Primary Objectives of Contract Management

The primary objectives of contract management set standards for an efficient, effective process that allows both the supplier and the business to meet sales and purchase obligations. The process starts with procurement planning and doesn't end until a purchase contract is complete. Each major business purchase mirrors steps in project management in that each has a specific goal, a time frame for completion and objectives the process must meet.

The Chartered Institute of Purchasing and Supply identifies the maximization of operational and financial performance and the minimization of risk as the ultimate goals of procurement contract management. Accomplishing these goals requires the development of a contract strategy and structured contract management procedures that adhere to and ensure the fulfillment of procurement goals. While contract management procedures include a number of important objectives, value, quality and compliance are the primary contract management objectives. Fulfilling them encourages success in the contract management process.

Value, quality and compliance objectives increase the chances that each business purchase adds value to the business, is a good value for the money and helps purchases meet business quality standards. Compliance is a two-fold issue. Not only must contract managers ensure purchases comply with any applicable government rules or regulations, but suppliers also must have the capacity to comply with the terms of the purchase contract. Activities during the upstream or pre-award stage focus mainly on setting quality standard specifications for products and services, service level agreements and on review of incoming bids.

The award stage of contract management fulfills value, quality and compliance objectives as contract managers verify the quality of products or the qualifications of prospective suppliers to confirm they comply with product or service specifications. Following verification, contract managers narrow a list of qualified choices to those providing the greatest value for the money and award the purchase contract to the supplier or service provider who best meets contract management objectives.

Contract management continues with post-award activities that ensure suppliers or service providers fulfill the contract according to previously agreed upon contract terms and conditions before receiving payment. Contract managers monitor products for on-time delivery and installation as well as perform quality inspections. If the purchase is a service, contract managers monitor work schedules, track labor and the cost of materials. A post-award stage process of review, assessment and evaluation includes addressing end-stage issues or problems immediately to document the contract continues to meet value, quality and compliance objectives.