9 Best Practices for Managing Contract Life Cycle

Whether you are managing a sales contract, or purchase contract or a deed of trust, managing complex contract through its life cycle can be very challenging. Contract life cycle goes on for many years, go through multiple change request so that the final scope and value could be materially different from what you started with and a large number of stakeholders are involved in authoring executing managing and auditing a contract. The fact that there are multiple systems involved in the process one for managing the cost, Mostly ERP, another for managing schedules and then of course the mails and the manually drawn documents. The un-integrated islands of information lend themselves to leakages. The approval process is usually flooded with changes and often inadequate to prevent leakages and mistakes. A single phrase could change the meaning and bring unforeseen risks.

In my experience as CIO for large organisations over the last more than a decade and a half, I have drawn these bullet points which can be used as a guide to ensure that your contracting process is smooth fast and with minimum risk.

Remember no contract goes wrong. It starts wrong. In many cases, the systems and processes are inadequate to cover the risk .The key to success lies in understanding the life cycle of a contract and adopting the processes and tools that can handle the complexities.

Get Everything at one place: Contract are very document intensive. From floating and RFI to bid evaluation, contract authoring, contact execution, budget request and approval and multiple documents & mails that are generated during the life cycle of a contracts can be humongous. Therefore it is very important to you have everything at one place, including the mails, status reports, CRs & CR request, Invoices, risk reviews etc. This enables audit besides giving a bird’s eye view of the how the contract has progressed over its life cycle. A trained eye can easily identify a contract going in the wrong direction.

Template based authoring: On the fly authoring of any kind of documents, mails or addendum should be avoided and all documents and mail should be generated using pre approved templates only. You should have a templates that address the situations that arrive in the life cycle of a contract and insist that your team uses them.Using pre approved templates, which in turn might be authored using building blocks of sections, not only makes the change or document generation faster but also reduce the risk, that something unintended might be introduced in the text due to extempore authoring, that some other stakeholders may not be happy with. Best to use template with sub-sections approved by the respective stakeholders say legal or finance. Mail is the most frequent form of communication and therefore it is essential to have a mailing tool which can generate mails from predefined templates and integrated with your contract life-cycle management.

Integration: You are bound to multiple systems such as the ERP (Such as SAP), the project management tool, the mails, the Content Management System (CMS) and a few other systems. It is important to ensure that these systems are seamlessly integrated to your contract life-cycle management. If a seamless integration is difficult or too expensive, then you must ensure that the contract lifecycle management system supports csv uploads from the source systems along with the references. It is very important to maintain the traceability, on how a certain document was generated apart from collecting everything at one place

Ownership and approvals based on sections: Contracts typically have multiple sections related to scop, quality, payment terms, insurance, accidents, delays etc. To ensure that respective sections are are reviewed by people who are responsible for these, the contract template should be an assembly of sub templates, and every version is approved by this section head. Typical contract will go through multiple versions at the request of the two parties, and it is important to ensure that the changes in each section are approved separately and the final assembly includes the approved version of each part. No team writes the entire template on its own and using pre reviewed sub parts reduces the risk considerable ensures clarity between contracting parties. Often the terms between the same parties are similar and previously approved contracts can be reused.

Digital Signature: It is digital signatures important not just for approval between the contracting parties but for every approval that is involved in the contracting process. Often people take approvals on emails and store a printout of that mail as a proof of approval. However this is not a good practice as the mail printouts can be easily tampered with. The mail themselves can be made secure with S/MIME or PGP encryption, but the printout or the forwarded mail don’t have the header and hence no legal entity. Trustworthy Internal approvals can be taken on e-signature with two factor authentication, if the signatory, for example, shares his mail access with secretary. E-Signatures are tamper proof timeless and simple. People have access to email even when they are travelling and all it needs is any email access to get the the secured link to sign the document electronically. For higher risk transactions it is necessary to have qualified digital signatures that requires that the certifying authority verifies the signatory or the organisation where the signature works

Edelivery and Tracking: E Delivery with document tracking should be the preferred option of document exchange. The tracking ensured that the document is tracked for open and the IP address recorded too. You need to ensure that the documents you sent were received and viewed, to avoid any miscommunication.

Powerful search: Once you get all the documents, Master contract, CRs, mails etc. at one place, you must have a powerful full text document indexing and search server. The pipe of documents over the years could become huge, and unless you have a good search server, difficult to manage.

Separation of data source and template: Templates should be designed to be generic and hence reusable even if it for a contract between given parties or work type. Data would be specific for that project and will change from project to project. The templates and its subcomponents should be designed to be reusable.

Role, Permission and Team Spaces: It is important to control who can do what within the team space, such as, who can create an amendment and who can approve it and similarly who all can view it or use it. You need to ensure that it people are not stepping on each others feet. Similarly, it is important to create separate team spaces for separate teams so that collaboration can be maintained securely.

If the best practices around contract life cycle management along with the enabling technologies is maintained, and of course, along with proper contract management and risk management practices, there is is much smaller probability of things going haywire, are haywire suddenly. Dociger integrated contract life cycle management is one of the top end cloud based tools which addresses all the points seamlessly.

Our website: Doctiger

About the author : Chetan Agarwal Linkedin , is a technology leader with 30+ years of experience of which more than 15 years has been as a CIO of large global corporations. He is a mentor and CTO for Doctiger.

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