CATS CM® methodology – Pillar 3: Contract Management Essentials
Author: Linda Tonkes
In my previous two blogs, I wrote about the first and second pillars of the CATS CM® methodology. They describe the distinction between the ‘Work To Be Done’, on the one hand, and ‘All Other Contract Matter’ on the other (Pillar 1:) and the roles that are created by a contract (Pillar 2:). Based on the principle lines, a division of tasks has been made, clearly showing who is involved in a contract. The third pillar of the methodology offers an overview of the areas on which contract management needs to focus. This means a further subdivision of the tasks in the form of Contract Management Essentials (CM Essentials).
What does a contract manager do?
Contract managers deal with many different issues. To add more structure and lay the foundation for a process-based contract management approach, we subdivided the ten most important focal points into smaller elements. The CM Essentials can be diagrammed as follows:
The contract objectives are at the top of the diagram. As I explained in my second blog in this series, this is what contract management is all about: realizing the contract objectives. The contract file and contract calendar are at the bottom of the diagram. The contract calendar is the overview of the important moments and deadlines during the contract execution phase. The contract file contains all documents relating to the contract and the information required for managing the contract. So basically, this is where the contract management details are recorded.
The vertical boxes in the diagram show the other seven CM Essentials. These are the areas that the contract manager will be managing with the ultimate goal of optimal achievement of the contract objectives. The contract manager records all information related to these essentials in the contract file and, if applicable, adds it to the contract calendar.
The stakeholders involved in a contract are the people or groups of people who have a vested interest in the contract execution and who can influence the contract. The contract manager identifies to what extent the stakeholders can contribute to achieving the contract objectives or if they may be or become a risk factor. He or she will then arrange for a subsequent and coordinated communication and information strategy.
Contract relationships are the relationships between the contract that must be managed and other contracts. This can be a legal relationship, but contracts that jointly form a delivery chain are also related. Because such contracts are related, it would make no sense to manage them as entirely separate contracts. The contract manager ensures the coordination between the related contracts.
Risk management is, of course, also part of the contract manager’s tasks. Wherever the risks may threaten achieving the contract objectives, the contract manager will use the organization’s risk management methods to mitigate these risks as much as possible.
The CM Essential obligations focuses on the status and progress of all obligations described and established in the contract, for both the WTBD and the AOCM. They not only include the supplier’s obligations but also the client’s obligations.
They key elements of a contract are performance and compensation. This compensation is part of the AOCM and is most often a monetary compensation. However, this is not the only financial impact of contracts. The Total Cost of Contract Ownership (TCCO) is also a financial element related to a contract. Through financial management, the contract manager safeguards, among other things, the contract value and the TCCO.
Contract governance concerns the meetings and reports, on the one hand, and the decision-making authorities and escalation lines on the other. The contract manager safeguards the contract governance structure within the organization and participates in the meetings when necessary. The contract manager also stays informed about the contract governance structure at the other party and whether it is similar or in line with that of his or her own organization.
Contractual parties are satisfied when their contract objectives have been realized. These objectives are mostly translated into performance to structure them. Apart from monitoring and safeguarding performance, the resulting satisfaction must also be safeguarded. This applies to both your own organization and the other party.
Targeted management through focus and clustering
The methodology’s subdivision of elements into CM Essentials is a starting point for clustering activities and using this to give the right focus to the right issues at the right moments. This is why it can also be considered a pillar of the CATS CM® methodology in which a scalable, process-based, manageable execution of contract management is the number one priority!