Last updated on May 9th, 2020 at 08:50 am
Many organizations have a single team that handles both contract administration and contract management. Many startups and small companies have a single individual who handles both processes. Because of this, it’s easy to think that contract management and contract administration describe the same actions and processes.
However, there are important technical differences between these two processes. Contract administration is concerned with the state of the agreement between the two parties in the period before the contract has been finalized.
Contract management is focused on the implementation of the contract after it has been finalized.
Each process has its own workflow and role in the contract process.
What a Contract Administrator Does
A contract administrator is responsible for the planning, drafting, and closing of the contract process. Often a contract administrator will start by issuing requests for proposals (RFPs) to potential vendors or partners.
The contract administrator is responsible for figuring out the actual terms of the contract. Some common details that a contract administrator will oversee in the drafting of the final agreement include:
- Delivery dates
- Payment disbursement dates
- How to measure each side’s performance of the contract
- Automatic renewal clauses
- Defining what a material breach of the contract is
The contract administrator will work with the representative of the vendor to finalize the contractual language and to deal with any requested revisions.
Once the contract is signed, the contract administration work is over, and the contract management process begins.
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What a Contract Manager Does
A contract manager works to make sure the organization honors its obligations under the contract and monitors the other side’s level of compliance.
Contract compliance is about much more than just on time payments and shipments. A contract manager will ensure that partners have everything they need to fulfill the contract.
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If the organization makes a product and contracts with retail partners to sell the product, the contract manager will need to make sure the retail partners have all of the signage and marketing display materials they require. The contract manager may also need to arrange education sessions for salespeople.
One of the biggest challenges of contract management is when circumstances change. Sometimes the parties will need to modify the contract because of a change in the law or the market. It is the job of the contract management team to negotiate and finalize any modifications.
Areas of Overlap Between Contract Administration and Contract Management
While smaller organizations may see contract administration and contract management as the same thing, larger organizations are vulnerable when they place too much separation between these processes.
Contract managers will often be in regular contact with contract administrators. They will want to make sure they understand the intent of the language in the contract. They may also need to know details about the original negotiation if the deal needs to be modified.
Both contract administration and contract management are focused on making sure every agreement with an outside company proceeds as smoothly as possible. Nobody wants to get tangled in litigation.
The best business practice for companies of any size is to be clear that contract administration and contract management are separate processes, even if the same personnel are handling both. As companies grow, it is also vital that there are open channels of communication between the contract demonstration team and the contract management team.