Each customer/supplier relationship will require its own level of contract management correlating to the level of interdependence and complexity. The contract professional’s goal will be to easily identify the appropriate level of administration, monitoring and relationship management for each of the contracts being managed. Once those elements have been identified, the contract professional inserts appropriate language from reporting deadlines to extensive governance mechanisms into the contract.
Sole/Single Source Contracts
The goal is typically to buy performance. In more complex sole or single source contracts, to ensure performance the parties agree on very clearly defined performance standards and relationship management protocols.
These agreements may seek to document more complicated pricing structures and complex risk events by the very nature of using a single or sole supplier. Again, typically, the parties spend a lot more time and energy on risk allocation (think of Terms of Limitations of Liability or Indemnification). Because performance is one of the primary goals, the more parties spend time and energy identifying, documenting and monitoring operational risks the more likely parties can mitigate or control risk.
- Administration: Payments are usually tied to progress or milestone dates associated with the performance (delivery) of the contract. These payments require more monitoring.
- Monitor: Ensure that the supplier continues to deliver defect-free goods, and or conforming services according to the contract requirements. In addition to technical specifications or statement of work, the contract will likely include performance standards, acceptance criteria, and milestone payments, etc.
- Relationship Management: Ensure appropriate levels of communication with the parties at all stages of the relationship (which tends to be more regular, such as monthly or quarterly meetings to discuss performance).
If you are looking for more information like this, or would like to move a team member from awareness of complex contracting to master, buy a copy of The Contract Professional’s Playbook on Amazon.
If you are looking for more information like this, or would like to move a team member from awareness of complex contracting to master, buy a copy of The Contract Professional’s Playbook available at Amazon.