately be impacted by how it manages its contracts. This also includes the technology it employs and the collaboration between teams. Your company’s total success will be determined by how strong these pillars are. Thus it is important to keep this in mind when developing your employees, operations, and technologies.
Contract Management Process
Even though there are many different aspects that make up contract management, we can simplify the process by dividing it into five distinct phases. These five distinct phases are creation, collaboration, signing, tracking, and renewal.
Within the stages, we can further distinguish between particular steps. The entire procedure can be divided into nine phases, with each contributing to one of the five broad stages. When it’s time for a new round of contracts, this makes it simpler to handle the end-of-quarter crunch that frequently occurs. The steps for each level are as follows:
First Phase: Creation
#1. Initial Requests
This basically has to do with finding contracts and relevant documentation to support the objective of the contract. The initial request mark the beginning of the first step in the CM process.
Drafting a contract by hand takes time, but using automated contract management tools can streamline the procedure significantly.
Second Phase: Collaboration
#3. Contract Negotiations
Employees should be able to review different drafts of the contract once it is written and mark any differences to shorten the bargaining process.
Third Phase: Signing
#4. Approving the Contract
The stage that experiences the most bottlenecks is getting management permission. Users can avoid this by designing customized approval workflows that include parallel and sequential approvals and maintain a quick flow of decisions.
#5. Execution of the Contract.
Through the use of electronic signatures and fax capabilities, users are able to manage and expedite the signature process when executing the contract.
Fourth Phase: Tracking
#6. Obligation Management
To make sure that key stakeholders are meeting the objectives and that the contract’s value isn’t declining during the early stages of expansion, this calls for intensive project management.
#7. Revisions and Amendments
It can be challenging to gather all the paperwork needed for the contract’s first preparation, so there might be lapses. Hence, systems must be in place to modify the initial contract when items that were ignored are discovered during this stage..
#8. Auditing and Reporting
Contract management does not entail creating a contract and immediately filing it away without further consideration. Contract audits are crucial for identifying both parties’ adherence to the provisions of the contract and any potential issues.
Last Phase: Renewal
#9. Renewing
Manual contract administration techniques can lead to lost corporate revenue and missed renewal options. Nevertheless, an organization can find renewal possibilities and then draft new contracts by automating the procedure.
The nine phases in contract management make up a large portion of the process. Generally, management of the contract lifetime is essential. Hence, contract managers need to keep an eye out for any potential modifications or violations of contracts when various contract types get through their varied stages. It could be worthwhile to make changes to a contract if an employee or company is dissatisfied with it. So, it’s crucial to uphold contractual responsibilities while also guaranteeing satisfaction for both parties of the agreement.
Lifecycle management is crucial at several points along the contract management process. When managing contracts, it’s crucial to take vendor performance and risk assessment into account. For instance, you might need to revise the contract or impose certain disciplinary measures if a vendor doesn’t fulfill their contractual responsibilities.
What Are the Three Stages of Contract Management?
The three basic stages of contract management are;
- Pre-award, or the period of time between the solicitation, development, and agreement of a service offer.
- Award, where the agreed-upon offer is subject to discussion and approval; and
- Post-award, where the contract begins its performance management phase before closing.
What Is Contract Management and Its Importance?
Contract administration is crucial since how you manage your agreements from the beginning to the conclusion will affect how they turn out. Contract Lifecycle Management (CLM) is a method that can help businesses get the most out of their contracts, all while abiding by the law and maintaining command over their interactions with outside or third parties.
The phrase “No Surprises” sums up the goal of good contract management. When everything runs well, everyone is aware of their responsibilities and when they are due. Hence, your company will always be able to know what’s coming up, confidently get ready for audits, and easily show that it is in compliance.
In addition, all company parties and stakeholders will be on the same page once you’re able to establish standardized and collaborative CM practices across your organization. Your company can thus count on consistently achieving the goals it has agreed to, as well as possibilities to fortify its position.
What Are the 4 Types of Contracts?
Generally, contracts can be classified according to their primary performances or the type of jobs they are needed for;
- Unilateral contract
- Bilateral contract
- Executed contract
- Executory contract.
What Are the Four Components of Contract Management?
Contract management is a multifaceted task that involves many different actions. But there are four key components that make up the main activities.
- Establishing governance and the CM team.
- Planning, establishing, and executing contract administration.
- Relationship management.
- Performance management.
What Are the Types of Contract Management?
Contracts can take numerous forms, and there are many different kinds that can be used for project management and other purposes. In the field of project management, a few of the types of contracts that are the most helpful are:
- Fixed priced contracts
- Cost reimbursement contracts
- Time and materials contracts.
