17 May 2023

Contract management is a dynamic process (and it is becoming increasingly complex)


Contact management is a relatively new and rapidly evolving field of management. Whereas in the past the focus was primarily on contract registration and timely contract termination or renewal, the work of modern contract managers encompasses a lot more. Using qualitative and quantitative tools such as KPI’s and risk assessments, the extent to which contractual agreements have been fulfilled is assessed, and appropriate action is taken based on the findings .
A recent phenomenon is the focus on the contribution that suppliers make to achieving organizational objectives. This means that all internal and external stakeholders in the contract management process have to be involved. After all, contracts themselves do not work; it is people who determine the outcome of contractual collaboration. 

In recent years, we at AddVue have witnessed a significant increase in the dynamic nature of contract management. The outsourcing of primary business processes continues to grow, and the outcome of value chains is increasingly shaped by a combination of highly specialized suppliers. This places additional demands on managing outsourcing and outsourcing risks well.
Another new focus is on Sustainable Development Goals (SDGs). Driven (imposed) by the EU, SDGs require countries, organizations, and citizens to work towards a better and more sustainable future for all, resulting in an expansion of the evaluation framework for contract managers.
Last but not least, we anticipate a tremendous growth in data being generated as a result of the Fourth Industrial Revolution (also known as Industry 4.0). This will result in enhancements in the way supply chains are managed. Contract managers need to be constantly aware of technological developments and the associated legal and ethical issues to effectively manage contracts and relationships. 

All these changes present contract managers with new challenges. Old forms of collaboration no longer work effectively. Client and contractor are no longer at odds; modern contracts require trust and connection to collaborate and cocreate. While the contract serves as a starting point, parties must adapt to the dynamic environments in which they operate. 

Transparency is essential to maintain trust. Transparent collaboration and information sharing lead to insights, and based on these insights, parties initiate a dialogue about their collaboration. Jointly evaluating and resolving findings that arise create new opportunities for process improvements and innovations. 

 Structure is indispensable for this. Structure can refer to a methodology or approach. By employing a methodology, expectations and responsibilities become transparent for both internal and external stakeholders involved in the contract management process. Transparency leads to more predictable outcomes and higher quality of these outcomes. And increased quality undoubtedly results in lower failure costs and higher (societal) value. 

A good example of a methodology is ©CATS CM. Implementing CATS CM clarifies the roles (with associated responsibilities) that must be assigned for the successful execution of a contract. The so-called contract Essentials are also part of the method, providing guidance to the contract management process. During the contract execution, the contract manager follows six steps that are adapted according to the chosen contract management scenario. 

However, implementing a methodology can be challenging and filled with potential pitfalls without a sound underlying technology (tool). Ensuring the governance of the contract management process requires intelligent means for managing and controlling contracts in a way that aligns with the organization’s requirements and targets, and through which performance and risks can be monitored and shared. Importantly, analyzing data enables better management decisions. Collaboration with internal and external stakeholders enables improvements and innovation once the results of the cooperation with suppliers are transparently revealed. 

Our platform, AddVue CLMS, meets these requirements. With its comprehensive toolset, AddVue proactively guides contract managers and stakeholders through the six phases of the contract management process. It becomes transparent what results have been achieved and how the setup, existence, and functioning of contract management processes are stengthened. 

In my next contributions, I will delve deeper into the dynamics of contract management by giving my view on these six steps. 


Vincent Brouwer
Managing Partner, AddVue 

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Click on me to chat via Whatsapp or send an email to vincent.brouwer@addvue.com.

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