Month: July 2020 Page 1 of 3

Future of Contract Management

Future holds much brighter for contract professionals than many other professions. The governments and businesses are just realizing the importance of the Contract professionals’ roles and the profession is beginning to gain grounds at many fronts in the economic scenes. With this growing sense of the capabilities and importance of contract management professionals, the future seems extremely bright for them.  

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What do contract management professionals need for the future?

Companies are doing more with less, and there is the expectation that each employee brings something extra to the table. The best Contract Management Professionals can do to their future is to remember the slogan “Never Stop Learning,” and continue increasing their knowledge, enroll to few Special courses, acquire latest knowhow, and supplement it with learning few relevant subjects. These activities are extensions to already possessing contract management knowledge and will add value to what you do as a contract management professional.

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Contract Management personnel in international commerce – Enjoy the benefits

With rapidly growing globalization, international trade is thriving rapidly, so contract professionals with knowledge in this area are becoming increasingly seeked after by international businesses and governments. Contract Management personnel in international commerce require to travel internationally to negotiate, finalize contracts, and audit contractors and suppliers to ensure Contract compliance.

In those travels, it may include spending long hours in industry and factory tours and involve in negotiations or consultation with the top managements, while getting opportunities to visit exotic and scenic places around the world.

Contract Management personnel getting the opportunity to enjoy the great travels around the world is the cake, but the icing is the invitations to enjoy tasty cuisine in cultural outlets.

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Contract Management – An important function in the corporate hierarchy

Contract professionals play integral roles in important and highly economic projects locally and internationally and thus relish reputation and power in organizations. With increasing globalization and international trade around the world, Experienced contract professionals are seeked after by organizations and enjoy substantial incomes.

Contract Management is being increasingly accepted as an essential and important function in organizations, and contract professionals are playing integral roles in the launching of large-scale construction projects, property development projects and in some cases, secretly working on black projects (highly classified and unacknowledged publicly by the governments, military personnel, or defense contractors) for various governments.

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Contract Management – An exciting profession

Contract Management is the back bone of corporate contracts and is associated with vital corporate management functions such as; legal work, policy making, policy implementation and control compliance and contract administration activities. A minor oversight of a contract management person might result in a drastic financial drain and hence the companies make sure that only qualified and experienced Contract management personnel are absorbed into their higher management positions. This sense of authority and responsibility drive the contract professionals into esteemed positions in corporate environments.

Most contract professionals will tell you that their work day is not boring. They’re given a high level of responsibility, and utilize skills drawn from a number of disciplines. Contract professionals solve problems and get things done.

At times, the function of Contract Management is so important, the entire corporate systems depend on the effective handling of the contractual obligations by the Contract Management personnel.

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Areas of engagement of Contract Management Professionals

The need of Contract Management professionals is diversified across many functional areas in business. But majority of them are being employed in sectors and activities such as; pre, post and on-going construction project management,  procurement, dispute resolution, risk analysis and reviewing economic activities … etc. Contract professionals possessing specialized contract qualifications coupled with substantial experience are essential for managing such areas for successful outcomes. Being instrumental in various processes such as, costing, bidding, contracts, change orders, contract administration and dispute resolution, the Contract Management professionals are integral in every stage of contracts and procurement. Additionally, they are the most looked after individuals for ensuring contract compliance and risk management in projects.

Contract Management professionals are instrumental in the bid process, risk assessment, costing process, managing customer changes, and contract closeout and are integral in almost every stage of contracts. They work with others, to ensure successful contract compliance, and to assure that the schedule and budgetary requirements are met.

Contract professionals are the interface between the companies and their stakeholders and play the front role in contractual relationships. Contract Professionals in either side of the contracts analyze and review agreements and corresponding documentation prior to signing agreements. In such processes, they utilize their knowledge and skills to optimum levels ensuring that the contracts do not end up in costly and unwanted outcomes or minimize risks involved.

In many instances, contracts professionals are a focal point of contact in the customer/supplier relationship. They review contracts and agreements that often contain complex requirements, as well as obligations and commitments that need to be managed effectively in order to optimize the maximum value from contracted relationships.

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Risk management under Contract management

Understanding the risks in the contracts and its mitigation is important for all organizations hence effective Risk management is vital for success in their commercial activities. and contract professionals are being engaged in growing numbers to identify and access the risks in their projects and activities. As risks could affect the financial strength of entire organizations, it is absolutely essential for organizations to review and analyze potential risks involved in their activities prior to implementation.

