Public sector organisations have a responsibility to procure effectively and drive maximum value from every contract that they award.
Effective contract management, ideally using a contract management tool, means that your organisation can stay in control and gain visibility of your suppliers’ activity across the entire contract lifecycle.
Learn more about the benefits of using a contract management system below.
What is contract management?
Contract management is the process of managing contracts between buyers and suppliers so that all contractual obligations are fulfilled compliantly and documented appropriately.
Many organisations use contract management software to manage contracts more effectively.
It is important that contracts are managed efficiently throughout the contract lifecycle as this can deliver savings across all parts of the supply chain.
Benefits of contract management
Having the right contract management system in place will make your life a lot easier as there are many benefits of this eProcurment strategy including:
- Evaluation of the supplier’s performance throughout the contract allows for action to be taken to increase the performance and effectiveness of the contract
- Decisions taken at the proper time, which mitigates potential risks appearing in the future
- The supplier is cooperative and responsive to the organisation’s needs
- The delivery of services is satisfactory to both parties
- There are no contract disputes or surprises
Aside from the benefits mentioned above, having a contract management framework in place is beneficial to maximise efficiencies within an organisation because it automates some of the processes which arise from managing a contract. This saves countless man hours and supports procurement teams to gain a more efficient style of working.
What is effective contract management?
The Chartered Institute of Procurement and Supply says within its Guide to Contract Management that:
“The most successful contract management plan is one which includes a focus on upstream – or pre-award – activities.”
Effective contract management is essential to meet project deadlines, save taxpayers’ money and strive for more sustainable procurement. Monitoring and sharing project progress through consistent contract documentation management is also integral. The larger and more complex the project, the greater the need for rigorous contract management.
The need for efficient contract management entered the spotlight after the collapse of construction giant Carillion in January 2018. This company’s demise is a prime example of procurement in desperate need of transparency between buyers, suppliers, and the wider supply chain.
At the time it went into liquidation, Carillion held 450 government contracts and was involved in high-profile construction projects across the UK, including HS2. Carillion’s collapse meant that many contracts were delayed while costs for others rose far above the original costs detailed in the contract.
This particular case brought to public attention the need for constant communication and contract management throughout the procurement process, even long after award of contract.
Delta eSourcing’s contract management system provides buyers with the right tools to achieve maximum productivity, all in one place, which is key to the future of successful, collaborative procurements.
So, what is contract lifecycle management?
There is little difference between the term contract management and contract lifecycle management. CLM is a process that will support your business to manage contracts or agreements effectively together with the relationship between all the contract management stages. Effective CLM will help your organisation to reduce financial, legal and procurement risks.
Learn more about the contract management cycle here.
What is lifecycle costing?
Contracting authorities base the award of many public contracts on which bidder provides the most economically advantageous tender. Cost-effectiveness will be considered before a contract has been awarded and this is where lifecycle costing is important. The importance of lifecycle costing was recognised in the Public Procurement Regulations 2015, where Regulation 68 lays out rules in this area.
As Regulation 68 stipulates, lifecycle costing, when relevant, should cover at least part or all the following costs over the lifecycle of a product, service or works. This includes costs borne by the contracting authority or other users, such as:
- Costs relating to acquisition
- Costs of use such as consumption of energy and other resources
- Maintenance costs
- End of life costs (e.g. collection and recycling costs)
Another factor to be considered is the costs imputed to environmental externalities that are linked to the product, service or works during its lifecycle.
Managing and tracking everything that has been agreed to as part of lifecycle costing is an increasingly important aspect of contract management. Delta’s Contract Change Control module gives users access to value tracking of all their contracts which feature in the organisation’s Contract Register.
This feature makes it easier for buyers to comply with PCR 2015 Lifecycle costing requirements as the tool gives Delta users full control over the cost and time implications for their contracts.
Time to update?
On 18th October 2018, the law changed around communication surrounding public contracts when Regulation 22 of the Public Contracts Regulations came into force.
All public sector organisations had to move to an electronic procurement solution for every aspect of the procurement process. This included communication and information exchanged in the tender process (for contracts above the EU threshold), as well as the submission of tenders. This new requirement has only encouraged tender management systems to become more interwoven with commercial eProcurement solutions by giving more transparency to each stage of the procurement process.
Get started with contract management software
Fully supported by our parent company, BiP Solutions, a renowned authority on public procurement since 1984, Delta eSourcing is committed to regular development cycles aimed at continuously improving our eProcurement technology.
Delta has worked with thousands of users across the UK, Europe and internationally to help them get the most out of their procurement. Designed with user experience in mind, our contract management software supports buyers through every aspect of contract management post-award.
With our contract management solution, you monitor supplier performance, undertake value tracking, create contract variations, and know when you need to plan to retender – and much more.
Delta eSourcing has a range of contract management software solutions that will help to manage multitudes of contracts that can be both time consuming and difficult for a busy procurement team.
- Contract Register – A central repository to manage and monitor performance, key activities, reporting of contracts, the call-off from framework agreements and spend analysis.
- Contract Change Control – Value tracking of all contracts within your organisation’s Contract Register. This will help buyers to comply with PCR 2015 ‘Life-Cycle Costing’, by giving them full control over the cost and time implications for their contracts.
- Contract Performance – The Contract Performance Module allows buyers to track their contracts, score suppliers against KPIs and review contracts at set intervals.
What is more, as part of our unique service, Delta clients are supported by our helpdesk. Delta’s helpdesk team are on hand to answer any buyer or supplier questions and offer training across our eProcurement solutions.
We hope this blog has given you a better understanding of what contract management is.
To find out how Delta can streamline your procurement process, contact us, or request a free demo today.