Practical Guide to Contract Management: Methods, Tools, Procedures and Best Practices of Contract Management

By Guy Vial

A guide defining the objectives and role of Contract Management describing the interfaces between Contract Management, key operational processes and key players of Projects and Programs and proposing Contract Management methods, tools, procedures and best practices.

• Language: English
• Publisher: Les Éditions du Net
• Release date: Jun 1, 2020
• ISBN: 9782312073439

Book preview

978-2-312-07343-9

Foreword

Welcome into the

Practical Guide to Contract Management

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The practices contained in the present document were identified combining extensive field experience in Contract Management within leading French companies with methods and best practices according to the state of the art of the discipline. The involvement into the foundation of the French Association of Contract Management (AFCM) and my role as company administrator, treasurer and webmaster within the governance of the association during more than six years now constituted a substantial additional contribution.

They do not obviously aim for exhaustiveness and can be enriched by experiences coming for instance from other related domains, the Project and Program Management not to quote them.

From the point of view of the author, this guide is addressed to Contract Managers that they are Contract Manager dedicated to selling or Contract Manager dedicated to purchasing.

This document defines the activities to be implemented, the roles awarded to the various involved players, the limits of responsibilities of eachone, compiles also methods, tools, procedures and identifies finally the best practices approved by the Contract Management community.

Its aim is to :

 Define essential activities which could lead to job descriptions such as the ones used usually in Human Resources departments of companies and best practices to manage the contractual relations between the Company, in the staff of which belongs the Contract Manager, its Customers, its Partners and its Suppliers, in the objective to improve the profitability and to secure the position of the Company, in its best interests, on the scope of its Projects and its Programs,

 Propose a table of assignment of responsibilities between the various players involved in the drafting and negotiation of Sales offers but also in the execution of Contracts and performance of the relative Programs, the various roles being adjusted in fine naturally according to the size and to the complexity of the Projects or Programs of the Company and the types of Customer and end users.

In this context, the role, the missions and the responsibilities of the Contract Manager, once assigned to a Project or a Program, will be described in more ample details.

This document constitutes first of all a guide intended for Contract Managers but also for all the Company managers involved in the elaboration and negotiation of Sales offers, in the execution of Contracts and related Programs as well as in their Amendments, namely :

 the Commercial Engineer or the Sales Manager,

 the Technical and Industrial Manager of the bid,

 the Project or Program Manager,

 the Project or Program Purchasing Manager.

And at the same time, the representatives of specific entities them such as :

 Legal Department,

 Financial Department,

 Export Control Department,

 Purchasing Department,

 Safety Department essentially in the field of defense and security activities,

 Information System Department,

 Technical and Innovation Department,

 Quality Department.

It will allow them to acquire a better understanding of the purpose of actions to implement and processes introduced within the framework of Contract Management and finally to identify as best possible the major problems while proposing solutions adapted to their resolution.

This document is mainly intended to be used as a collection of recommendations and a reference guide, as well as for those who start in the activity of Contract Management that for those more experienced in the subject.

It is designed as a support for business processes, if the company is organized on this type of concept (Cf. ISO 9001), such as for example « Obtain Contracts », « Perform the Programs » and « Make available Supplies and Services » to the Company.

It is used as well in phase of Bid or Project as in phase of Program performance.

It is finally the reference document used for the training of Contract Managers.

Illustration of the content

The purpose of Contract Management is as follows :

 In the Bid or Project phase, the application of Contract Management is supposed to provide a guarantee that the contractual commitments between the Company, its Customers, its Partners and its Suppliers are relevant, coherent and controllable,

 In the Program phase its application is intended to ensure strict compliance with the Company’s contractual obligations, contribute to improve the profitability of the Program and ultimately to secure the Company’s position in the event of significant contractual problems which may lead to a disagreement or even a dispute with the Customer, the Partners or the Suppliers.

This document :

 defines the concept of « Contract Management » with its related activities and introduces the function of « Contract Manager »,

 defines the main areas of activity within the framework of Contract Management in the Offer phase and in the Program performance phase,

 clarifies what is implied by the terms « contractual obligations » as defined in the data and contractual documents (Contracts themselves, documents referenced in the Contract, external exchange of information, interface, etc.),

 lists all the activities and describes the recommended practices in the management process of contractual relations between the Company, its Customer, its Partners and its Suppliers,

 proposes a table of allocation of these activities between the various players of the Company involved in both the « large » and the « small » Programs, understanding that at the boundary between small and large Programs the distribution of roles (casting) must be adapted to reflect the existing organization in the entity in charge of delivering the Program and the specific context of the Program,

 provides examples of application and recommendations for the best possible management of contractual relations between the Company, its Customer, its Partners and its Suppliers, these examples and recommendations being maintained periodically by the use of experience feedback.

The author

Graduate engineer at POLYTECH Montpellier, he has extensive experience and a proven track record within leading French companies, where he has worked mainly at Program Management, Commercial Management and Contract Management levels.

