Contract management

Contract management includes the supervision of the contractual negotiations between client and contractor, implementation of contracts and making changes to contracts for technical, scheduling, personnel or financial reasons.

Another definition is as follows:

Contract management refers to all activities in the context of project management that deal with the development, administration, adaptation, processing and updating of the entirety of all contracts in the context of a project.

background

Contract management (contract responsibility) is used as the foundation for the practice of business considered actions of a company and is thus a global as well as a complex business issue. In this context it should be noted that almost all departments in a company along the value chain of this topic are affected. Each department has its specific requirements for contract management, e.g. B .:

Purchasing : The possibility of creating and processing contracts with suppliers, brokers and partners
Sales : The ability to create and process contracts with customers
Legal department : Compliance with legal regulations (such as KonTraG , Sarbanes Oxley Act or Basel II ) as well as company law regulations (e.g. compliance with company guidelines ) in contracting
Controlling : active risk assessment based on existing contractual relationships
Revision: Improvement of the ability to audit existing contracts, as well as transparency of all contract processes
Management : Development and optimization of the internal control system (ICS) (see also Management Risk Controlling (MRC) ), as well as cost reductions based on limited and calculable contractual risks.

General risks that result from inadequate contract management include: a .:

Failure to comply with legal regulations
Uneven level of information / lack of topicality
Difficult to find contracts
Content risks of contracts
Loss of contracts / contract components
Missing deadlines, contract options, etc.
Poor machining process
Approval / approval process not always transparent
Long lead times, no contract controlling
Balance sheet and audit security (see also internal audit ).

Subsections of contract management

The sub-areas of contract management for the prevention of the above risks can generally be summarized as follows:

Contract controlling

Contract controlling, as an essential part of contract management, is primarily concerned with the active risk assessment in contract management. Typical questions in everyday working life can be summarized as follows in this context:

Who are the top contractual partners and what volume is purchased for which purchase commitments?
How high is the sales potential per quarter / year?
How big is the current difference between new and existing customers?
What is the value of the existing active sales and service contracts?
What is the rate of contract renewals?
Which projects are going according to plan under the given contractual conditions?
How high are the existing rental and leasing obligations?
How high are the costs based on concluded contracts?
What are the opportunities and risks per tenant / supplier?
Is balance sheet and audit security (see also internal audit ) guaranteed?

In addition to these typical questions, other aspects such as contract-relevant planning options, deadline and payment monitoring and financial planning are also in the focus. Reports to be prepared accordingly for the annual financial statements , auditors and, of course, management are also of particular importance .

Contract administration (responsibility for contract execution)

Contract management is an essential part of contract management for optimizing the contract system. The basis of contract management is, among other things, the generation of contract- relevant information ( metadata on contracts and contracting parties). The focus here is of course on the structuring of this information. However, in addition to the aspects mentioned, the optimization in contract management also requires the mapping of the relevant contract processes. These processes can generally be defined as follows:

Comparison and processing of offers (as a basis for draft contracts)
Contract drafting and negotiations
Contract / document reviews and contract structures
Approval processes (such as signatures)
Fulfillment of the contract (based on the contractual conditions)
Contract controlling
Overview of the most important parts of the contract (notice period, scope of services, billing, etc.).
Monitoring of deadlines, in particular notice dates and periods
Contract archiving
Automated invoicing - e.g. B. in the form of recurring invoices

In order to always guarantee the aforementioned optimization and the associated efficiency in the contract system, with the help of contract management, for example, responsibilities (both external and internal) and of course also the contractual partners should be clearly recorded and defined (quality assurance measures within the framework of contract management ).

Furthermore, legal and / or company law requirements with regard to transparency in contracts can be met through active contract management. In order to guarantee cost reductions (personnel and infrastructure costs), structured approval procedures, transparent and automated processes in this context, standard software solutions for automating contract management (see also contract management software ) are increasingly being used in practice .

Contract archiving

In addition to contract management and controlling, contract archiving is a main component of contract management. The focus here is on the unchangeable, long-term and audit-proof archiving of contract-relevant documents (e.g. contract text, draft contracts, images, minutes and terms and conditions ) in electronic form (see electronic archiving ). In addition to contract management and controlling, contract archiving is also aimed at optimizing the contract system.

In practice, there is an enormous flood of information in contract management (e.g. through emails with important comments on the contracts, supplements, different contract versions, references to other documents, etc.). The objective is to collect all this information and to archive it centrally (central database ) and to make it available for contract management and controlling.

Summary

An active contract management should cover all subfields mentioned three to increase with the aim of the efficiency of the business trading of a company. It should be noted here that the key data of a contract in everyday work are often insufficient for such objectives. For example, as part of optimal contract management - especially in negotiations - you need at least an overview of the most important contract data and the ability to access all contract details. Contract-relevant documents are only available in files without a contract management software. In addition, different and confusing responsibilities make it difficult to find these documents and data.

literature

Bertram Laibach: Contract Management in Construction , Darmstadt University of Applied Sciences, 2007
Heussen (Ed.): Handbook contract negotiation and contract management , 2007
Slaghuis, Bernd: Contract management for investment projects. Quantitative project planning to support contract management, taking into account information asymmetry. 2005, ISBN 3631542100
Brandt, Christian: From contract management to inter-company communication - using contracts as the basis for interorganizational information systems. 2009, ISBN 9783937968070
Walter Gregorc, KL Weiner: "Claim Management" A guide for project managers and project teams . Erlangen 2009; ISBN 978-3-89578-335-7