Every business that wants to scale its operations needs to implement efficient contract administration and management processes. As a result, it becomes a full-time responsibility for employees, who are termed as “contract administrators”.
Contract Administration is the management of contracts in general. It has the potential to impact all aspects of your business and you should not neglect it.
Read on to find out how you can improve your contract management processes.
What Are Contract Administrators?
Contract administrators are professionals responsible for creating and managing all legal contracts in which a business participates in.
It involves the planning, negotiation, execution, and performance of contracts for a business and its clients. They also need to ensure that all parties to the contract will fulfil their obligations as stated in the contracts.
Jobs and Responsibilities
The job scope of a contract administrator may differ in each company and industry according to the business’ needs and the type of contracts they oversee.
Despite that, these are some of the typical responsibilities for someone responsible of contract administration:
- Keep records of all contracts made and continuously monitor its progress.
- Coordinate actions with the various departments involved.
- Report status of current contract processes to management.
- Plan and propose new contractual agreements.
- Negotiate, clarify, and address any questions regarding contract terms.
- Analyse potential risks posed by a contract.
Contract Administration can be a relatively demanding job.
Here are some common challenges faced by contract administrators daily:
- Locating contracts. Contract documents may not be stored in a centralized platform. It could be across various cloud drives, business applications, etc. This makes it difficult for contract administrators to find contracts.
- Ensuring contract compliance. Monitoring and managing contract obligations without a dedicated contract management solution is tough. contract administrators need to be able to share and proactively monitor terms within contracts.
- Routing contracts for approval. Getting contracts approved without an automated contract management system is time-consuming as it may require a lot of follow-up emails and “nudges” to the parties involved. contract administrators need to chase these people and keep up with the contract approval deadlines too.
- Finding out the status of a contract at a glance. contract administrators need to constantly report the status of contracts in an organization. This is especially difficult to monitor when they are working on several big contracts at once.
Is Having Contract Administrators Important?
Of course! Contracts are the building blocks in the modern business world. contract administrators play pivotal roles in ensuring all parties to the contract fulfil their obligations, ensuring the success of a project.
Contract administrators also play important roles in reducing a firm’s exposure to business and legal risk, resulting in higher overall profits from contracts.
How Does the Contract Administration Process Work?
- Kick-off/Pre-performance period
This kick-off period allows companies to evaluate the performance of interested parties, especially for high-risk, high-dollar value contracts. These meetings facilitate discussions of the roles and responsibilities of both parties, performance evaluation metrics, information documentation and sharing, etc.
When both parties gain a better understanding of performance standards, it fosters a positive and open relationship among parties. This also ensures a smooth collaboration and the success of the project.
- Ongoing maintenance throughout the duration of the contract
The contract administrator plays a critical role in this stage. He/She needs to ensure that all elements and planning tools required are in place.
It is also recommended to prepare a Contract Administration Plan (CAP) in this stage. This is to document all proceedings and developments from the start to end of the contract. The CAP aids in contract administration and ensures that all activities are carried out effectively.
Your CAP should include all critical elements and activities such as:
- Contract goals
- Delivery terms and requirements
- Scope of work or specifications
- Key contract terms and conditions (including risk mitigation and information security)
- Payment terms
- Performance evaluations and milestones
- Monitoring contract performance, documenting, and record keeping
Monitoring performance helps ensure that all parties to the contract are fulfilling their obligations and issues are addressed timely. A good practice for this is to document and maintain a contract repository containing records of all contract awards, performances, and issues.
Maintaining regular communication with contractors helps with identifying problems as they arise. Dispute resolution processes need to be in place to resolve problems and reach agreements before seeking legal remedies. Thus, maintaining your repository is especially important when disputes arise, to assess liquidated or actual damages and to justify terminations of contracts. A great contract management solution can help you save time and reduce costly handling mistakes stemming from human error.
Amendments to certain contract terms are inevitable. Common changes such as contract prices, extension of performance durations and other appropriate terms should be anticipated and built into your contract provisions. Depending on the complexity of your contract and the type of contract modifications to be made, it may or may not involve a legal counsel.
- End of the contract/ Contract closeout
A contract is considered successful only when all obligations have been met, including the completion of all related legal, administrative, and managerial tasks. As such, adopting a Contract Closeout Checklist is a very helpful tool in doing a final review of the contract.
A general closeout task checklist would include:
- Are all contractual obligations completed?
- Have all invoices been submitted and paid?
- Do all parties agree that no claims, issues, or unresolved matters exist on the contract?
- Are all required contract audits completed?
- Has an outbrief with the contractor’s personnel and management been conducted?
- Is the contractor’s performance evaluation completed?
Best Practices for Preparing a Contract Administration Plan:
- Plan the work ahead with a detailed timeline.
This may sound like a given, but your plans should include a detailed timeline for each important milestone throughout the contract. This includes project start and end dates, deadlines for deliverables and tasks, pre-planned dates for progress update meetings, etc. to ensure transparency and accountability.
With a plan to measure success throughout the contract in place, it keeps contractual parties aligned and provides for course correction and conflict resolution where needed.
- Define contract scope and deliverables.
Setting down clear expectations is key in a successful contracting process. This includes the contract scope, its deliverables, contractor performance, etc.
“Scope Creep” refers to how a project’s requirements tend to increase over a project lifecycle. For example, midway through a project, the needs of your customers change, and you need to reassess the project requirements with the other contracting party.
Scope Creep is usually caused by key project stakeholders changing requirements, or from miscommunication and disagreements. It is a common issue that can derail any contract. Hence, writing down the core elements of the contract will help to steer the contract in the right direction.
- Anticipate risks.
Every contract comes with its own risks, but ensuring adequate contingencies are in place will prevent the contract from failing. Starting a risk management plan for each individual contract is not difficult.
First, outline the risks that are most likely to occur for each agreement. Then, assess the risks and determine the steps that should be taken if those events actually happen.
Allow room for changes to timelines and budgets that would be needed to prevent the contract from suffering significantly. This could be costs arising from unexpected delays, acquiring new materials, switching suppliers, etc.
- Sort out finances
Establish that all employees involved in the contract administration process know the financial terms of the agreement. This includes the value of the contract, payment dates, processes to address the need for additional expenses, etc.
This avoids any disputes across departments within the business and maintains positive relationships.
Improving the Efficiency of Your Contract Administration Processes
As mentioned above, contract administrators face many challenges in their day-to-day operations.
However, these challenges can be mitigated like so:
- Invest in a centralized contract management platform. This allows businesses to store all contracts and related information on a single platform. Contract administrators can now find contracts quickly and view details at a glance. There is no limit to the employee access on Contract Hound, so every employee can view or extract the latest versions of contracts with ease.
- Set approval workflows and notifications ahead of time. contract administrators will no longer need to send mass emails chasing the relevant people in charge for contract approvals! These can be set ahead of time and approved, so no more emailing back-and-forth is required, saving your contract administrators a lot of time.
- Set reminders and notifications for key milestones. With reminders and notifications for key milestones set, employees will no longer forget important contract deadlines. This helps to prevent overspending or delayed payments to contractors.
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