Contract management and contract administration are hot. The two terms are sometimes used interchangeably, although they differ significantly. To make sure that there are no misunderstandings and to clarify who does what, good agreements are a must. This is the only way to work together effectively and efficiently. Contract management versus contract administration: what’s the difference and how do they complement each other?
Contract management is the management of all responsibilities and duties recorded in the contract. This always takes place upon instruction of the contract owner during the execution phase of the contract. This doesn’t only mean keeping a close eye on compliance with who does what. The tasks of the contract manager also include managing procedures, agreements, conditions, rates and unclarities, gaps and desired modifications to the contract.
In short, the contract manager is:
- responsible for managing the execution of the contract on a daily basis in order to achieve the contract objectives;
- appointed by the contract owner; and
- tasked with agreed responsibilities and powers.
Contract administration is one of the tasks which is included in contract management and is often performed as a separate role or function.
Contract administration is about setting up, filling in and keeping all recorded information about a contract or connected contracts up to date and accessible. As such, this involves administration. A contract administrator usually does this for multiple contracts. He/she supports the contract manager in the administration of all contract data and provides (management) information about contracts.
In summary, the contract administrator is:
- The person who maintains the contract file;
- responsible for recording/ registering all the documentation relevant to the contract;
- the person who makes this information available, whether requested or not, to all the people who need access to this information in the context of their role in the contract.
Contract management versus contract administration
It is important to clarify which tasks and responsibilities your organisation recognises in the various roles/functions of contract management and administration,
so the different officers know what to expect from each other. They can complement each other well to ensure an efficient and effective contract management process!
Supplier management versus contract management
Contract management, vendor management, supplier management, or contract- and supplier management. These are all terms used in organisations and which are related to purchasing. But what’s the difference and what are the similarities?
Despite the fact that there are quite some differences within some organisations in terms of tasks and responsibilities, one can say that vendor and supplier management involve managing the supplier. So, let’s equate both these terms with supplier management. Then two areas are left for comparison: supplier management versus contract management.
In the past, I thought: “Isn’t contract management just supplier management?” From the client’s point of view this is correct to some degree, it’s after all about getting what you need from the supplier. There’s no other way to do this than in proper consultation with your supplier. So, if you’re managing the contract, you’re managing your supplier at the same time; that’s what I thought at the time.
By now I have found out that supplier management consists of more than that. Contract management and supplier management mainly differ in terms of objectives, tasks and responsibilities.
The objectives of supplier management versus contract management
The objective of contract management is to achieve the contract objectives. Proactively steering towards goals so that you can actually achieve the result intended when signing the contract. You of course do this together with the supplier.
The goal of supplier management is to arrive at the right choice of supplier, choosing the correct form of partnership and managing suppliers after these choices have been made. This is about determining, structuring, setting up, maintaining and monitoring the (correct) supplier relations. This means it overarches the entire process from purchasing to the termination of contacts.
The scope of contract management and supplier management
So we immediately see that contract management and supplier management have a different scope. Contract management concerns the ‘contract execution’ and ‘contract termination & evaluation’ phases (under the slogan: ‘you can only manage a contract if it exists’). Supplier management on the other hand involves the entire contract lifecycle, from determination of needs to contract termination. The image below illustrates this clearly.
Tasks and responsibilities of the contract manager and supplier manager
As such, the contract manager and supplier manager have different tasks and responsibilities.
The contract manager is in his tasks and responsibilities geared towards achieving the contract objectives. The Contract Management Essentials according to CATS CM®1 provide a good indication of the focus areas of the contract manager:
- The contract environment
- The contract file
- The contract risk profile
- The invoicing process
- Status, implementation and progress
- Contract calendar (keeping track of the important moments of the contract and carrying out the related activities)
- Contract Assessments (check regularly: are we still getting what we need?)
- Topics for consultation with the contract owner, project or service manager, Contract Board and the other contract party
- Carrying out these consultations and recording and following up on activities
- (Dis)satisfaction of the other party
The supplier manager on the other hand has a broader horizon. His primary task is to select the right suppliers for the organisation and to maintain contact with these suppliers. This includes the following responsibilities:
- Market research into potential suppliers
- Gaining insight into the organisation’s current supplier portfolio
- Determining the type of suppliers required by the organisation, now and in the future
- Selecting, classifying and qualifying suppliers
- Determining the supplier strategy per category with the related contract type
- Relationship management
- Risk management
- Performance measurement and management
We often see that the roles of contract and supplier management are combined in one position. This could of course be a very good thing, because there are clear areas of overlap. However, it is important to realise that one’s attention must in this case be divided over two focus areas and that you have to manage your time carefully.