Mismanaging the post-award phase of your contracts cost your company considerably. Luckily, we have the solutions you need. Here are our top three tips to make sure you’re not leaving money on the table.
Understand the 3 phases
Every contract has three phases. In the first, called pre-award, parties decide to enter into an agreement and select its purpose and desired outcome. Then, during the second phase, contract development, terms are drawn up, lawyers sometimes spar, and a document is handed to the parties to sign.
The third is the post-award phase, also known as the post-execution phase. It includes everything that follows: sending and receiving payments according to the contract’s terms, getting out of the agreement if certain events are triggered, reporting information between the parties, and so on. In other words, during post-award, parties are doing what they said they’d do in the contract.
The cost of mismanaging contracts
Mismanaging this stage can be costly. KPMG estimates that companies lose between 17 and 40 percent of their contracts’ value by not performing proper contract management. Those costs come in various forms: disruption of service due to missed renewals, breaches that go uncompensated, opportunity costs from not opting out of a disadvantageous agreement, and wasted time are just some of them.
How can you make sure you yield the full value of your contracts? There are three things you have to keep in mind.
The 3 do’s in post-award
Leave your lawyers out of it
Lawyers serve an essential role in writing, amending, and finalizing agreements, and without them, you’re liable to make possibly existential mistakes. But they’re also costly: At a mean hourly wage of $69, the Bureau of Labor Statistics ranks them the 23rd most expensive profession of the 1,040 it tracks.
Partly, that comes from the opaque standards of legal billing. But it’s also because methodical due diligence and complexity are in the profession’s DNA. That makes lawyers suitable for handling multidimensional tasks like negotiating a 50-page contract, where careful deliberation is what lets you walk away from a negotiation with peace of mind. But it makes them financially hazardous for tasks you could be doing yourself.
And by leaving the lawyers who wrote your contract out of your post-award phase, performing obligation management for your own company or team lets you demonstrate that you’re able to stay on top of things without the need to resort to the most expensive resource solution possible. Whether you’re in sales, business development, or finance, it shows the value of your team and you, personally, as a valued member of your organization.
Do it fast
Even if you’ve expedited your contract management by omitting the lawyers, keeping on top of your contracts, if done poorly, can become an almost bottomless time sink. The relationship between time wasted and how analog your methods are is a linear one. Automatically adding information into a searchable database is better than keeping it in an Excel spreadsheet, which is better than storing paper stacks agreements in your desk drawer and rifling through them when you just remembered an upcoming deadline in the middle of the night. By the time you’ve remembered, you get to look forward to four hours — or four days — of paging through documents trying to remember where exactly that clause is.
It might sound like a relic from the days of rotary phones and switchboard operators, but many companies have yet to digitize their contracts. And even for those that have, keeping information in an Excel spreadsheet still places a heavy burden on the person managing the company’s agreements: they have to know what they’re looking for, which sheet it’s on, the language they used to organize the contract’s information, and so on. As a method of preventing value leakage, it’s a boat made of Swiss cheese.
Automate wherever possible
Ideally, you shouldn’t even be searching for anything yourself. Instead, find a contract management system that remembers for you. While some contract management systems do an excellent job organizing the information in your documents, the duty still falls on you to keep up with all of your obligations, relying on a mixture of Post-It notes and spontaneous memories in the shower. The solution is to find a contract manager should also be a contract monitor, alerting you whenever there are new deadlines, amounts owed or paid out, and any other obligations your contracts might contain.