The CATS CM® approach to contract management recognises a number of important responsibilities. It is crucial to incorporate these responsibilities unambiguously and in the correct place in the organisation. What to keep in mind? How do you make sure that contract management responsibilities are assigned to the most logical person or department?
Responsibilities for successful contract management
The four most decisive responsibilities for successful implementation of contract management are:
- The process ownership
- The contract ownership
- The contract manager(s)
- The contract administration
Process ownership: high up in the chain
Who is responsible for determining the contract management process and with it the description of the contract lifecycle? Process ownership is the authority to determine what the process looks like. This also includes the responsibility to inform and support all parties involved, to monitor the execution and to implement changes when necessary.
Process ownership must be placed high up in the organisation. The bigger the scope of the process ownership of contract management, the greater the guarantee that the contract management process will be carried out in the same way everywhere. On the client’s side, it makes sense to assign this process to the person who also has the process ownership of the other processes of the contract lifecycle, for example the central purchasing manager, or a central contract management department. Suppliers will more commonly house this in the production departments, because the supplier’s contract management process is much closer to the primary business processes.
Contract ownership: signature or requirement?
Who is the owner of a contract on behalf of the organisation? Who is authorised to settle the obligations with the counterparty, solve contractual issues, accept any deviations in the execution and to approve contractual modifications?
The most obvious way to determine the contract owner of a contract is by looking at who signed the contract. However, this does not always provide certainty, for example because only the senior managers are allowed to sign. That’s why one often looks at the original determiner of the need of the contract. On the supplier side, this is the person who decides to conclude the contract with the client.
It is best when an organisation sets rules for determining who the contract owner is, so the owner can be easily determined for new contracts.
Who is assigned the role of contract manager? Are these people at the determiner of needs, purchasers or others?
There are three obvious positions for placing the contract manager in the organisations:
The contract managers are brought together in their own department. This can be a central location in the organisation or a certain department, from where they can be deployed for the whole range of contracts. This variant is often used when the contracts are directly related to the primary process of the organisation and with it the success of the organisation as a whole.
The contract manager works in the department of the contract owner. This is often the case when substantive knowledge is crucial for being able to manage the contract.
The contract manager works in the Purchasing department (client) or Sales (supplier). Because the involvement of the purchasing/sales department is very significant during the first part of the contract lifecycle, it can be useful to maintain this involvement after signature of the contract.
What is the best variant? It depends on the situation. It is important for organisations to make a conscious choice on the basis of the arguments which are important to them. And these aren’t the same for each organisation. Factors which could play a role in this include:
- necessary knowledge of the content
- necessary knowledge of the organisation
- direction (central/decentralised/matrix)
- size of the organisation
Where is responsibility placed for the registration of all data related to the contract? Two different requirements must be brought together for positioning contract administration. One the one hand the contract manager must be properly facilitated in his job. This requires a solution that can be set up and structured according to the wishes of the contract manager.
On the other hand, there is a need to apply the same method of registration across the organisation, in which the data of all phases of the contract lifecycle
As such, contract management does not always have the same place in an organisation. There is no ‘best’ way, it’s different for every organisation. The most important thing is that organisations make well substantiated choices. This is the only way in which contract management can work efficiently and effectively and add maximum value to the organisation!