Effective Contract Management or compliance nightmare-

Effective contract management or compliance nightmare?

Andrew Davidson Blog, Procurement

I was recently reminded of the importance of running an effective contract management system when I was invited to do a contracts audit. This should have been straight forward, the company had an established governance standard defining what should and what should not be present and a team of capable procurement professionals

The findings of the audit were eye opening. High levels of expired contracts, high volumes of missing documents, varying degrees of acceptable authorisation and no risk or liability assessment at all. The company believed that they were compliant because they had assumed their teams were adhering to the company rule book.

So why is this? We spend months living and breathing the development of lengthy contract documents, enduring rounds of supplier negotiation, legal approvals and authorisations, only for that document to be buried in the bottom of a filing cabinet or deposited into an online system all too often never to see the light of day again. All too often it is because our personal objectives focus us on doing the next deal and banking the next saving, or because the contract management process is complex and laborious with no standardised methodology for capturing information. Additionally, as personnel change within the department each new person brings their own take on how best to store, capture and file a contract making it difficult for others to follow.

Contracts contain a wealth of information that give us competitive advantage if used appropriately in the right circumstances. Amongst many things, They protect the integrity of our supply chains, they give us the ability to benchmark our performance and they enable us to manage the risks associated to change within the organisation.

Capturing that information for the future after the deal is done is the key to an effective Contract Management system