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Based on your previous answers assess risks & implementation of risk management techniques in
contracts (in the context of category management)
Solution
Contact administration and contract management are essential functions in category management. They play crucial roles in ensuring that procurement processes are efficient and aligned with the overall company’s strategic objectives. However, their scope, focus, and activities differ significantly.
Contract Administration
Contact administration refers to the operation and procedural aspects of managing contacts after they have been executed. This function is primarily concerned with ensuring that all parties adhere to the terms and conditions of the contract (Smith, 2023). The primary focus of contract administration is on compliance and the smooth execution of the contract terms.
Monitoring compliance– This involves ensuring that both the buyer and the supplier fulfil their contractual obligations such as meeting delivery timelines, adhering to payment terms, and maintaining agreed-upon service levels (CIPS, 2024a). For instance, if a contract specifies that deliveries should be within 45 days, the contract administration team monitors the supplier to ensure that timeline is met consistently (see following terms and conditions for ADNOC Sourcing);
Documentation management– This involves maintaining accurate and up-to-date records of all contact-related documents which include the original contract, amendments, and correspondence between the parties and the performance reports (Lysons & Farrington, 2020). Proper documentation is crucial for resolving disputes, auditing purposes, and ensuring transparency in contract execution.
Performance tracking– This is an ongoing activity in contact administration which involves regularly assessing the performance of suppliers against the agreed-upon metrics and milestones. This helps to ensure that the supplier is meeting the contract terms and provides data that can be used for performance evaluation and future contract negotiations.
Managing contract amendments– Over the lifecycle of a contract, changes may be necessary due to evolving business needs, regulatory changes, or other factors (Omar et al., 2021). The contract administration team ensures that all amendments are properly documented and agreed upon by all parties. This helps to maintain the integrity and clarity of the contract.
Contract Management
Contract management encompasses the entire lifecycle of a contract from pre-award activities through to the post-award performance monitoring and eventual renewal or termination (CIPS, 2022) as shown in the following;
Source: CIPS Notes
Planning and drafting– This involves developing the contract strategies aligning them with the organizational objectives and drafting comprehensive terms and conditions (CIPS, 2022). Effective contact planning ensures that the organization’s needs are clearly defined and that the contract provides a solid foundation for the relationship with the supplier.
Supplier selection and negotiation– This process involves evaluating potential suppliers based on criteria such as cost, quality, reliability, and innovation. Once the most suitable supplier is selected, contract management involves negotiation terms that are favorable to the organization. Effective negotiation ensures that the contact aligns with the strategic objectives and provides the best possible value for money.
Risk management – This involves identifying the potential risks associated with the contact and developing strategies to mitigate them. For example, if a supplier is located in a region prone to political instability, the contract management team might develop proper contingency plans to address the potential supply disruptions. Proactive risk management helps to ensure the resilience and continuity of the supply chain.
Continuous performance improvement and managing contract renewals and terminations– Continuous performance improvement involves regular monitoring and evaluating supplier performance to identify areas for improvement. The contact management team works with suppliers to implement corrective actions or enhancements to ensure that the contract delivers its mandate over its lifecycle. Based on performance evaluations and future business needs, contact management teams to decide whether to renew, renegotiate, or terminate contracts. This ensures that the organization maintains high-performing and valuable supplier relationships.
Contact administration and contract management–
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