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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

Contract management needs to be brought into the 21st century. It needs clear ownership, better skills, and better tools to address the issues. Senior procurement executives, particularly when moving into a new role or organization or at a critical period (such as a merger/acquisition situation), are finding they have limited or no visibility into existing contracts. This is not a legal problem (or responsibility), nor one that third parties should solve in a consultative contract treasure hunt. What tends to happen is that procurement ends up relying on time-consuming and expensive manual extraction of key points from complex documents, often held in a mixture of hard and soft formats. And without that visibility, it is difficult to get to grips with the necessary processes for effective ongoing contract management.

This paper is written for CPOs and other senior executives with influence over, or participation in, the organization's contracting and contract management process. It explains why contract management is important, and outlines the two key factors that explain why it deserves focus – risk and opportunity. As well as exploring those areas in more detail, the paper considers the current state of contract management in major organizations. It also outlines the importance of gaining that initial visibility of the contract "population" – an essential starting point for a successful improvement program. We firmly believe that Chief Procurement Officers (CPOs) and other procurement leaders need to grasp the opportunity to own contract management across their organizations. It is unlikely that anyone else will take on the responsibility, although others can be useful allies. The General Counsel or Head of Legal and the CFO, for instance, should appreciate the risk and opportunity issues. They should also take ownership of the contract authoring and deal structuring process during any type of transaction. But the CPO is best placed to lead on better contract management as a continuous and constant process across the organization.