Contract Management – our Readers Speak

Our article last week about contract management drew a really impressive batch of comments, very thoughtful and worth featuring here I thought. It’s obviously a topic that is of interest to a lot of us in the procurement world, and the comments also reflected this struggle between the desire for procurement to “own” contract management in some sense, against the practical issues around making that happen.

Daren Murphy kicked things off:

"I subscribe to the view that Contract Management is everything to do with procurement and CIPS should be claiming it as our own. However, I see a clear distinction between Contract Management (including activities such as change control, benchmarking, commercial dispute resolution) and Service Management (including, for example, performance monitoring, variations to quantities, continuous improvement, operational dispute resolution, DR and BCP testing). Except where combined as part of a Category Management approach, I generally treat these as distinct roles, and like to include a dedicated Schedule to describe and allocate these roles. I find this forces the business to think about how it wants to manage the contract early in the process, overcomes the land grabs and power plays, and helps to ensure that a formal regime is implemented.

However, there are also important areas where Procurement / Contract Managers and the business need to collaborate, which I badge under SRM e.g. those activities that require both operational and commercial input, such as strategic oversight, gain share and value enhancement, market and supplier development, supplier integration, etc".

On the side of ownership, Phoenix probably took the most bullish line in terms of procurement’s role.

"I agree entirely with Daren. But is it really a fact that “procurement can’t possibly take the lead on every major contract in their organisation”? If you ask me, we should be leading on every major contract, leaving (if absolutely necessary) some of the minor ones to the amateurs.

Any CPO should, in my opinion, be responsible for managing all key commercial relationships, including all major outsourcings, partnerships, PFIs, what have you. Look at your average large local authority. Usually there’ll be a series of these commercial relationships that are critical to service outcomes: outsourced care homes, highways maintenance, IT, schools joint ventures and the like. All high value, all critical and all very political – especially if something goes wrong.

Traditionally these contracts would be managed by service managers – with specialisms in social services, highways, IT and so on. And of course, they are vital in providing the ‘intelligent client’. But they’re not trained in the key disciplines required to manage these relationships – performance management, negotiation, risk management, cost management and contract law. If the CPO can’t provide this, then s/he should at least be setting the framework – ensuring there’s proper investment in training, proper contract and relationship management processes, proper reporting and management of risk".

TimBya said this:

"I see procurement’s role is to manage the supplier relationship, manage all commercial aspects of contracts management and ensure that the internal departments are managing performance (service delivery against SLAs). We also oversee VFM initiatives, improving sustainability etc and I sit on or chair a strategic overview meeting with all our major suppliers.

In short – procurement must ensure that the benefits foreseen at the outset are being delivered or hopefully improved during the life of the contract. To support this, we have also invested time on commercial training for business staff involved in managing the services".

While Mary Wildsmith supported Daren’s view:

"I agree entirely with Daren, particularly the difference in the roles of contract management and performance management. If all parties are joined up about the importance of both, and all fulfil their roles, there is a good chance of success. The best situation is where the good work done during negotiation in agreeing the governance rules, change processes, SLAs, risk management processes etc carry right through the life of the agreement, driven by contract managers who know their contract thoroughly and manage the supplier robustly".

RJ was a little more cautious in terms of where responsibility might sit:

"There’s a very strong argument for Procurement teams taking on contract and supplier relationship management roles particularly in the case of framework agreements where the relationship has to be managed across a diverse range of stakeholders, business units and/or geographies. The case is less strong for major projects where the responsibility has to lie, in my view, with the budget holder.

However, whether the skills required to source a supplier and negotiate a deal are likely to be possessed by the same individuals as those who then manage a complex business relationship over several years is a completely different issue".

And as is so often the case, Bitter and Twisted summed things up succinctly:

"Basically, what matters is that the procurement bod what done the deal has to be made to suffer if the contract doesn’t work. Whether they have to manage the wretched thing , or get regular stakeholder beatings, is horses for courses".

More to come on this topic!

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First Voice

  1. Ogaufi Obert Marumoloa:

    what is the difference between Supplier Relationship Management and Contract management. I ask this because all I see is the relationship that exist in the two. that is to say Contract can as well be a Supplier relationship.

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