Your Guide to Everything Contract Management Can Throw at You
There are some excellent examples of successfully implementing public procurement best practices across Europe, and there are plenty of examples of less-ideal practices in public procurement as well. However, many of the biggest problems and issues the public sector of procurement has experienced in recent years can be traced back to one thing: poor contract management.
Procurement and contracts management go hand-in-hand, so why is there still so much confusion about what good contract management skills look like? In fact, poor contract management more so than poor procurement is to blame for poor results in public procurement efforts. Recognizing this, some contracting authorities have started to focus on challenges in contract management. The topic receives much more attention than it did just a few years ago, yet it still is not given nearly as much priority as it needs to truly improve. Why?
In this article, we’ll explore the top 5 reasons why contract management is still a big challenge for procurement people:
- It’s misunderstood
- It’s highly-dispersed
- It’s complicated
- It defies assessment
- It’s undervalued
Do you know what contract management is? Are you sure? Most people in public procurement only know a small portion of the responsibilities that go into contract management.
1. Contract management is not well understood
Introduce the topic of contract management to people in the public sector (and private business as well, for that matter), and you’ll quickly find that the majority of them don’t truly know what “contract management” means.
Today, it’s still commonly believed that contract management focuses predominantly on the terms and conditions of the contract document itself. That means that most procurement people think contract management is all about disputes and arguments surrounding those elements: Has the supplier done what they said they would? What is the penalty if they don’t do that? And so forth.
In reality, contract management is a much broader topic than that, as all of us who have really been down in the contract management trenches can attest. In its broadest definition, contract management includes every aspect of both the value and the risk arising from the contract, and how both those elements can affect the buyer. It is much more than just managing the specific words in the contract (although in many cases, unfortunately even that is not done well).
Most organizations don’t have a dedicated contract management department– contract management is handled by people dispersed throughout the organization.
2. Contract management is usually dispersed throughout the organization
In most organisations, contract management is not a task that is relegated to a specific person or even to a specific department. Instead, contract management activity is often spread throughout the organization, involving many different peoples from its farthest corners.
Now, that makes a lot of sense– managing contracts is best done by people who really care about and are close to the contract delivery. The result, however, is that there is no single contract management “department”, and even if there is an intention to build a community of contract managers (which is unusual in itself), that is a challenge because of this dispersal. We see IT contracts managed largely by the IT function, FM contracts by the property and estates team, contracts for services provided directly to the community managed by a “commissioning” group… and so on.
That is not necessarily the wrong approach. It may indeed be inevitable. But it does present a challenge for getting to grips with this diverse and dispersed situation.
Contract management skills are difficult to define (and master!) because they include a wide range of technical abilities and “soft” interpersonal skills.
3. Contract management requires a complex skill set
Because contract management is not well understood, there is also little understanding of what it means to possess good contract management skills, and this challenge tends to persist whether contract management is a full-time role at an organization or just an element of a wider job.
Yet effective contract management requires, in many cases, a challenging and quite complex set of skills. There may be technical aspects (understanding the detail of supplier performance in the case of a complex IT contract, for example), as well as more generic technical skills such as negotiation and project management. A good contract manager also requires a range of softer interpersonal skills: persuasion, listening, tenacity, independence, and the list goes on.
Not surprisingly, few people are very strong across the whole range of skills required, so there are few “exemplars” of what we might call “superstar contract managers” that can be admired and imitated!
When other procurement activities go well, you can expect a celebration. Because contract management can be difficult to define, it’s hard to measure what good contract management has done for an organization.
4. It is difficult to measure the benefits of contract management
When contract management goes wrong, it really goes wrong.Many of us have examples (horror stories, we might say) that show the cost when things go wrong with contract management. But what does it look like when contract management goes right? Identifying the tangible benefits of good contract management is, unfortunately, much more difficult.
If the supplier delivers the contract perfectly, everything works well, risks are avoided and managed, then often, nobody notices! The business case is not a dramatic “saving” or headcount reduction of the sort that the CFO likes to see. This too contributes to the elusive nature of good contract management.
Contract management requires a variety of skills and competencies, and yet it is underappreciated by most organizations. Image Credit: Transport Executive
5. Contract management is not valued
That brings us to our final point: because it is so misunderstood and its benefits are so hidden, contract management is still not valued as an activity or as a career. We don’t see senior people in public organisations who have got to the top via a successful career as a contract manager. Yet when it goes wrong, it is clear just how important it is to the organisation.
Matters are improving slowly now– the growth of the International Association for Contract and Commercial Management (IACCM) is just one sign of that. But we still have a long way to go before contract management gets the recognition it deserves.
Addressing the challenges of contract management will take effort from across public sector organizations.
Understanding that challenges that have allowed contract management to remain such a significant challenge for the public sector is an important step towards improving the situation. Now that we’re all on the same page here, what do you think there is to be done about contract management’s not-so-great public profile? Share your ideas with us in the comments!