Contract Lifecycle Management
Negotiation is (legally) just one, major stage of the total lifecycle of a contract. Please find my summary of contract lifecycle management below
Contract lifecycle management (CLM) is defined as the proactive, methodical management of a (all) contract(s) from identifying the needs of a business and initiation through award, compliance, renewal and post-mortem analysis. It includes establishing, implementing and analyzing contract(s) in which the company is and will be a party in, with the goal of maximizing operating and financial performance and reducing risks.
Effective CLM includes a number of approximate stages
- IDENTIFYING NEEDS AND SPECIFYING REQUIREMENTS: At this stage, the company's needs are determined. What are the available means to meet these needs? Who are the potential stakeholders for that? What resources are needed to fill them? And who is responsible for managing each of these operations?
All these questions should be answered at this stage in order to explain why the company concludes in any agreement.
- AUTHORING AND ASSIGNMENT: At this stage, contracts are drafted to secure the company's needs and ensure its effective operation. Contracts are to be written using a specific template, in a clear and non-ambiguous manner, including the necessary terms and conditions according to each contract. The laws of the other party/parties country should be observed if they have a different nationality/jurisdiction. Also at this stage, all the documents required to complete the agreements with external parties are prepared. It is a good practice to establish internal evaluation criteria by which the company can maintain the best models that meet its needs with the utmost benefit and the lowest risk.
- PRE-CONTRACT STAGE (NEGOTIATION, MARKUP, AND REVISION): The negotiation process typically precedes signing. This stage should begin with transparency and confidence in order to produce a contract that meets the needs of the parties. In order for the company to facilitate the negotiation process, those concerned should search and anticipate the other's needs, which creates a strong basis for an ongoing relationship. It is preferable to follow one specific method for exchanging documents in the negotiation process (e-mail, fax), because a variety of methods may lead to misunderstandings which can become expensive errors.
- REVIEWING AND APPROVAL BEFORE FINALIZING THE CONTRACT: After completing the negotiations, the final version of the contract should be reviewed before signing. All the signing requirements must be collected, and the final text must be reviewed by professionals, especially internal and external legal professionals, for comments. Without blanket approval, a promising agreement could lead to significant loss. After that, the contract is ready for signature.
- CONTRACT STAGE (SIGN AND EXECUTE THE CONTRACT): During this stage the contract appears to the public and becomes formal, legal and binding to its parties. It must be ensured that the contract is signed by the persons authorized to do so. Contracts can be signed by email, depending on the situation of the contractors. All relevant parties should be informed about this agreement and the signed commitments, and the contract's implementation should be started.
- EXECUTION, ANALYSIS, REPORTING, AND KEEPING UP WITH AMENDMENTS: Often during the implementation of the contract, a set of circumstances occur (with or without the will of the parties), which make the contract subject to review in order to make the necessary revisions and amendments. At this stage the performance is supervised and the necessary reporting is provided by legal and risk management personnel. New claims to the parties are addressed, ambiguity is clarified if any, disputes are resolved, and views are rounded.
- POST-CONTRACT STAGE (CLOSE OR RENEWAL): Contracts that are about to expire must be monitored to prepare for their proper termination or for their timely renewal according to the interests of the parties. If the contract is not terminated or renewed on time, it may cause financial risks to the parties participating in the contract. Good communication before the time of termination or renewal shows reliability and interest in the relationship, which reflects positively on trust and loyalty. This stage is the last stage in CLM during which the expired contracts become an additional value for the company to benefit from in subsequent experiences.
⇨ Do you have further experience in this field, then please share some of it here. I am looking forward to your comments...
F. Seebauer, (2007), "Contract Lifecycle Management", SAP Labs LLC, Business Process Expert Community, p. 10.
"Purchase Control, Implementing Contract Lifecycle Management", p. 6.
Douglas K Macbeth (2012), "Contract Lifecycle Management", p. 51.