Recently the International Association of Contract and Commercial Management published evidence that stated typical organisations lost 9.2% of the value of contracts through poor contract lifecycle management.
Organisations are rightly focused on obtaining the best value for their spend during a procurement process and there is a lot of best practice to ensure that the tender process delivers excellent value for organisations. Unfortunately, that is when the problems start. It is too easy for organisations to sign a contract and then place it in a drawer and forget it. It is at this point that the contract should be broken apart: the obligations identified, and individuals should be assigned to manage those obligations.
Contract Lifecycle Monitoring system
A monitoring system should be created using crowdsourcing to enable monitoring of the obligations by the most appropriate person in either organisation. The system should be such that it shares with senior management a simple dashboard showing in real-time what is in compliance and what is not. This enables both organisations to take action as and when a problem develops rather than allow it to fester.
Contract Lifecycle Accountability
Accountability is critical to contracts delivering what the parties desired. One astonishing aspect coming out of the Grenfell enquiry is that the contractor made repeated promises to engage a fire safety engineer and failed to do so. There was no real-time system in place to show that that obligation had not been met; nothing to record what actions were being taken to rectify/mitigate the situation and no named person was held to be accountable. Could this also be true of your organisation?
Apart from the obligations registers, such a contract lifecycle system should include:
- a change control register;
- a value-added register;
- a goodwill register;
- claims and disputes register;
- a question and answer log;
- a workflow log.
All of these will assist the organisation in ensuring that the obligations are delivered in the intended manner, or if they cannot be, that the change is recognised and agreed by both parties. Senior management can see the risk exposure their contracts place on the organisation from a simple dashboard with the ability to drill down to the details and involve themselves as appropriate from a position of knowledge.
What does this mean for the higher education sector?
In brief, such a solution enables individual operational academics to manage their contracts with suppliers efficiently. The system tells them what to check and when and if the supplier is not doing their part, it is shown up immediately. If there is a problem such as a supplier not responding to their obligations, the system allows them to record it, and procurement and other experts can lend a hand to resolve the issue with the supplier. The principal advantage is that problems do not get lost in a string of emails, accountability is clear, but that accountability is supported by the appropriate experts being made aware of issues in real-time and offering help. You get what you want, when you want it and with good governance.
That is a good start but contracts end, although commitments often persist beyond the expiry date. There are often continuing warranties, royalties and obligations post-contract which need to be managed for perhaps years after the contract and very few organisations have a handle on these continuing obligations. All of this is picked up by such a solution adding real cash in the form of royalties or avoiding payments through the use of war.
Author: Monica Augustine