Who Should Own Contract Management?

The following post is based on the paper authored by Peter Smith, Managing Director, Spend Matters UK/Europe: Preparing for Procurement in 2020: Negotiation, Contract and Supplier Information Overload Getting to Grips with Contract Management? -- How the CPO Can Lead on Managing Contract Risk and Opportunity – Discovery, Focus and Capability (available for free in the Spend Matters Research library).

A common failing in many organizations is the lack of a clear senior owner for contract management, often true at both the individual contract level and across the overall picture. It is a truism that initiatives and activities rarely succeed without senior sponsorship and ownership, and that is as relevant here as in any other business area.

And in terms of contract management, if the CPO does not own it, who will? Usually the answer is nobody. The legal department or general counsel may have an interest, but in our experience they only get really interested in the latter stages of a major contract negotiation, or post contract award if an issue arises (provoked by either party). They are less concerned about maximizing the value and minimising risk over the whole term of the contract delivery, or in taking the steps to improve capability throughout the client organization. To borrow a nautical analogy, they only do their job if the ship (i.e., the contract) truly sinks – not if there is a slow leak and rising water levels under the main deck.

Without stewardship, contract administration is then left to local, budget holder initiative (or lack of initiative). That leads to inconsistent, unfocused, and un-prioritized efforts. It's not possible for the CPO to claim "ownership" in the sense of executing every activity at an individual contract level; but having strategic oversight over contract management policy, process, skills and systems issues seems to us a vital part of a CPO's responsibilities.

In addition, if procurement can achieve and share visibility of existing contracts, and offer support to aid improved management, that can be an effective way of establishing a positive relationship with internal spend owners, without appearing to threaten their power or autonomy. Showing how procurement can add value in that area can be a powerful lever for further and deeper engagement with the wider sourcing process. (In my time as the CPO, my team's credibility with one business within the NatWest Bank Group, a division that historically had not been great supporters of procurement, improved significantly when we assisted with some tricky software license and contract management issues post an acquisition they had made).

Preparing Download our full analysis and opinions on the topic of why contract management matters for CPOs here.

- Peter Smith

Discuss this:

Your email address will not be published. Required fields are marked *