Contract Lifecycle Management: Where Do I Start?

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Recently I was talking to someone who runs a contract & commercial management function in a large multi-national.  Being well-read, she understood the value proposition regarding recovery of lost revenue, elimination of cost-overrun and had a vision for an organization that doesn’t “leave money on the table”.  But she also had a very pragmatic question:  […]

Recently I was talking to someone who runs a contract & commercial management function in a large multi-national.  Being well-read, she understood the value proposition regarding recovery of lost revenue, elimination of cost-overrun and had a vision for an organization that doesn’t “leave money on the table”.  But she also had a very pragmatic question:  “Where do I start?”   When vendors, white papers, analysts and pundits show flashy graphics and statistics for GOP increases, they are often showing the ideal “best-in-class” organization, which although appealing, can be a daunting journey to achieve.   For those of us who live in the here and now, we know that the road to best-in-class is long and can be an organizational challenge.   But from what I have seen, there are still many wins along the transformation journey such that less-published locales as “ok-in-class” and “good-in-class” are not without redeeming aspects.

There may be debate on the names, but fundamentally Contract Lifecycle Management consists of two main sets of high-level processes:  Pre-Award & Post-Award. Of the two sets, Pre-Award processes will take the longest transformation path in an organization.  These processes are important to completing the full contract lifecycle and however tempting it may be to start there I would recommend against it unless the organization has the Post-Award processes under sufficient control. 

 Pre-Award is where organizations first notice the “pain” point, but this is more of a symptom than a root cause.  People often look here as a natural instinct to think that they are “leaving money on the table” during negotiations with vendors or clients.   Although this is true, without real data on the backend, organizations are often left with conjecture and anecdotes about how they lost money due to poor contracting.  Yes, money is lost in Pre-Award, but we stress to our clients to look deeper and understand where this occurred, not just as a one-off, but as a practice. 

This deeper understanding requires looking at the Post-Award processes. Post-Award processes include document retention, handover, obligation tracking, change order management, and then financial dash-boarding, penalty/bonus tracking and more interesting analytics.  But at the heart of this is visibility.   If you don’t know where the contracts are or what is in them, you will never know where you are losing money or why, or know where to put the right control points in your process.  

Full end-to-end contract lifecycle management is “best-in-class” but by attacking the Post-Award piece first, there will be data and visibility that can then allow for proper Pre-Award controls and many opportunities to keep costs and risks under control as well.  This is “good-in-class” and can still be lucrative.  

So my answer to the question at the top:   Start by getting your contracts in order and find out for certain where the money is being lost.  Then things can get really interesting. 

 

 Read more BPO Expert views from our archives

 

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