The Contract Management Maturity Model How to systematically improve an organisation's contract management capabilities.

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Brittany Allison
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1 Contract Management Maturity Model How to systematically improve an organisation's contract management capabilities., 2012 Presented by Cyril Jankoff 3 July Section 1 Introduction to Contract Risk Management, (c) 2012, 1

, 2012 Presented by Cyril Jankoff 3 July 2012 1 Section 1

2 Definition of Contract Definition of a Commercial Contract > A contract is a legally binding agreement between two or more parties that the courts will enforce > In short for our purposes it is a legally binding commercial agreement > It can also be seen as a legally binding exchange of promises where the parties intend to be legally bound., Definition of Contract Management Contract management is about managing contracts to ensure that the parties: get what they agreed to and simultaneously: improving relationships increasing value reducing risk delivering best quality goods/services to customers at the least cost. NOTE: Commercial Contracts are about enforcing promises made relating to commercial subject matter., (c) 2012, 2

, 2012 3 Definition of Contract Management Contract management is about managing contracts to ensure that the parties: get what they agreed to and simultaneously: improving relationships

3 Contractual Rights and Obligations, Staff Responsibility Care needs to be taken as to who can sign a contract as a major problem facing senior management with contracts is the very real possibility of an employee exposing the organisation to potentially catastrophic litigation through commercial contracts. This can easily occur if an employee does not exercise proper care in negotiating, agreeing to, documenting, monitoring and enforcing the contract s promises (that is, the terms and conditions ). What further worries management is that commercial contracts are an everyday occurrence for most corporate managers. Risk. Doctor, (c) 2012, 3

This can easily occur if an employee does not exercise proper care in negotiating, agreeing to, documenting, monitoring and enforcing the contract s promises (that is,

4 Three Key Contract Lifecycle Stages Contract risks are largely predictable if one has an understanding of the contract lifecycle. se risks are usually categorised as either pre-signature or postsignature as it is the act of signature that creates a legally binding contract., How the Contract Management Lifecycle Assists lifecycle model helps us to: 1. Predict the risks as each of the three stages; and 2. Understand that if one wants the seller to do something after signature then one needs to agree on deliverables with the seller before signature., (c) 2012, 4

, 2012 7 How the Contract Management Lifecycle Assists lifecycle model helps us to: 1. Predict the risks as each of the three stages; and 2.

5 Section 2 Organisational Contract Management Capabilities, How Best Practice Organisations Manage Risk Best practice organisations are aiming for greater consistency, and in doing this seek: 1. Reduced variations of individual judgement and attitude 2. Better definitions of what risky is 3. Clearer guidance on what to do about risk 4. Responsibility for solutions, not lists of risks 5. Better contracts: less unbalanced or inappropriate contracts, and less poorly worded/constructed contracts., (c) 2012, 5

Better definitions of what risky is 3. Clearer guidance on what to do about risk 4. Responsibility for solutions, not lists of risks 5.

6 Best Practice Contract Management Best practice contract management is more than increasing the probability of successful transactions and projects that achieve balance between opportunity and risk. Best practice contract management is a strategic competence that oversees the quality and integrity of business operations aligning your business with that of your trading partners, to mitigate risks and drive savings, value-add and innovation. To do this one needs highly developed contract management capabilities. Thus, ask yourself as to how mature are our contract management capabilities? re are a number of models that can help us., IACCM Contract Management Maturity Model IACCM (International Association of Contract and Commercial Management) Contracting Capability Maturity Model looks at the capability, or maturity, of a number of key organisational areas, called Areas of Measurement (see list below), and then each Area is ranked on a 1 to 5 basis, with the 5 being the most capable. nine Areas of Measurement five possible Rankings 1. Leadership 2. Customer/Supplier Experience 3. Execution & Delivery 4. Solution Requirements Management 5. Financial 6. Information Systems/Knowledge Management 7. Risk Management 8. Strategy 9. People Development 1. Start Up (least capable) 2. Disciplines Under Development 3. Discipline Is Functional 4. Continuous Development 5. World Class: Best-in-Business (most), (c) 2012, 6

and drive savings, value-add and innovation. To do this one needs highly developed contract management capabilities. Thus, ask yourself as to how mature are our contract management capabilities?

7 Contract Management Software & Maturity Model A superficial view of contract management software is just to buy the software (often with pressure from the salesperson), often off-the-shelf, and install it and hope for the best that it will speed up processes and reduce errors. When one considers the Maturity Model one sees that there will be a higher probability of success if the organisation as a whole is considered before purchase of the software., , 2012 Summary 1. Commercial and contracting competence is critical to competitive performance, and includes flexibility, agility, time to market, ease of doing business. 2. discussed maturity models measure the maturity of a particular process of an organisation and indicates when and where remedial action is required. 3. One should determine how competitive one s organisation s (or department s) contracting function is. In doing this one needs to consider if the organisation (or department) needs to become more mature, and if so to what level, remembering that any improvement in maturity level need not necessarily be to the highest possible category. 4. Must ensure that the model is implemented the people and the process are great barriers to success. 14 (c) 2012, 7

When one considers the Maturity Model one sees that there will be a higher probability of success if the organisation as a whole is considered before purchase of the software.

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