What Is Contract Administration and Management?
Contract administration and management determines whether or not a contract fulfills its intended purpose which results to a good relationship between parties.3 min read
Contract administration and management ultimately determines whether or not a contract fulfills its intended purpose. A well-administered and managed contract can result in a wonderful relationship with the other party that you enter into an agreement with. If you fail to adequately adhere to the terms and conditions negotiated with your partner, supplier, or client, it could adversely affect your ability to continue to do business with them in the future.
The degree to which you clearly laid out the roles and responsibilities in a contract and the attention that you pay when carrying out those items reveals quite a bit about yourself as a businessperson. It shows the respect you have for the legal workings of a contract, your understanding of the obligations established by the agreement, and the value you place on the bond that the contract has created with the other party.
The Difference Between Contract Management and Administration
Although the terms “contract administration” and “contract management” are often used to describe the same activity, and although there may be overlap between the functions of both, they are essentially two different things. Each occurs at a different time throughout the cycle or existence of a contract.
One point of misunderstanding often lies in the fact that the same people are responsible for both activities, especially in a smaller company where roles may not be clearly defined or the personnel does not have the luxury of devoting their energies to only one part of the equation. In larger companies, however, two specific teams to handle the tasks usually exist: one to handle the administration of the contract and then the other to see to its management.
Contract administration involves planning and implementing the agreement.
- Researching and investigating potential partners, contractors, or suppliers and then preparing and distributing a request for a proposal (RFP) to qualified parties.
- Preparing the details for things such as pricing and delivery or setting parameters for performance measurement.
- Working with contractors throughout the bidding process and making sure there are no misunderstandings.
- Handling revisions to the contract in response to feedback from bidders.
- Reviewing and processing every bid that is received as a result of the RFP, either through spreadsheets or software created to manage bids.
Successfully administrating a contract requires a full understanding of the purpose of the contract and an ability to rapidly adapt to issues that unexpectedly spring up throughout the bid preparation and review process. It’s more than just shuffling papers and comparing numbers. It’s also a matter of understanding the way things are priced and determining whether bidders actually have the capability to meet the terms of the contract at the price they put forth.
Contract management comes into play after the contract has been signed and is in effect. It is assuring that the terms and conditions of the contract are met throughout the life of the contract and that all obligations made by both parties are met. It includes:
- Working with contract administrators to analyze bid submissions and reviewing the work of the administrators to troubleshoot for potential problems that could arise.
- Determining what resources of a company, whether they are personnel, financial or technical, will be devoted to carrying out the terms of the contract.
- Confirming work completion and issuing payments upon the completion of the project or according to agreed-upon schedules.
- Monitoring and modifying the contract as conditions dictate.
- Creating professional relationships with the other party to the contract to avoid misunderstandings that could negatively affect future business dealings.
- Maintain communication with contract administrators to ensure that the intent of the contract is being met and that there have been no deviations from purpose.
Contract management is essentially what it sounds like, namely overseeing all aspects of the contract once it goes into effect. As is the case with contract administration, there are contract management software programs available to integrate the process into all features of a business’ operation, such as inventory management, accounting, and scheduling.
Every company can create their own systems of contract administration and contract management depending upon the frequency of entering into contracts, the scope of the project, and, of course, the size of the operation. Knowing the components of each role can lead to better efficiencies and relationships with vendors.
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