What are the 3 Phases of Contract Management?
Contracts are a central component of modern business. Without them, there wouldn’t be company partnerships, employment opportunities, or the exchange of goods and services. Since contracts play such a critical role in business today, it’s essential to understand the 3 phases of contract management, allowing you to optimize the process without losing sight of what’s important for your company’s growth.
Understanding the Phases of the Contract Management Process
All businesses, no matter how big or small, require contracts of some form or another. Whether it’s for leasing an office building, employment contracts, or even partner agreements, contracts are central to modern business. Since no company can get by without contracts, it’s critical to understand the 3 phases of contract management and its essentials.
Once you know the different phases of contract management, your company will have a competitive edge in its industry because you will be able to complete them more efficiently.
The importance of properly managing the phases of the contract management process
When you don’t put energy into managing the phases of the contract management process, they can quickly stall and bring unnecessary issues to your agreement. These issues include counter-productive practices, a decreased profit margin, missed deadlines, and documents riddled with errors, which all damage your company’s success.
In fact, companies that don’t know how to efficiently manage their agreements are often left behind as others continue to grow. Therefore, it is essential to understand and carefully manage each phase because you will strengthen and increase the value of your agreement portfolio with decreased cycle times, reduced costs, and increased compliance.
The 3 Phases of Contract Management
The crucial process of contract management is composed of three phases: pre-award, award, and post-award. Each of these three phases of contract management covers a different step in an agreement’s life cycle, and each is equally important to its success.
Regardless of their importance, the phases often consist of repetitive tasks handled manually, making it easy to slip up and overlook small details. Therefore, you must complete them carefully to make sure the agreement is error-free at each stage and beneficial to your organization.
If you want to improve the way you handle the phases of contract management, you should understand them first:
The Pre-award Phase of the Contract Management Process
Pre-award is the first of the three phases of contract management, and it differs depending on your business’s role in an agreement depending on if it is the buyer or seller. Generally, this phase begins with the seller attempting to improve customer relations and their marketing strategy. After consideration, they have to decide whether or not to tender an agreement with another company. If they choose to submit an offer, they must develop a winning strategy that covers execution and plans to minimize risk.
The two parts of the pre-award phase of the contract management process:
The buyer’s role in the pre-award phase starts when they plan to purchase goods or services from another business. Before reaching out to potential sellers, the buyer must define their requirements, conduct market research, analyze risk, and devise a contract strategy. After that, they can begin solicitation.
When the seller receives a request from the buyer, it is their job to provide a business development plan and an offer. Meaning, they must respond to show they understand the customer’s desire and deliver value if the customer chooses to conduct business with them.
The Award Phase of Contract Management
During the award step of the 3 phases of contract management, the buyer typically has various offers to consider. The length of this phase varies from contract to contract as it depends on the number of offers and the term’s complexity. It could be straightforward, allowing you to move to the next phase quickly.
However, for companies that deal with more complex documents, such as those in finance or which form agreements across borders, this phase will be far more drawn-out.
Steps of the award phase
First, the buyer must evaluate all of their offers by looking at the terms, risks, and benefits. After they’ve done that, the buyer can then conduct price and cost analysis to decide the front-runners for the agreement.
During an evaluation, the buyer can ask for clarification on the sellers’ offers before proceeding with negotiation. This lets them dig deeper into each submission before asking for a final offer from the sellers. Once the buyer has each final proposal in hand, they can reevaluate all of the offers and choose the most advantageous one.
The Post-award Phase
The last of the 3 phases of contract management is the post-award phase. This phase occurs after the contracts are signed and exchanged, moving to performance monitoring. It’s important to note that just because the document has a signature doesn’t mean that it no longer needs to be monitored and assessed. All contracts must be continually monitored after closure to ensure that both parties remain compliant and evaluate risk and performance. Therefore, the post-award phase of contract management is essential to every business.
What is post-award contract management, and how to do it properly?
Post-award contract management is everything to do with an agreement after it’s signed. To effectively manage a deal after it’s closed, you must ensure that all terms and conditions are being met, that both sides are maintaining communication and know their expectations, and that the contract is meeting your performance standard.
Additionally, post-award management involves further negotiation of a deal in unforeseen circumstances or if the final deliverable changes. The last step of post-award management is monitoring an agreement’s end date. If there’s a definite end date, you and the other party must confirm that all the obligations were met and any unresolved issues are fixed, then final payment is coordinated.
Using Contract Management Solutions for the Different Phases of Contract Management
As mentioned earlier, the 3 phases of contract management often involve tedious and repetitive tasks. However, these phases can be optimized using an automated contract management solution. Automated management allows you to streamline the stages, making them quicker and error-free.
However, to use the platform to your advantage, it’s essential to know the ins and out of the contract management phases. Understanding the phases lets you use technology to drive the management process, ensuring that you can dedicate more time and resources to expanding your business and increasing profits.