The Stages of Contract Lifecycle Management Explained
Contracts are not valuable or self-explanatory by themselves – they are the end products of long and extensive tasks or processes. Therefore, in this post, we do not look at the processes that lead to the formation of contracts but rather the contract processes in themselves and thereof. Different firms have different contracting processes and, therefore, might have different stages in the contracting process, but these can be divided into different categories for easier understanding and execution. This post talks about this.
Broadly speaking, the contracting process has two stages – pre-award and post-award. In the pre-award phase, we have all the stages that come before the contract gets signed by the counter-party, while the post-award phase will contain the stages that come after the signature and acceptance of the contract by both parties. The pre-award stage can be further divided into three stages based on the different tasks or accomplishments involved in the process – creation, review and negotiation, and approval.
The creation stage contains different tasks, such as the request for a contract from a business unit and the review of the contract by the required in-house parties. The parties then go back and forth over the language or the terms, which is the in-house negotiating stage. Once the negotiation is done, the contract receives the approval of the in-house authority. Once the in-house authority’s approval is given, the same steps of negotiation of language and terms are also carried out with the counter-party, and once both parties come to a consensus on everything, the contract then goes for execution, or in our language, award. This is where the pre-award stage ends, and the post-award stage takes over.
Once the contract is awarded, a copy of the contract goes to both parties for storage so that they can retrieve it whenever they want to check it. This storage is built into the contracting system even if one of the parties uses a contract management system. This way, they can always find an original copy of the software whenever they need to refer to the original terms and conditions.
The next stage, once the award is done, is to ensure that the contract is administered at all times adequately by both parties. If the firm, for example, enters into a contract to receive supplies of a particular product that they need to make a product, they will also have the timelines for the receipt of the product, the way the product is to be received, and so on. If the supplier does not follow this process at all times, then there is a cause for a complaint to be raised against the supplier. This is the job of the contract administration stage. Similarly, the supplier will have terms on how to receive the payment for the supplies delivered, and so on. This is where both parties ensure that the terms of the contracts that they have entered into are met by both parties. Small inconsistencies can be ignored, but if any major terms are not met, then there is a need for re-negotiation.
In the post-award stage, the parties also need to analyze the contracts for their performance across the duration of the running of the contract. With a contract management software solution, this is done easily since the software provides both parties with reports on the performance of the contract. It is at this stage that auditing also occurs.
Lastly, we come to the contract renewal stage, where both parties again decide whether the contract is to be renewed for the next time period. This is done automatically if there are no causes for concern regarding the performance of both parties, and often, organizations use the recurring contracts option to renew contracts, especially if they are maintained for smaller time periods.
As mentioned earlier, contracts can happen in different stages, depending on the way they are handled by the specific firm in question, but the stages broadly remain the same and allow all parties to be cognizant of the contracting process and therefore make the process better for themselves.