The Contract Management Process: Step-By-Step
Businesses need all kinds of contracts to conduct their affairs. Contracts with customers, vendors, partners, or employees will need soundly written, and clearly defined documents that will ensure good relationships between contracted parties and your business. But there is more to do than simply write and sign the contracts; the process of finding partners, procuring services, making the deal, and executing the contract – steps that are part of the contract management process – are all necessary components to running a strong business.
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Managing Contracts with other Companies and Service Providers
When a company or business needs to get services from another company or business in an area of expertise outside of their own, they will need to arrange a contract for services. Generally, process of contracting can be broken up into six steps. They are: procurement planning, solicitation planning, solicitation, source selection, contract administration, and contract close out. Each of these steps will require a large amount of control control, which includes heavy planning, for the proper execution of the contract management process with a minimal amount of error. While it’s a lot of work, having a standardized process for contract management is a great way to ensure a more successful outcome in any operation. Furthermore, by having employees move step by step through the process the success of the contract is more greatly ensured.
Step 1: Procurement Planning: Be Prepared
Phase 1 of contract management is procurement planning. This is a type of heavy preparation. Because many outside organization are going to vie for the same contract the manager will need to know all the ins and outs of what they are asking and what is being offered. This means that the manager will need to figure out which of their needs could be met by which other parties outside their own business. In other words, this part of the process involves figuring out who is best for the job. There might not be one specific company or organization. In fact there might be several that could potentially meet your needs. In preparation for receipt of services it is important to lay out all the information necessary so the best decision can be made. Be sure to go through your entire project analyzing and cataloguing any services that might be required. The better an understanding a contract manager has of the needs of the job, the better able they will be to make strong decisions on the right outside company, and the better the management skills will prove to be. During this planning phase it is important that the contract manager know as much as they can about what service they are seeking. A strong knowledge will make for better management. Market research and background analysis will help them prepare for the next phases, as they will have a better idea of what is going to be offered and what they might need. They should also draw up guesstimate and preliminary budgets so they will not be surprised or ill prepared for budgets submitted by outside parties.
Step 2: Solicitation Planning: Getting Ready To Ask
The next step in good contract management is solicitation planning. In this second ‘preliminary phase’ of contract management the manager prepares all the documents that will be needed in order to conduct business with outside parties. Getting your paperwork in order ahead of time will save you trouble once the subcontractors and outside parties start rolling in. It is also very importing during this period to decide on the approach method. This means that the manager, upon having decided to seek specialty help, will open the floor to other parties. How they are allowed to submit their proposals for the contract depend on the manager. Two possible options are sealed bids (in which the outside party makes a single final offer on the contract) or an openly negotiated proposal (when there is a back and forth discussion between the manager and outside party). It is good practice for a manager to set up internal evaluation criteria that will describe how they are to judge the different bids or proposals coming in. This will allow them to keep a keen understanding of who offers which services and which company might be best. It is also suggested to take up an award strategy in this period so that management can focus on getting the best value for the lowest prices. Even though this second round is also a preliminary one, it is highly important to conducting a strong and strategic contract management process.
Step 3: Solicitation: In Come the Bids
In the third stage, the contract manager opens the floor to bids and proposals from outside parties. In this stage of contract management it is important to review all the bids and proposals that come in as well as conduct proposal conferences. By keeping the flow of information back and forth free, through the conference policy, there is an easy channel of communication between the manager and outside parties. Most of the bids and proposals will come in through an advertising strategy that has been started prior to this phase. Having a strong campaign, as well as connections with reliable contractors, will help get the word out and bring the best people around. Bidding will begin shortly thereafter. There is no set time for bids to come in or go out and the process can continue until the best match is found for the contract. It is important not to lose track of the information coming your way. Check out Udemy’s course on computer organization to learn how to keep your management process organized.
Step 4: Source Selection: Who Do You Choose?
After a full review it is time to make a sound choice. If you had set up evaluation criteria, then hopefully it will have been followed. Once you begin final discussions with the contractor selected it is important to Obtain independent cost estimates from them as well. No one should be in the dark about any aspect of the project or contract.
Step 5: Contract Administration: Everyone To Work
Once the contract has been signed and the work has begun then things can relax. However, overall administration of the contract is necessary for a good process of contract management. It is necessary that both parties live up to the agreement in full. As a manager it is within your right to conduct risk monitoring, performance measuring, and milestone reviews. This ensures that the work being done is as good as promised, which is a key factor in the management process.
Once the job is completed it is time to close out the contract. However, before doing so, make sure to process all final payments, and then document performance standards. Finally, remember to engage in a post contract audit. Good project management requires a high level of people skills. In order to solidify your abilities in the process of contract management check out Udemy’s course: project management and human resources.If you’re encountering contract management in the field of construction you might want to check out Udemy’s course on how to manage a large construction project like a master. Running a good contract management process is a skill necessary to all businesses, large or small. That is why should take Udemy’s introduction to business management course. If you plan on preparing an effective contract then you’ll need to be prepared to handle the entire contract process from start to finish.
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