For large public organizations, contract management can be a burden. A largely manual process for many organizations, contract management is often a time-consuming, laborious task that, if not done correctly, can have a huge negative impact. Most public agencies deal with thousands of contracts, each one with its own unique set of stipulations, deadlines and other hidden risks that can lead to noncompliance or cost overruns.
Contract lifecycle management (CLM) has emerged as a viable strategy to help organizations deal with the increasing volume and complexity of contracts. I’ve found that there tend to be two primary reasons for public organizations to take on a CLM project. The first is to mitigate risk in the contracting process by ensuring compliance. The second is to achieve cost savings by making the contracting process as efficient as possible. Implementing a CLM project allows organizations to achieve these goals by providing several benefits, including:
- Streamline Authoring and Negotiation: The ability to standardize contract language and processing is the easiest path to increased compliance and efficiency. Utilizing standard legal- and compliance-approved template language allows organizations to reduce the time legal and compliance departments spend reviewing contracts. Tracking deviations from the standard language and processes allows those exceptions to be routed to the appropriate legal or compliance channels to ensure the deviation is acceptable.
- Commitment Management: Contracts work both ways. Public agencies themselves are held to them, but so are the vendors contracted with them. CLM provides vendor compliance and performance management against contracts, allowing organizations to effectively gauge how vendors are performing and take appropriate action if needed.
- Communication Management: Every contract has its own set of pertinent dates. CLM solutions provide automated notifications to the appropriate parties when important contracting dates are coming up such as renewals, ending of contracts and compliance issues (e.g. certificates of insurance) to ensure all parties are aware of important dates.
- Visibility: Not every person in an organization needs to be aware of every contract detail. CLM solutions allow organizations to ensure that only the correct people in their organization have visibility into contracts, providing a secure central repository.
- Documents and Record Management: CLM solutions help organizations comply with document and record management policies by providing a central repository that manages the full lifecycle of a contract, including contract creation, approval, management and its final disposition.
Too often, organizations fly blind when it comes to contract management, leading to costly issues in processes ranging from authoring/negotiating contracts through the management and all the way to contracts’ end of life. Improving the process through automation can have a significant impact on the bottom line and increasing efficiency. In this space next month, I’ll dive into some tips for organizations looking to get the most out of their CLM implementations. Stay tuned!
Originally Posted on Spend Matters' Public Spend Forum