There are also;
- Implied contracts
- Unit price contracts
- Unilateral contracts
- Express contracts and
- Bilateral contracts.
Contract Management Software
There is no business too big or too little that doesn’t need to regularly draft, negotiate, and manage contracts. However, it takes time and is prone to the usual data-entering errors at every stage. Contract management software can help shorten the duration of contracts and reduce the likelihood of audits and financial losses. However, what exactly is contract management software?
What Is Contract Management Software?
Contract management software is a type of technology created to simplify and automate the process for organizations.
By automating the tedious work often required in a contract workflow, CM software makes it simpler for legal and business teams to draft, negotiate, sign, renew, and report on commercial contracts.
Contract management software allows teams to handle all aspects of a contract without having to switch between separate applications. This is so because their entire toolkit is accessible through a single interface.
Who Makes Use of CM Software?
Organizations that want to expand their contracting activities but can’t afford to hire more people turn to contract management software.
This indicates that organizations with high growth rates and rising contract volumes stand to benefit the most from using CMS
The legal, sales, financial, operational, and human resources departments are just some of the in-house departments that can benefit from using the company’s CMS
What is the Best CM Software?
The 6 best contract management software for 2023;
- PandaDoc
- ContractWorks
- Concord
- DocuSign
- Outlaw
- Cobblestone
- Agiloft
- Conga
Does CMS Help With Searching and Reporting?
Software designed specifically for managing and organizing contracts is invaluable when trying to find specific agreements or compile reports on them. Such contract management tools help simplifies the archiving, querying, viewing, and reporting of contractual agreements.
Is Contract Management Software Secure?
The digital cloud provides a safe haven for your contracts, and contract management software does just that. With CM software, your agreements have a safe haven that features granular access controls, centralized document records, and extra security options.
Contract Management Lifecycle
Contract Lifecycle Management deals with the process of applying pertinent contract management ideas and practices across the contract lifecycle that will open up chances to regain control, ensure compliance, restore visibility, and develop deeper connections with your contractual vendors.
Basically, there are seven major phases that make up the contract lifecycle management process;
- Inception
- Negotiation
- Execution
- Start-Up
- Operation
- Renewal
- Closeout
Defense Contract Management Agency
The Defense Contract Management Agency (DCMA) is an organization of the US federal government that answers to the Under Secretary of Defense for Acquisition and Sustainment. The Department of Defense (DoD) and other approved government departments, it is in charge of managing contracts. Its main office is in Fort Lee, Virginia. Contracts for Foreign Military Sales are sometimes handled by DCMA.
The Department of Defense, the National Aeronautics and Space Administration, as well as several other federal, state, foreign, and international governments and agencies, rely on the Defense Contract Management Agency to manage their contracts. Its objective is to guarantee that contracts are carried out on schedule and within budget.
DoD contract administration has been researched and changed for a long time. The Secretary of Defense ordered a study to look into the entire DoD contracting procedure in the early 1960s. The results of “Project 60,” which combined contract management and audit, showed a variety of advantages. At the time, there was a significant degree of duplication of work because each defense department and the military branch were handling and auditing its own contracts. Eventually, the Defense Logistics Agency took on a large portion of the CM duties (DLA). However, the military services continued to oversee the key procurement programs for armament systems.
Processing Entry Summaries from Defense Contract Management agencies
The Automated Commercial Environment is used by U.S. Customs and Border Protection to process imports for which duty-free status is claimed under Harmonized Tariff Schedule of the United States duty subheading 9808.00. (hereinafter referred to as the Defense Contract Management Agency [DCMA]).
When the supplies are certified by the Commissioner of Customs, DCMA entries permit the duty-free handling of goods for military departments. The 19 CFR sections 111 and 163 recordkeeping regulations continue to be in effect. After the DCMA products entered U.S. Customs jurisdiction, the importer is still obligated to keep a comprehensive record of all information pertaining to those entries for a further five years and to give CBP access to any such data in its possession upon request.
Conclusion
Contract management deals with the process of managing contract formulation, execution, and analysis. Its goal is to increase an organization’s operational and financial performance while lowering financial risk. Organizations are under more and more pressure to save expenses while boosting productivity. The necessity for an efficient and automated CM system is facilitated by the fact that contract administration tends to be a particularly time-consuming aspect of a company.
When you are able to implement standardized and collaborative CM procedures across your business, not only will all company parties go with one voice, but also all stakeholders will be on the same page. As a result, your business has a good chance of regularly meeting its agreed-upon targets and developing new advantages.
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