In many organizations the managements have realized the importance of contract management for long term survival and sustaining their businesses though there are still some who have not fully understood the strategic importance of contract management and continue to suffer from poorly managed contracts without any realization the causes. It seems that such organizations, though near majority, give priority to other matters such as, negotiation for most competitive prices, acquiring projects, signing contracts, getting the jobs done at any cost or satisfying their clients. Within the context of under-rating, such organizations fall into the subject directly. Although it is equally important for such organizations to carryout above said activities, their failure to give the due attention to professional contract management undercuts the gains of such, and attributes to un-accountable losses due to cost and time overruns of their projects. Matters become invisible further as such organizations fail to have proper accounting systems to deliver actual losses accrued from such failures and continue to follow the same processes endlessly.
At the commencement of projects the managements become aware of the profits their organizations likely to make from available documentation such as tender documents and the costs as documented by the estimation departments but never get a clear idea of actual profits made from the projects. Project Managers who are entitled with managing projects are interested in completing the projects and pay attention to avoiding liabilities of time overruns rather than actually monitoring the cost levels.
Those organizations with professional contract management processes enjoy the competitive advantage due to their regular contract monitoring and proper cost management processes and continue to flourish among the rest with the satisfaction of their stake holders. Such organizations not only employ systems to report actual earnings from each project thereby allowing the managements to make strategic decisions with long term goals.
Starting a contract management process doesn’t have to be complicated. It can be started in a small way and then gradually let it grow while acquiring right personnel and knowhow. Starting may be as simple as creating a spreadsheet with dates and tasks that must be finished by those dates. The contract professional could simply monitor those dates and keep in close contact with the supplier to ensure timely performance. For major contracts, the contract professionals should also hold regular periodic reviews with subcontractors and suppliers to keep channels of communication open and discuss strategic issues.