Contract Management: Maximizing Performance & Reducing Risk - Essay Sample

Introduction

Contract management is a process of managing contract creation, execution, as well as the analysis in order to maximize the operational and financial performance in an organization while reducing the financial risk. Organizations have been noted to encounter an ever-increasing amount of pressure in order to reduce the costs and be able to improve the performance of a company. Therefore, management of contracts has proven to be a time-consuming element of business, that facilitates the need to effective as well as automated contract management systems (Saxena 2008). When two entities aim to do a particular business, a contract can specify the activities that are entered in both organizations as well as the terms through which both entities will fulfill their parts of agreement. To achieve a fruitful contract, a contract manager is fundamental. A contract manager is a person who plays a vital role in facilitating the contract throughout its lifecycle. It has been established that contract managers can influence the success of a contract depending on how they handle various events. Therefore, contract managers serve the liaison between the companies, vendors, or even independent contractors as a means of facilitating negotiations, recommendations, and the overall change management as guided by the laws of the land.

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Offer, Acceptance, and Settlement of Contracts

Contract managers cover various industries from the government to the technology of any company that facilitates and handles a huge number of contracts. Regardless of the type of the organization, contract managers in either situation are tasked with a primary duty regarding the creation as well as management of the contracts that are used in that organization (Puil and Weele 2014). Therefore, it has been quite important for the contract managers to have competence and skills in the areas of legal compliance, relationship management, and negotiation, in order to be able to oversee contracts effectively including drafting and the execution of the contracts. It should be noted that contract managers can serve as key points between the business and their third parties that facilitate a timely review as well as approval of any variations (Saxena 2008). In the process of making offers, contract managers ensure that they provide the necessary recommendations and even negotiate directly with the purchasing staff and the customer attorneys to ensure that the final document is satisfactory to all the parties.

Figure 1: Contract management relationships (Dutch Modern Academy 2019)

Good contract managers are significantly knowledgeable in the areas of maintaining a contractual record as they understand that once a document is signed and the contract is active, there is a need to ensure a live document. Therefore, organizations must keep thorough documents regarding the contract to ensure efficiency and compliance with the available statutes and laws. Contract managers keep good filing system to maintain the complete records in the entire procurement as well as contract administration processes (Puil and Weele 2014). Policies, as well as procedures, are important in contract development and implementation in an organization as they must be carried out with the vision of the entity.

It is important for contract managers to ensure organizations have the required policies in place that set the precedents for the decisions that ought to be made. With these frameworks at place, a contract starts at the sponsoring department where the work is to establish the contract offers and the ones that present the most efficient as well as cost-effective approaches (Saxena 2008). At this stage, there is a need to understand the commitments as well as the risks involved to ensure proper utilization of resources. The contracts are signed and settled once all the parties are satisfied with the terms as guided by the contract manager. In this regard, a contract manager is fundamental in the settlement of contracts.

Figure 2: Role of a contract manager (World Bank 2018)

Areas of Contract Dispute

Contracts are not void of disputes that must be resolved properly and in time to avoid money losses to the involved parties. It should be noted that disputes arising in contracts can be very costly especially when there is no goodwill among the parties involved. It has been established that the shortcomings of language which is the main medium of communication, the nature of the organization regarding the contracting processes, as well as the dynamic nature of the contract relationships all have a potential role in contributing to contract disagreements between the parties that are involved (Saxena 2008). Some of the disagreements include the changes that may take place even after a particular agenda has been agreed upon. Such changes are virtually inevitable in contracts. This implies that the larger and the more complex a project is, the greater the potential of misunderstandings disagreements. In this regard, contract managers develop a contract management planning approach that includes the agreement regarding the procedure that should be followed in resolving the disagreement that exists between parties. In such dispute settlement especially when a change has occurred, every party involved should be aware of their responsibilities based on the contract interpretation.

