Contract Management in Project Management and Construction Management

 

Contract Management in Project Management and Construction Management


Contract management is the process of managing contract creation, execution and analysis to maximize operational and financial performance at an organization, all while reducing financial risk. Organizations encounter an ever-increasing amount of pressure to reduce costs and improve company performance. Contract management proves to be a very time-consuming element of business, which facilitates the need for effective and automated contract management system.

Organisations in both the public andprivate sectors are facing increasingpressure to reduce costs and improve financial and operational performance.New regulatory requirements,globalisation, increases in contractvolumes and complexity have resulted inan increasing recognition of theimportance and benefits of effective contract management.

This is some benefit of contract management

Standardized Processes and Procedures

This helps to decrease maverick buying and decrease supply risk while increasing spend leverage. The net effect is that buys as a whole become less costly and more valuable and a much greater percentage of negotiated savings are captured by the business.

Spend Visibility

Probably the most valuable benefit of a contract management system – which lets you know if you are buying from the suppliers you’re supposed to be buying from at the right times, quantities and prices – it can also help an organization standardize on consistent contract terms and conditions. Furthermore, it also allows for easy identification of contracts with suppliers in high risk zones due to natural disasters, political unrest, or economic uncertainty, which is critical to the development of appropriate organizational risk management strategies.

Improved Compliance

According to Aberdeen (Practical Approaches to Contract Management Deployment) compliance management is improved 55% with a contract management system.

Solid Foundation for Spend and Performance Analysis

With all of the contract conditions and negotiated prices and fees in a central location, it’s a lot easier to compare actual purchases against contracted buys. This allows policy or regulation violations to be caught and dealt with immediately and insures that all spend is known and available to be appropriately leveraged in sourcing projects.

Rebate Management

Contract Management systems make it easy to track rebates and insure that all of the savings negotiated in a sourcing cycle are captured.

Reduced Maverick Spending

With a contract management system, a buyer can immediately determine if a contract exists, who the contracted suppliers are, and what the contracted prices are. No longer is “I didn’t know we had a contract” or “I didn’t know I wasn’t supposed to do that” a valid excuse!

Evergreen Contract Elimination

Without a contract management system to automatically alert a buyer of contracts coming up for automatic renewal, many auto-renewing contracts are likely to go unnoticed and automatically renew, locking the buyer in for another buying cycle. With a system in place, the buyer can be alerted weeks or months in advance, depending on how long a sourcing cycle normally takes for that commodity or service, and take appropriate action.

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