The Ultimate Guide to Contract Administration
This is the Ultimate Guide to Contract Administration, where you’ll find out everything about:
• Contract administration and why it’s important
• Who is responsible for contract administration and how should this be carried out
• The contract administration process
• How contract administration can be improved using software
What is Contract Administration?
If any contract is going to successfully deliver the agreed obligations, it must first be effectively managed from start to finish. Contract administration is typically required from the point when a contract has been awarded and will continue throughout the parties’ relationship until it is either closed or terminated.
Effective Contract Administration will improve the chances of successful contract delivery for the parties and will continue to provide a profitable outcome for the wider business.
Simply put, Contract Administration is the planning, negotiation, execution, and performance of contracts between two or more parties. The process involves oversight of the contract lifecycle management and the monitoring to maximise financial, and operational performance and reducing the risk for the party involved.
Contracts can be simple and straightforward, or complex and confusing. But the one thing all contracts have in common is that they need effective contract administration to deliver the best possible outcome on time and within budget.
Successful contract administration will enhance the business performance, while minimising the risk and bringing greater profit returns. However, if not done correctly, it can lead to claims and disputes, which can cause delays in business operations and cost vast sums in legal fees.
Why is Contract Administration Important?
Every company will enter legally binding contracts. They are the foundation of any commercial relationship. They are agreements that will ensure each party knows what is expected from them and what they need to do to fulfil their agreed terms. That also means that either party can be held to account if they fail to deliver on their requirements.
When entering a legally binding agreement, both parties involved will go back and forth on terms, clauses, pricing, and termination until both parties are satisfied. Contract Administrators act as the middleman - the point of contact between the two involved. Having an individual or a team dedicated to having these discussions no doubt streamlines the work and aids for a smoother set of negotiations.
Contract administration is not limited to the handling of post-signature duties. The task is heavily focused on the pre-signature and the negotiation stage of the contract. It is important for the business to clearly understand the obligations, and the rights of the company from the earliest stage to ensure a smooth commercial relationship with the parties involved.
Contract administration plays a crucial role in the success of not only a project, but the company overall. It negotiates the terms and ensures those terms of the contract are fulfilled and ultimately, lowers the company’s exposure to legal risk, increasing the chances of higher profits.
What is a Contract Administrator?
Contracts are an essential aspect for a business to be successful. If managed correctly throughout the contract lifecycle, they can prove to be one of the strongest assets a business has.
Depending on the company set up and the size overall, contract administration duties may fall either to an individual or team. The individuals are typically known as Contract Administrators. Contract Administrators have a crucial role within the contract lifecycle, as they will oversee and manage each contract.
The role of a Contract Administrator is vast, but the simplest definition of their responsibilities is the management and communication of a contract between parties. The employees responsible for a company’s Contract Administration will, however, focus their primary efforts and work on the planning and execution of contracts.
What Does a Contract Administrator Do?
Everyone’s roles vary and that includes a Contract Administrator’s. Their duties can often vary depending on the type of contract, as each contract will have a set of unique demands and obligations that need to be fulfilled.
The role is often downplayed, and the word Administration is often overlooked. Many people today think that a Contract Administrator is just an extra in a project - the Project Manager’s assistant. Someone that can write letters, respond to emails, and manage the bureaucracy.
The role, however, requires the individual to have strong commercial awareness of the legal field. Entering binding contracts plays a critical role in the financial and operational success of many businesses across the globe, so it is crucial to find individuals with the correct skill set and knowledge base.
In many ways, the Contract Administrator acts as a third-party agent on behalf of their company. In the process of contract creation, the document is prone to multiple errors, party disputes and miscommunications. It is the responsibility of the Contract Administrator to oversee these types of issues and produce the best possible version of the contract.
Contract Administration Best Practices
Just like any project, if the contract is going to deliver a successful business outcome, it must be planned from start to finish.
The Contract Administration process will vary depending on the business sector, and the type of contract that is being negotiated. However, we have included the fundamental stages of contract administration that apply to all businesses.
1. Contract Creation
Firstly, contract administration begins with a clear understanding of the goals and objectives for a contract. Contract Administrators will set the scope and lay the foundations for the project, highlighting the deliverables, creating timelines, and determining how to measure KPIs (Key Performance Indicators).
2. Contract Authoring
With the foundations laid and the parties in agreement of the outcome and expectations, the contract moves onto the Contract Authoring stage. Also known as Contract Writing, the Contract Authoring stage involves the parties and stakeholders establishing the terms and conditions of a contract. Typically, a legal team or another party will write the contract that defines the agreement by bringing together standard clauses, key dates, pricing, and other crucial data.
Contract Negotiation is a formal process in which the parties come to a legally binding agreement on the terms of their future relationship. Contract Negotiation, however, is much more than just reaching an agreement with all involved. The process provides an opportunity to increase the economic value and ROI of the relationship and minimise the risk associated with your company. Negotiations typically begin with redlining. A process that allows each party involved to either remove, modify, or exclude clauses and terms before signing the dotted line.
4. Contract Execution
The most important stage of the process is the Contract Execution phase, in which the parties involved will sign the dotted line, meaning they are now bound by the terms of the contract. Monitoring compliance will be an ongoing process for the lifetime of the agreement by the person appointed as the Contract Manager.
What is Contract Administration Software?
Effective Contract Administration will significantly improve the chances of successful contract delivery and continues to provide a profitable outcome for the wider business until the contract is terminated. But there is no doubt that it can be a complex, sophisticated and time-consuming process. Businesses across the globe are exploring ways to replace outdated, inefficient processes with contract review, creation, and management tools like Summize.
Some of the main benefits include cost-effectiveness, accuracy, and speed. With Summize, users can reduce the time spent on reviewing a contract by up to 85%, freeing up time and resources for other fee-earning activities. Using our software can simplify your business' processes and empower your legal team to focus on the future of your company.
Summize is also a flexible tool that helps you create contracts even more easily within an everyday program - Microsoft Word. Our Add-In links to your playbook and standard clauses, making it faster to generate contracts from scratch.
And that’s Summize’s Ultimate Guide to Contract Administration!
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