Contract management then, now & in the future

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Author: Shane McInnes

A lot has changed in the last 20 years, but some people still manage contracts like it’s 1996…

At the risk of sounding like a dinosaur, I don’t think many of the people who are involved in contract management today were doing it back when I started out 22 years ago. It’s interesting to see what’s changed and what hasn’t over that time. A lot of improvements have been made and some companies even have a contract management system in place. It’s made me think about how things used to be.

Contract management – then and now

At its core, contract management has always been about adding value. But what that value is, and how best to add it, has changed over the past two decades.

1996 2016
VALUE
Value means going to market and getting the best price for services. It is all about getting bang for your buck. The notion of “contract management” finishes once the contract is awarded. Value is a wider concept. Competitive tendering is now a given, so organisations look for other factors, like relationships with suppliers, ethical contracting, category management, understanding the playing field and the ability to manage the contract throughout its entire lifecycle.
FUNCTION
Contract management is considered an engineering function, so contract managers are engineers. They are the people who best understand maths and formulae in spreadsheets and are out on the site literally managing the contractors. Contract management is an administrative and management function on an organisation-wide scale. Contract managers can come from any part of the business and manage all aspects.
TOOLS AND SYSTEMS
Details are recorded in spreadsheets, filing cabinets, inside the heads of engineers and on random pieces of paper. Different departments have different needs and priorities, and record only what they need to know. There is one centralised system for the relevant inputs by the right people in the relevant departments of the contracting organisation. Where appropriate, the system allows for direct supplier inputs as well. Contract management systems allow contracts to be stored, tracked, searched, and reported.
REPORTING
Contract management at its most basic is simply a register of what was agreed, with whom, at what price. Contract management reporting is ongoing throughout the lifecycle of the contract and includes email alerts to relevant decision-makers of key dates, red flag alerts like pending budget blowouts, and risk assessment and management reports.
CHARACTERISTICS
  • Manual
  • Siloed
  • Individual-level data
  • Retrospective
  • Time-consuming
  • Opaque
  • Automated
  • Centralised
  • Organisational-level data
  • Proactive
  • Efficient
  • Visible

WHAT’S STAYED THE SAME?

Many financial systems that companies use haven’t changed much, and a lot of people are still wedded to their spreadsheets. I can understand why – spreadsheets are one of the great inventions of the personal computing eera and in the right hands, what programs like Excel can do is astonishing.

Yet a spreadsheet is only as good as the people who are driving it. When systems become intertwined and complex, spreadsheets become inefficient and prone to operator-error. Many people are still effectively living in 1996, when today there are so many tools available to streamline contracts management.

LOOKING TO THE FUTURE

Contract management will only get more streamlined as technology adapts and improves in line with the needs of organisations. I don’t have a crystal ball, but here are a few things we can expect in the next ten years:

  • Big data – we are constantly collecting more and better data, which means improved reporting and the ability to make smarter decisions more quickly. Machine learning means systems learn from what came before and adapt to produce better outcomes in the future. As more contracts are awarded and more data is entered, we will gain efficiency and make fewer mistakes.
  • A shrinking world – as we become more connected, geographical borders and distances become less important. Organisations have a larger market from which to select suppliers and relationships will become more important as price alone will be too broad a field to play in.
  • System integration will go to the next level, with customisable dashboards providing useful, centralised information at the fingertips of all those who need it. There will be more transparency and visibility across the organisation.
  • Mobile applications and the cloud will play an increasingly important role.

Everything points to the future of contract management being smarter and faster with greater visibility and fewer risks. The engineer inside me is excited to see where it will go!

  • Shane McInnes is Director, Open Windows Software; a leading provider of modular procurement and contract management systems in Australia, www.openwindows.com.au

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Procurement and Supply Australasia (PASA) is the leading provider of information and education to procurement and supply professionals throughout Australia and New Zealand. PASA supports the largest community of engaged procurement stakeholders in the region, through its renowned series of events, publications, awards, plus various community and network building activities. PASA is a trading name of BTTB Marketing, for many years recognised as the leading producer of conferences and events for the procurement profession in Australia and New Zealand. Whether producing under the BTTB, CIPSA Conferences or now PASA brands over the last ten years, our events have consistently led the market in terms of both educational and networking opportunities.

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