Contract management in procurement refers to the process of managing contracts related to Procurement and purchases made as a part of legal documentation of forging work relationships with customers, vendors, or even partners. Learn more about contract management in procurement in this guide. For more information about these risks and how to control them, you can check out our course on managing procurement risks.
Importance of Contract Management in Procurement
In addition, contract management can help streamline the procurement process by helping to keep track of deadlines, payments, and other important details. Effective contract management in procurement is also necessary for implementing legal strategies that ensure compliance with contractual obligations and company policies.
For example, it helps a company avoid potential conflict of interest situations by ensuring that staff members are not accepting gifts from vendors or providing information about new opportunities before all employees have been notified. Contract Management also helps procurement professionals handle changes more efficiently when necessary for both the customer and vendor parties involved. Contract Management is an essential part of Procurement, and it helps companies create strong relationships with vendors.
This process should be easy to manage for Procurement teams, but several factors can lead to miscommunication between both parties. A company that’s expanding its existing operations may have trouble keeping track of contract management in the procurement process of existing contracts as they’re renegotiated or terminated. And while it may be easy to forget about old contracts, it’s important to follow up on outstanding balances since late payments could result in penalties. Procurement professionals should be able to work with managers and vendors directly so that each contract can proceed as smoothly as possible.
Three Stages of Contract Management
The first stage is creating the contract. This involves working with the legal team to ensure that all the terms and conditions are fair and accurately reflect the agreement between the two parties. The crucial process of contract management procurement is composed of three phases
The second stage is managing the contract. This includes ensuring that both parties are meeting their obligations, keeping track of deadlines, and responding to any changes or issues that may arise. The third stage is renewing or terminating the contract.
This is where you’ll decide whether to continue working with the other party, make changes to the contract, or end the agreement entirely. Depending on your organization, contract management procurement may be performed by several different departments or individuals.
The legal team is often involved in creating and renewing contracts, while contract managers handle day-to-day operations. If you’re new to managing contracts, getting started with contract management might feel intimidating. It’s helpful to start by familiarizing yourself with your organization’s policies and procedures, as well as its top legal concerns.
What are the Control Measures of Contract Management in procurement?
There are a few risks that come with contract management in procurement related to procurement. One of the biggest risks is not having a clear understanding of the contract. This can lead to misunderstandings and conflict between the parties involved. Another risk is not properly tracking or managing changes to the contract. This can result in legal disputes or financial losses.
To manage these risks, there are two key things you need to do. First, you need to make sure that you’re clear on what is covered by each part of your contract. There should be no confusion about whether or not certain items are included in your contract or which party is responsible for covering certain costs. The second key thing is tracking and managing changes to your contract.
You should always have a centralized repository of all changes made so that you can easily reference it when a dispute arises. In addition, you should also regularly revisit the contract to see if any additional risks were created by the change.
If you want to learn more about contract management procurement risk and control measures, take a look at our free guide as well. It will teach you everything you need to know about managing risks related to contracts. You’ll also find a detailed analysis of different types of contracts along with plenty of examples of sample templates so that your business stays protected.