Lesser-Known Benefits of Contract Management
Contract management makes sure that you and your project vendors agree on costs, terms, deliverables, and conditions. Dig a little deeper, and contract management can help your projects in other ways:
- Enhanced vendor relationships. Time spent negotiating vendor contracts helps vendors understand project goals and your organization’s culture. This effort also helps set expectations that smooth the process when the vendor’s resources are needed in future projects. In longer-term relationships, the vendor will be able to anticipate future needs and train their staff to support your organization’s future initiatives.
- Expanded risk mitigation. Contract management helps identify and mitigate potential risks by defining terms, obligations, and liabilities for everyone involved. By identifying and planning for these risks, you reduce the probability of issues occurring when vendor resources work on tasks. In longer-term relationships, vendors can develop skills that position them to work on more and broader tasks. Skilled vendor resources help in several ways. If skilled resources within your organization aren’t available, you can turn to a vendor – thereby reducing the risk of using less skilled people within your organization. Skilled vendor resources also lighten your internal peoples’ loads so they have time for cross-training. That way, you reduce future risks related to skills shortages.
- Compliance support. Vendor resources can help ensure your organization complies with government regulations or industry standards. When you include compliance in the terms and conditions of a vendor contract, the burden of creating compliant tools and processes shifts to the vendor. That reduces your organization’s compliance risk. Note: Even though that responsibility is shifted to the vendor, the contracting organization (that is, your organization) is ultimately responsible for compliance. Be sure to review all deliverables to ensure that the vendor has maintained compliance.
- Long-term cost savings. Contract management helps current and future projects. Contracts on file simplify the renegotiation of favorable terms during renewals and can identify opportunities benefiting both the contracting organization and the vendor. This can yield longer-term deals at reduced cost, shorter ramp-up times for vendor personnel who return to the same client, and increased efficiencies.
Because contract management provides so many benefits, it’s a good idea for project managers to be involved even if another department does the bulk of the work. If you don’t already know the contracts people in your organization, make a point of introducing yourself!
For more about contract management and procurement, check out Steven Brown’s Purchasing Foundations course.
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