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22 March 2013 | Anna Reynolds
Businesses need to make the most of their contract managers because they “are scarce resources and they cost money”, according to a contract management expert.
Speaking on yesterday’s SM webinar, the secrets of successful contract management, sponsored by IBM, Paul Carter Hemlin, founder of consultancy Contract Management Direct, shared his tips on how to get the most out of contract managers.
Hemlin said it is crucial for companies to understand what level of contract management and legal support is required and advised limiting the use of contract managers to large or medium contracts only. He suggested using a contracts helpdesk to manage smaller contracts.
He added contracts should not be over complicated and recommended companies try to resolve their disputes with suppliers. Hemlin said that contracts should include sections on risk and how to cater for disagreements. He identified the most common causes of contention as badly drafted contracts and ambiguity in the language used.
A question from a listener asked whether contract terms need to be in a standard template. “It depends on your strength in the industry. If you are managing lots of transactions it can be useful for your contracts to look similar,” Hemlin answered, adding this is particularly useful in the UK construction industry where templates have been drafted by bodies such as the Royal Institution of Chartered Surveyors. This saves money, rather than getting a lawyer to draft a contract from scratch each time.
Fellow panelist Ioana Canescu, EMEA contract management business practice executive at IBM, said contracts are the “central nervous system” of an organisation, and they provide a framework for communication and managing risk.
She said the need for technology in contract management is a “must”, as more complex business relationships bring more risk. “More CEOs recognise that to be competitive they need to invest in technology. Transforming contracts into data and analytics should be at the forefront of a company,” she said. According to research carried out by IBM, 66 per cent of companies do not track risk and 71 per cent do not have KPIs in contracts to measure risk.
☛ A replay of the webinar will be available on the Supply Management website shortly.