Best Practice Contract Management for Sourcing

10 Contract Management Questions that You Need to be Asking

Blogs, Best Practice Article

In managing supplier relationships, contract management is the foundation that ensures smooth operations, mitigates risks, and maximum value of supplier agreements. This crucial aspect of business dealings involves overseeing the creation, execution, and analysis of complex contracts to safeguard organisational interests. 

In this article, we focus on the top ten contract management questions that not only need to be asked but are critical in ensuring that contract managers are optimising the performance of sourcing contracts.

Editor’s note: this is an updated version of the article originally posted on September 16, 2016.

Before we get started, let’s define contract management.

What is Contract Management?

Contract management is a multifaceted discipline that encompasses the administration, monitoring, and optimisation of contracts between different parties. It extends far beyond mere document management, involving meticulous attention to contract terms, risk management, and compliance with legal obligations. 

Now, let’s look at the questions that you need to ask as part of your contract management process.

what is contract management

Effective contract management hinges on asking the right questions

10 Contract Management Questions

Effective contract management hinges on asking the right questions. This list is by no means a comprehensive list, but questions we believe are integral to the success of anyone attempting to manage their key sourcing contracts.

1. Clarity on Objectives: Do you and your key stakeholders truly understand the objectives of your sourcing contract? Lack of clarity often becomes the Achilles’ heel in supplier relationships. Ensure that expectations are communicated effectively with your supplier.

2. Avoiding Excuses for Non-Performance: Are you inadvertently giving your supplier a free pass for underperformance? Check if your supplier needs additional information or support from your procurement team to meet contractual obligations.

3. Leveraging Supplier Expertise: Are you tapping into the wealth of knowledge your supplier brings to the table? Beyond delivering goods and services, suppliers often harbour valuable insights. Foster an environment where they can contribute ideas for more effective collaboration.

4. Building a Strong Relationship: Is there alignment in your vision of a strong, respectful working relationship with your supplier? Evaluate if the relationship aligns with your strategic goals or if a recalibration is necessary.

5. Understanding and Mitigating Risks: Do you have a grasp of the risks associated with your contracts? Regularly review these risks with stakeholders and take proactive measures to mitigate or avoid potential pitfalls.

6. Stakeholder Perspectives: How diverse are the views on your contract’s performance among stakeholders? Understand the perspectives across departments to gauge the overall sentiment, whether positive or in need of improvement.

7. Monitoring Supplier Performance: Is the performance of your supplier diligently monitored? Regular performance reports from stakeholders contribute to a comprehensive overview of the contract’s effectiveness.

8. Prioritising Critical Contracts: Are your contract management resources allocated efficiently? Focus on contracts critical to your organisation’s overall success to optimise efforts.

9. Senior Management Engagement: Do senior managers actively acknowledge and review contract performance? Ensure that the significance of successful contracts is recognized, and risks associated with underperforming contracts are under their scrutiny.

10. Efficient Contract Information Management: Is your contract information accessible, organised, and secure? Streamline contract administration by ensuring that relevant documentation is efficiently stored and easily retrievable.

Find out more about Market Dojo’s Contract Management solution – safely store and access all supplier contracts with our secure cloud-based solution.

Contract Management Best Practices

Here are three simple best practices when undertaking contract management.

  • Clear Process: Establishing a transparent and standardised process for contract creation and management reduces the risk of human error and ensures consistency.
  • Track Spending: Implementing effective tracking mechanisms helps procurement teams monitor spending against contractual commitments, preventing budget overruns.
  • Automated Systems: Using automated systems streamlines administrative tasks, enhances efficiency, and minimises the risk of errors associated with manual processes.

contract management best practices

Following best practices in contract management will ensure success of your sourcing contracts

On Demand Contract Management Software

Frequently Asked Questions on Contract Management

Q1: What are the 4 stages of contract management?
The four stages are initiation, creation, execution, and analysis/renewal.

Q2: What is the job of contract management?
Contract management involves overseeing contracts’ lifecycle, ensuring compliance, mitigating risks, and maximising value.

Q3: What are the six stages of contract management?
The stages are initiation, creation, negotiation, execution, monitoring, and analysis/renewal.

Q4: What is the role of a contract manager?
A contract manager oversees the entire lifecycle of contracts, ensuring adherence to terms and mitigating risks.

Q5: What are the 3 P’s of a contract?
The 3 P’s are Promise, Performance, and Penalty.

Q6: What are the 5 steps of contract management?
The steps are initiation, creation, negotiation, execution, and analysis/renewal.

Q7: What are the 7 requirements of a contract?
Offer, Acceptance, Consideration, Legality, Capacity, Consent, and Legal Purpose.

Q8: What are the 3 C’s of contract law?
The 3 C’s are Certainty, Consideration, and Capacity.

Q9: What is the top part of a contract called?
The top part is typically called the preamble or introductory clause.

Q10: What are the 5 C’s of a contract?
The 5 C’s are Clarity, Consistency, Completeness, Conformance, and Correctness.

Conclusion

In a world where contracts form the backbone of commerce, mastering contract management is essential for businesses. By adopting automated systems, procurement teams can take back control, reduce costs, and ensure supply chain continuity, minimising the risk of failure and fostering successful partnerships with key suppliers.

Book a demo with one of our sourcing specialists to find out more about Market Dojo’s Contract Management solution – safely store and access all supplier contracts with our secure cloud-based solution.

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