Contacts have massive differences that are likely to arise among the qualified professionals within the course of execution. The claims, as well as requests for the changes, have been noted to be a normal part of contract execution. Therefore, a contract manager must be aware of the procedures that should be followed within the legal framework and even escalate them when necessary to ensure that the established procedures from the beginning are followed and fulfilled (Puil and Weele 2014). However, it is important to have an agreed procedure regarding the escalating concern within the authorities. All parties must fulfil the responsibilities that are allocated in the contract agreement and must respect the responsibilities of the other parties. Despite the disputes that arise during the contract management, it is vital for the parties not to allow the disagreements as well as the disputes to prevent the execution of the agreed contract. This implies that the parties must be able to commit themselves to amicable solutions of the inevitable situations that lead to disputes. In this regard, while contract claims, as well as disputes, cannot be avoided entirely, they can be resolved amicably, effectively, and fairly without litigation and rancor.

Many of the contractual disagreements stem from the ambiguities that exist in the language used in contracts. This implies that there is a need for the procurement officer and the contract manager to follow the commonly accepted rules that are developed by arbitrators to solve the ambiguities in the contract language. Some of the basic rules that should be followed regarding the ambiguity of the contract language include respecting the established order of precedence in the contract documents and ensure that the words are defined according with the contract definition (Baker, Akka and Glass 2018).

Additionally, the contract should be interpreted as a whole and ensure that the contract language is not defined in a manner that renders it meaningless. The intent of parties is imperative in dispute resolution. It has been argued that if the words themselves cannot be able to solve the existing ambiguity, then the procurement officer should be able to find evidence regarding the intent of both parties at the time they entered into the contract. In such a case, the contract manager might be needed to examine the minutes of the pre-proposal conference that could provide the necessary information regarding the intent of the parties involved.

Various procedures can be followed in the resolution of disputes that result from contracts. It is important to maintain that an issue regarding disagreement or problem that exists should not automatically trigger a dispute. However, when it happens, a range of options that should be used to solve the dispute include negotiation, problem solving and discussions, mediations, and arbitration. Problem-solving and discussions involve relatively informal discussions in which the parties cooperate to resolve the issue (Baker, Akka and Glass 2018). Such parties can have round table discussions where they should not take sides but rather focus on the problem at hand. In such a process, only the parties involved manage the discussions with a degree of goodwill from both of them. In situations where discussions do not merit the required results, a negotiation can be facilitated by both parties as it introduces a degree of formality. However, negotiation is also facilitated and is within the control of the parties under contract. In case negotiation fails, a mediation process can be facilitated by the contract manager or a neutral third party who facilitates the process of getting a solution and not imposing the solution. However, adjudication and law courts may remain the only option of solving contract disputes if all the other processes fail.

Health, Safety Issues, and Laws of Contract Management

Understanding the contract and tort laws that are associated with contracts require a proper understanding of a valid legal contract. It should be noted that a contract entails a valid legally binding agreement that is made between two or more parties, which obligates the parties regarding how specific acts must be performed. This implies that contracts are made under the law of the land which can be specifically addressed as contract law and tort law. Contract law aims at providing the platform in which the contract will be established and respected, and be able to offer damages to the injured people (Baker, Akka and Glass 2018).

On the other hand, a tort law refers to a body of law that covers the violations especially when the behavior of a person and actions cause suffering, injury, and unfair loss to another person. Therefore, it has been established that tort law entails the different provisions and the premise that people ought to be liable to their actions. In this regard, tort and contract law are both branches of civil law (Uher and Davenport 2009). In these laws, there is a consideration that a civil wrong is done by a person hence leading to property damage by another person. Therefore, both contract and tort laws are established to address the breach of duty that can result to the harm of another party. However, contract and tort laws differ regarding the issue of consent as well as agreement between the two parties. In contract law, a person must demonstrate that there existed a valid contract which was breached. On the other hand, the breach in tort law is violated on the legal duty imposed by law. However, both laws have provisions that guide the nature and fulfillment of contracts and the relationship between the two parties.

Contract laws bind the people in the contract who knowingly and willingly entered into an agreement without any form of coercion, and consented to the contract outcomes. However, tort laws in contract management demonstrate that the party did not consent to the other party but had an action that is unlawful to the other party. This has implied that when a case of torts is established, the duty is violated as imposed by the law and is owed to everyone. This is contrary to the contract law where the duty is breached only on the bases of the specific contract that was agreed and signed (Uher and Davenport 2009). This means that while in tort law the damages might not be fixed, they are fixed in a contract as established during the agreement.

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