Over about forty years of career have allowed him to gain solid experience in negotiating and putting into force major contracts in French and export markets, mainly in the domains of armament and security, coaching engineers, managing large Programs and performing Contract Management.

Abstract

A guide defining the objectives and role of Contract Management describing the interfaces between Contract Management, key operational processes and key players of Projects and Programs and proposing Contract Management methods, tools, procedures and best practices.

Symbols

Chapter I – Contract Management definition and general presentation

Introduction

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This chapter :

 defines the concept of Contract Management,

 list the main areas of activity of the Contract Management in the Offer or Project phase and in the Program phase,

 presents the function of Contract Management and all the relevant players foremost among which is the Contract Manager.

The concept of Contract Management

The following diagram shows how the activities of Contract Management are arranged to manage the contractual requirements between the Company, its Customer, its Partners and its Suppliers, with a view to achieve the projected objectives.

Nota Bene :

The activities that are part of Level 1 (Yellox Strip) are the sole responsibility of the Program Manager (PM) in the Program phase and the Sales Manager or Commercial Ingeneer in the Project or Bid phase,

however that

those at Levels 2, 3 and 4 (Orange Strip) may be delegated by the PM or the (depending on whether you are in the Offer or Program phase) all or part, to the Contract Management function, to specific departments of the Company or to the General Management for tasks within its area of responsibility, depending on the size of the Programs, their complexity and the importance of the associated risks.

Figure 1 : Activities of Contract Management.

The activities of Contract Management

In the Program phase, the activities of Contract Management are defined as follows :

 Management of contractual obligations, as soon as the Contract enters into force, is in the form of a set of basic contractual documents (the Contract Baseline or the entire Contract and nothing but the Contract according to the motto) whereas it is necessary to interpret and manage,

 Management of Risks and Opportunities, linked to contractual commitments and for which « highly proactive » behavior is required, with the objective of :

 Improve Program profitability and avoid or minimize penalties,

 Create and manage opportunities for amendments or Engineering Change Proposals,

 Prepare without delay, in the event of significant contractual problems likely to result in a dispute or litigation with a Partner, a Subcontractor or the Customer, a detailed file for the attention of the Legal Department of the Company.

 Management of information flows in the three categories of activity described in the diagram of Chapter 3, namely :

a) Management of technical and industrial performance, object of the Contract,

b) Management of contractual obligations,

c) Management of risks and opportunities related to contractual commitments, in order to formalize exchanges and keep track of all events.

In the Bid or Project phase, i.e. drafting of the proposal and negotiation of the Contract, homologous activities must be handled by the team in charge of the Offer (Cf. Figure 1) if possible with a distribution of roles similar to the Program phase.

However, it should be noted that during the Bid or Project phase, the Contract management function takes place in two stages :

 Upon receipt of documents related to the call for tenders, an analysis of the non technical requirements formulated by the Customer is carried out, from which are derived recommendations to the attention of the team in charge of the Offer concerning the content of the Company’s answer to these requirements.

 During negotiations, the Contract Management function deals with the specific points identified by the Commercial Engineer, and checks in particular the consistency between the contractual clauses, the contractual arrangement and the proposed services, subject of the Contract, possibly with the collaboration of in-house lawyers. An analysis of the accepted contractual risks but also of the potential opportunities, during negotiations, is performed and is an integral part of the job.

The Contract Management activity

Whether or not a Contract Manager is appointed, there are always Contract Management activities. They are distributed among the members of the team in charge of the Offer and the Program team, namely the Technical and Industrial Manager of the Bid, the Sales Manager, the Program Manager, the Contract Manager, representatives of specific entities such as the Legal Department, the Export Control Department, the Technical and Innovation Department, the Financial Department, the Purchasing Department, etc.

It is strongly recommended that the distribution of tasks and the interactions between the various involved players (management, supervision, organization, negotiation) be customized according to the nature (civil or defense), to the size and complexity of the Contract and to the type of Customer (Anglo-Saxon, Middle-Eastern, French, Asian…) and finally to the size of the Company and its organization.

The Contract Manager is one of these protagonists. He may be assigned full-time to a Project or Program deemed to be of complex or risky importance regarding the Company ; in this case, its role is to coordinate all Contract Management activities. He may also be part of a specific Company organization, such as a task force, in charge of support to the Commercial Engineer and Program Manager. However, in the absence of a Contract Manager, the Commercial Engineer and later the Program Manager may perform Contract Management activities with the support of specialists and experts appointed by the ad hoc departments of the Company, in their own area of expertise (Legal and/or Financial managers).

Based on the definition of Contract Management activities, the present publication proposes a table for assigning responsibilities to the various participants. Chapter 3 gives more details concerning the responsibility and role of the Contract Manager when explicitly appointed to a Project or Program.

Chapter II – Contract Baseline

Generalities

This chapter :

 Clarifies what is referred to as contractual data and contractual documents ; also clarifies where contractual obligations are defined,

 Propose a breakdown of