Contract management plans are a designed to help businesses outline how a contract is going to be administered and executed. Implementing one at the beginning of a contract lifecycle can offer a set governance and control and can help manage the expectations of all parties, leading to a successful contract for all involved.
What is a contract management plan?
A contract management plan (CMP) is an agreement that summarizes in detail, every step that should be conducted throughout the life of a contract and key information as to how a contract will be managed. A CMP is integral to the success of a contract and should be considered a core principle and best business practice when dealing with any new contract.
Creating a contract management plan and adopting this type of detailed framework to contract management allows for the contract management process to be correctly outlined and undertaken in well-defined stages, supporting clear workflows that create accountability and can help with risk management and compliance.
How can a contract management plan help my business?
Contracts form a cornerstone of every single business, they are a key element of conducting business in the modern market, which is why developing a contract management plan can be of huge benefit for businesses and organizations, regardless of industry or sector.
Increasing revenue and cutting costs, optimizing your business both operationally and financially, staying compliant with ever changing regulatory requirements and minimizing exposure to risk are all established reasons why you should have an effective Contract Management plan in place, especially if you want to successfully manage a larger volume of contracts of increasing complexity.
It is obvious that the more efficient a system is, the less time and money it will cost your business. Having an effective CMP in place can improve efficiency and productivity. This streamlining of the overall governance of a contract and the associated acceleration of stages, optimizes the time and the value of each contract.
A CMP creates administrative control and you can identify any issues within the contract process. A successful contract management plan can help your business to continually improve and accelerate your contract management system and smooth out your overall system.
You will notice a difference to how much quicker the initial contract cycle can be once you have implemented an efficient contract management system into your business. This acceleration optimizes the time and the value of each contract.
When you are trying to build relationships with clients and service providers, transparency is essential for all parties involved. Having transparency during the contract lifecycle can help with relationships. Therefore, a CMP is a vital source of Information relating to a contract and needs to be readily available and communicated easily and effectively with all relevant stakeholders and persons. Using it as a base framework for tracking and reporting performance and progress can be of huge benefit to your business when it comes to communication and managing expectations.
Having set KPI’s, contract reviews and deadlines in a contract management plan also allows for decision making to be based upon real-time data and is the correct step for the future of the business.
What should a contract management plan include?
When you have a structured contract management plan in place, the framework can be divided into stages. This makes it easier to understand the roles and responsibilities at key points in the process and means employees and third parties can find the required information quickly and easily.
As a contract management plan is a summary of the administration and goals of a contract, there should be clearly outlined information and definitions for all of the below:
Assignment of roles & responsibilities for all parties – including what may be expected of them
Contact information for everyone that may have a role during the contract lifecycle
An agreed level of management according to the contract value/risk profile
Agreed contract objectives & and agreed schedule
A performance management framework, e.g., KPIs
All obligations, e.g., dates, deliverables, and deadlines
How contract compliance will be monitored and how any changes will be managed
A regular review meeting schedule & communication with stakeholders
Risk management & issues
Before creating a CMP, it is good practice to determine the value of a contract and where and what risk it poses. This value and risk assessment can provide the correct level and specificity of management required. Lower value contracts may not need the same amount of management and monitoring time as higher value contracts and your CMP should reflect this as assigning too much resource to contracts that may not need it can result in loss of productivity, efficiency, and revenue.
Factors that need to be considered include the length and value of a contract, performance criteria, risk and compliance, public visibility, reputation, and business dependency. Once you have your value/risk profile, you can ascertain the amount of governance and administration the contract lifecycle needs to have.
Once you are ready to produce a CMP, it is important to remember that it needs to be a formally written document. This assures everyone involved in the process – employees, stakeholders, and vendors, officially know of their roles and responsibilities and what is expected throughout the contract lifecycle. Although formality helps with structure, it is important not to overcomplicate the language, so the document is user friendly. All documents need to be stored securely.