Contract management

Contract management or contract administration is the management of contracts made with customers, vendors, partners, or employees. Contract management includes negotiating the terms and conditions in contracts and ensuring compliance with the terms and conditions, as well as documenting and agreeing on any changes or amendments that may arise during its implementation or execution. It can be summarized as the process of systematically and efficiently managing contract creation, execution, and analysis for the purpose of maximizing financial and operational performance and minimizing risk. Common commercial contracts include purchase orders, sales invoices, utility contracts, letters of engagement for the appointment of consultants and professionals, and construction contracts. Complex contracts are often necessary for construction projects, goods or services that are highly regulated, goods or services with detailed technical specifications, intellectual property (IP) agreements, outsourcing and international trade. Most larger contracts require the effective use of contract management software to aid administration among multiple parties. A study published in 2007 found that for "42% of enterprises the top driver for improvements in the management of contracts [was] the pressure to better assess and mitigate risks" and additionally, "nearly 65% of enterprises report that contract lifecycle management (CLM) has improved exposure to financial and legal risk".

A contract is a written or oral legally binding agreement between the parties identified in the agreement to fulfill the terms and conditions outlined in the agreement. A prerequisite requirement for the enforcement of a contract, amongst other things, is the condition that the parties to the contract accept the terms of the claimed contract. Historically, this was most commonly achieved through signature or performance, but in many jurisdictions especially with the advance of electronic commerce the forms of acceptance have expanded to include various forms of electronic signature. Contracts can be of many types, e. g. sales contracts (including leases), purchasing contracts, partnership agreements, trade agreements, and intellectual property agreements. A sales contract is a contract between a company (the seller) and a customer where the company agrees to sell products and/or services and the customer in return is obligated to pay for the product/services bought. A purchasing contract is a contract between a company (the buyer) and a supplier who is promising to sell products and/or services within agreed terms and conditions. The company (buyer) in return is obligated to acknowledge the goods / or service and pay for liability created. When the purchasing contract is between a retailer and manufacturer, the contract also includes conditions for processing returned items. However due to the cost of reverse logistics, retailers often dispose of returns rather than sending them the back to the vendor. A partnership agreement may be a contract which formally establishes the terms of a partnership between two legal entities such that they regard each other as 'partners' in a commercial arrangement. However, such expressions may also be merely a means to reflect the desire of the contracting parties to act 'as if' both are in a partnership with common goals. Therefore, it might not be the common law arrangement of a partnership which by definition creates fiduciary duties and which also has 'joint and several' liabilities.

Another dimension of contract management relates to the interplay between contracts and trust. In particular, management scholars have discussed the nature of the relationship between contract and trust development. On the one hand, some have argued that contracts and trust would substitute each other; that is, the use of one mechanism decreases the advantages of the other. On the other hand, others suggest contract and trust complement each other; that is, the use of one increases the benefits of using the other mechanism.

In 2008, the International Association for Contract and Commercial Management (IACCM, now World Commerce & Contracting) began a project intended to clarify the role of a contract manager, which has since been updated on several occasions. This work identified that among contract managers themselves, there is a "widespread belief that the title (and its variants, such as Commercial Manager) masks massive variations in job role, status and responsibilities". However, the IACCM's research found indications that "the core responsibilities of Contract Managers (and by deduction, Contract Management Departments) are very similar" and applied across a range of tasks from bid preparation and contract negotiation to a "middleman" role between an organization's employees and its customers, and compliance and ensuring contract close out, extension or renewal at its end point. Scholars in business and management have paid attention to the role of contracts in managing relationships between individuals or between organizations. In particular, contracts work as instruments of control and coordination. On the one hand, contracts can moderate the risks of exploitation or misappropriation by an opportunistic partner. On the other hand, contracts can help foster communication and information sharing between parties.

In the UK public sector, concerns were raised by the House of Commons Public Accounts Committee in 2009 regarding resourcing and training in relation to contract management. The committee reported that No commercial director/head of procurement rated the level of resources allocated to the management of their major contracts as 'good', and 22% of contract managers considered they did not have time to perform their responsibilities well. Most contract managers had undertaken relevant training, although 60% of organisations did not provide a structured training programme for their staff. Contract management standards were published in 2014 by the Crown Commercial Service, and have been updated periodically. These standards were developed as a result of a 2013 "Cross Government Review of Major Contracts", commissioned by the Cabinet Office to assess the management of major contracts held by the companies G4S and Serco, and led by Bill Crothers, the government's Chief Procurement Officer. Having highlighted previous failings, by September 2014 the UK's National Audit Office (NAO) felt that the government was "starting to improve how it manages its contracts", but important improvement work remained to be done. In December 2016 the NAO re published a good practice contract management framework which had been first published in 2008

the UK government has in place a "Contract Management Capability Programme" aiming to develop the skills of government staff involved in contract management roles. In the United States, the National Contract Management Association and the National Association of Government Contractors offer certification in the skills required for government contract management.