Contract Management – Procurement’s New Frontier

Great procurement work can be undone by poor contract management. Great contract management can salvage poor procurement. If both are great, we’ve hit the jackpot.

Procurement teams are increasingly stepping up to deliver the results designed to be achieved in the procurement process. They aren’t just buying wisely, but delivering the business outcomes intended at the outset of any purchase. This is a whole new world for procurement – making business decisions, not just purchasing decisions.

Whose Domain is it – the Business or Procurement?

Often it feels like procurement celebrates too early. Contract signature is seen as an end-point of the work, not a start-point of the work. The benefits built into the business case, or benefits hard-won from hungry suppliers in negotiations, are too rarely delivered in full.

Contract management has historically been the domain of the business; procurement’s job was to get the right provider at the right price. No more; old silos have been cracked wide open. The business hasn’t managed contracts particularly well and now it’s up to procurement to lead the way. It can’t be left to people to do in addition to their ‘real job’.

Post-award is Where Actual Value Occurs

As the procurement profession matures, contract management increasingly offers the greatest potential for procurement to make a difference for their organisation.

Most businesses are spending around 70 per cent of their annual revenue on the external supply of goods and services, with services procurement increasingly outstripping goods. As your organisation moves towards greater levels of contracting, and becomes more dependent on third parties, contract management becomes a core activity.

Post-award is where the ‘rubber hits the road’ for procurement stakeholders – where suppliers and the procurement team become truly accountable for the deals they have done. This is when risk quickly becomes the real issue and delivering real value can begin. It is merely theoretical prior to this juncture.

The Right Contract Management

Decades of studies across the globe demonstrate that goods, projects and services cannot be contracted for and then not managed by the client while expecting a positive outcome.

What exactly makes up the right contract management? For many contracts, a set-and-forget approach may be the most pragmatic, and indeed much of the administrative box ticking will soon be done through robots (software automation). For others, however, this would be the death knell of value realisation.

Our Roundtables – You Can Still Hit the Jackpot

Contract management is the new frontier for procurement – the new place to generate real value for your organisation, the place where human relationships outweigh AI automation, the place where the business needs expertise.

We are running six roundtable sessions to accelerate procurement’s expertise in contract management. The sessions started on the 5th of March with the 12 Best Practices of Contract Management and run through for the next month. There’s still plenty of time for you to get involved with our future sessions as we deep dive into practical best practice that yields outsized returns.

The jackpot is just around the corner.

This article was written by Dr Sara Cullen, Managing Director, The Cullen Group. 
Dr Sara Cullen will next be joining The Faculty Roundtable Program on 23rd April for a masterclass on genuine leadership that transforms relationships and enhances your approach to contract management, ensuring that your arrangements not only meet but exceed the intended results. If you’re a Roundtable member, you can register for the masterclass here.