What is a successful contract management strategy?
What is a contract strategy?
A contract strategy is a key aspect of contract management. It's deciding what’s best for your project and choosing the right policies to meet your objectives. When deciding on a contract strategy, you will have to do a complete assessment, look at the size and complexity, delivery methods and contract admin, to name a few. Importantly, it’s key that your strategy aligns with your organisation’s procurement strategy.
Whether you are operating in the public or private sector, contract strategy is a fundamental part. So why do you need an effective contract management strategy?
How do you manage contracts effectively?
With a growing need to improve contractual processes and an increase in contract volumes, it’s important to have an effective contract strategy.
A successful contract management strategy should:
- Manage the organisation’s own responsibilities during the contract
- Ensure the supplier meets the minimum performance criteria, such as compliance
- Allows the achievement of both short and long-term supplier performance objectives
Before developing your contract strategy, it’s important to:
- Establish the nature, scale, and significance of the need to the organisation
- Identify the value of need
- Outline the type of specification - input or output
- Complexity of the need
- Attractiveness to the market
- Market capacity
- Timescale and phasing
- Level of understanding of the need by stakeholders and potential supplier
The use of supplier positioning matrices will also assist in determining the contract strategy, the nature of any negotiations that may need to be conducted and the form of the supplier relationship following the award of contract. Supplier relationship types vary depending on the size, value, and risk of the contract or items purchased. The market conditions and opportunity to create value will also be a factor in determining which strategy to adopt and how proactive you are in devoting time to developing the relationship.
What are contract management skills?
Contract management requires time and commitment. It’s important to put the work into managing your contract to ensure you develop a mutual trust and understanding. Here are ten key skills that you’ll need to master during the contract management process.
- Understanding contract terms and conditions
- Negotiation tactics and planning
- Soft skills such as influencing and persuasion
- Risk management
- Financial analysis
- Handling conflicts and dispute resolution
- Managing internal stakeholders
- Understanding contract law
- Creating a performance framework for suppliers
- Relationship management
Top tips for a successful contract management strategy
A contract management strategy will differ between organisation, no strategy is the same. However, there are some common best practices to help you on your way to delivering a successful strategy.
- Make sure arrangements for service delivery are satisfactory to both parties
- Ensure expected business benefits, efficiencies and value for money are delivered
- The supplier is co-operative and responsive
- Your organisation understands its obligations under the contract
- There are no disputes or surprises
- Professional and objective debate over changes and issues
CIPS Contract Management Cycle
Our Contract Management Cycle is used to create a smooth end-to-end process, ensuring optimum scoping, planning, managing, and reviewing are taken place at the right time.
Find out more about the Contract Management Cycle
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Contract management guide: Part 1
Contract management guide: Part 2
Dispute resolution
Managing Supplier Non-Performance
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