Risk mitigation is today’s corporate obsession. As an integral corporate component, contracts professionals are needed to identify and assess the levels of risk associated throughout the life of a project. Risks could positively or negatively affect a company’s financial bottom line or reputation. Before a company bids a contract or administers a subcontract, teams containing a contract professional review and analyze potential risk to the company.

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New trends in contract management

The governments all over the world are increasingly under pressure due to dwindling resources and increased spending due to growth of populations as well as their growing needs. This trend has given rise to the importance of Professional Contract Management in the relevant organizations.

While dwindling resources press reduced government spending, which in turn results in risks and opportunities. Risks causes down scaling the economies causing government contractors and suppliers reducing staff due to cancelled or scaled-back projects, which harms the economy further due job losses. On the positive side, opportunities, though lesser in value than the risks, make the governments to look at subcontracting the necessary services to the private sector in order to save money and maintain the services.

As the governments with limited resources are being pressurized by the increasing and material hungry populations around the world, the state projects being the backbones of local economies, are being scrutinized to get the maximum yields while maintaining expenditure to minimum possible levels. In such scenarios, the project management teams are constantly trying to find ways to curtail excess expenses by cost management, and avoid or mitigate possible risks through professional contract management, for timely and cost effective project completions.

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Contract Management – A growing phenomenon in the industry

Contracts are present in almost every industry or with every adult individual, where the services or supplies are received or given from or to other organizations or individuals. Contracts govern rights of those who make contracts from deviations or disputes in getting or giving expected outcomes. Having a proper understanding of the contracting process – and how to effectively work within it – is paramount to the success of any contract and its intended reasons.

Contract Management is relatively a new function compared to other fields in the industry though its growth is phenomenal over the years and is poised to evolve into an essential role in commerce. Although contracts are present in some of the actions we perform in business as well as personal levels, at present, the position of Contract Managers and the function of Contract Management are mostly seen in; public agencies, construction companies, property developers, corporations and business entities and the recognition of its vitality in all business sectors is being realized by the business community in growing numbers.

Owing to this growing phenomenon many employers seek to recruit qualified and experienced contract managers or contract administrators into their organizations. Many of such contract managers start as assistant contract administrators, and climb the ladder while acquiring further qualifications in Contract Management through Diplomas or Certificate programs.

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Tort of Negligence against Contract Managers

When entering into an agreement within the function of contract management, it is important to be aware of the express terms as these define the duties and obligations of the parties concerned. It is also important to be aware of the standards of service normally expected through custom and practice, detailed in professional Codes of practice or advisory papers and set out in statute or common law as they will have a bearing upon what implied terms may exist within an agreement. It is important to be aware that through the use of collateral warranties or the Contracts (Rights of Third Parties) Act contractual obligations may be owed to third parties. Finally there is always a potential of being found liable to third parties through the tort of negligence.

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Liability associated with management roles of Contract Managers

Since some time ago many Contract Managers have looked to diversify from their traditional role and offer their employers other services, such as project management and construction management. These roles are evolving within the construction industry and as a result the Contract management function is being diversified and must make sure the functions expected from Contract Managers for clear understanding of their scope.

Therefore, when a Contracts Manager takes on a management role it is important to clearly define the scope of service to be provided and also be aware of the standards expected from within the industry and from various professional bodies as this may have an impact on what terms may be implied in an agreement between an  employer and Contract Manager.

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Achieving maturity in Contract Management in organizations

Achieving competency in Contract Management in an organization is not an overnight affair and needs time and efforts. The best way to acieve maturity is by planning the whole process in steps spanning for a finite number of years.

By observing those organizations who have arrived maturity in contract management, organizations could plan road maps to attain maturity in contract management. One such model is Contract Management Maturity Model (CMMM) and the CMMM© consists of five levels of maturity ranging as listed below;

Level 1 – Adhoc: The organization realizes the benefits of contract management and possess some functions in contract management which are applied on adhoc projects. The personnel involved in such functions are not accountable for their work in contract management.

Level 2 – Basic disciplined process capability: Basic contract management processes exist within the organization but are used only for special projects of high value, or landmark projects, or belonging to prominent clients. The processes are not applied for the whole organization.

Level 3 –  Structured, established and institutionalized processes capability: Contract management processes are fully established within the entire organization, and are mandateory.

Level 4 – Integrated processes with other corporate processes resulting in synergistic corporate benefits: Contract management processes are fully integrated with all organization core precesses. Management is fully involved in monitoring the processes.

Level 5 – Optimized processes focused on continuous improvement and adoption of lessons learned and best practices: The highest level and the organization has achieve maturity in contract management. Continuous process imporement is implemented by utilizing lessons learnt, and best practices.

By the use of similar models, interested organizations could evaluate their existing levels and plan ahead to achieve the maturity level in a systematic and professional approach.  

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Issues pertaining to actions on negligence against a Contract Manager

It is normally required, as with any other legal case, in contract management, that if an Action for negligence against a Contract Manager is to be successful, a number of issues have to be proven. Such issues can be listed as;

1 It has to be proven that the Contract Manager owed the other party a duty of care. This is not always an easy concept to define and it may be useful a typical case, where a definition was provided identifying the class of person to whom a duty of care may be owed – ‘persons who are so closely affected by my act that I ought reasonably to have them in my contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question’.

2 It has to be shown that the Contract Manager was in breach of the duty of care.

3 It has to be reasonably foreseeable that injury or damage might arise as a consequence of the breach.

4 It has to be shown that injury, loss or damage has occurred as a result of the breach.

Contract Managers in contract management, are frequently in a position of providing advice and information in relation to a building project and sometimes this information is provided to parties with whom they have no contract but as demonstrated above, if a Contract Manager makes a negligent mis-statement to a party whom they know will rely upon that statement then there is a potential for being sued for negligence.

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Contract Manager’s Obligations to third parties

A Contract Manager, on the job in contract management, has the ability to understand from the Contract documentation, to whom he is liable, who are possibly the other relevant party(s) involved or has stakes in the contract. Depending on the jurisdiction, it may be possible for third parties to be given beneficial and enforceable rights within a contract. Therefore it is important to be aware when entering into a contract whether third party rights have been incorporated, as this may broaden the Contracts Manager’s normal scope of liability. A Contracts Manager also needs to understand that his liability may not be solely limited to his contractual arrangements because there is always the potential for liability to be incurred through the law of tort, and especially the tort of negligence. Due to this reason, the contract management function should not be considered ‘a risk free’ job.

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Contract Closeout

Contract Closeout is the process of verifying that all administrative matters are concluded on a contract that is otherwise physically complete (Garrett & Rendon, 2005).  The contract closeout process includes the following activities: 

1.  Processing property dispositions

2.  Conducting final acceptance of products or services.

3.  Processing final contractor payments.

4.  Documenting contractor’s performance.

5.  Conducting post project audit.    

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Contract Administration

Contract Administration is the process of ensuring that each party’s performance meets the contractual requirements (Garrett & Rendon, 2005).  The contract administration process includes:

1.  Conducting a pre-performance conference.

2.  Measuring contractor’s performance, using performance evaluation tools (Earned Value Management, schedule analysis, budget analysis).

3.  Conducting risk monitoring and control.  

4.  Managing the contract change control process.

5.   Measuring and reporting contractor’s performance (cost, schedule, performance)

6.  Conducting project milestone reviews.

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Implied obligations of a Contract Manager

When entering into a contract it is obviously important for a Contracts Manager to be aware of and understand the express terms incorporated into the contract of employment, as failure to comply with these terms may lead to a claim for Breach of contract resulting in the award of damages. This is especially important for those who work in contract management function in an organization.

However it is also important for the Contracts Manager to be aware that other terms may exist within the contract of which he is totally unaware, i.e., implied terms. For example, if a dispute arises in relation to a contract, one of the parties may claim that although a term was not expressly written into the contract its existence is nevertheless implied and if the dispute is taken to the courts a decision will have to be made as to whether such a term was implied in the agreement.

Contract Managers employed in contract management, are sometimes asked by their employers to provide advice and actively engage in the selection and appointment of contractors and in such cases it is important to be aware of what liabilities may be associated with the advice provided.

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Source Selection

Source Selection is the process of receiving bids or proposals and applying the proposal evaluation criteria to select a supplier (Garrett & Rendon, 2005).  The source selection process includes the contract negotiations between the buyer and the seller in attempting to come to agreement on all aspects of the contract, to include cost, schedule, performance, terms and conditions, and anything else related to the contracted effort.  This source selection process includes the following activities:

1.  Applying evaluation criteria to management, cost, and technical proposals.

2.   Negotiating with suppliers.

3.   Executing the contract award strategy.

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