You’re a contract manager. What metrics should you be tracking?

Monitoring the cycle time of a contract is similar to leading an efficient symphony for a contract manager. Reduced cycle times signify more efficient procedures. Monitoring cycle time helps identify problems early and keeps performance on schedule. Timely contract execution becomes a tune that fosters good relationships with contractors to avoid any dissonance. It's a compliance standard that ensures contracts are drafted correctly to avoid litigation. Cycle time is an introduction of continuous development that refines the performance and produces a work of effective art. Tools like Revnue deliver you your virtuoso soloist in the form of visibility, analytics, and automation.

One of the most important metrics is the Contract Cycle Time (or the PR to Contract Award Time). Lower Cycle time means less risk of delays and higher customer satisfaction. However, lower cycle time should not be at the expense of compliance short-cuts. Contract Manager should be tracking the cycle time regularly and initiate remedial measures to correct the situation if there are any bottlenecks. Almost every organization's contract section has Contract Cycle Time as their annual KPI and it is regularly tracked.

In my previous role as a Company Lawyer, I actively track legal and regulatory issues associated with contracts. This involves vigilant monitoring of disputes, litigation, and other legal challenges. Assessing their impact is crucial for mitigating potential risks and ensuring the organization's compliance with applicable laws and regulations. Leveraging legal management software enhances our ability to proactively manage and address these issues, contributing significantly to our overall risk management strategy.

Contract signing is a time consuming process and using tool like docusign and adobe sign will definitely help. I have implemented docusign in my organization and it clearly elevates the cycle time of the contract

Contract Management is bit time consuming procedure. Hence we should look at below metrics. Contact Cycle time and compliance rate. Need to analyse the contract renewal period and rate based on future requirements. Risks involved in contract signing, completion and renewal, as many times contract comes with cost pay back if not completed within certain time. Profit Margin and Saving the cost.

Compliance is one of the most critical aspects when dealing with contracts, and so it is defining indicators to measure it. Therefore, it is essential to first determine what terms suppliers must adhere to (i.e., ethical, legal, financial and/or service related); and then, what metrics will be used to ensure such suppliers are complying with the agreement. Controls and monitoring must follow, which can be conducted through assessments, or reviews according to parameters also set in the contract.

Tracking Volume of contract reviews; contracting cycle times; timely renewals and termination; compliance to agreed pricing, discounts, annual price escalation restrictions; deviations against standard contracts, risk analysis and mitigation etc.

In my experience, tangible KPIs on below always give you a real time pulse hence a better control / prompt mitigation; Milestone completion: Percentage of milestones met on time and within budget. Delivery performance: Timeliness of deliverables and adherence to quality standards. Service level agreement (SLA) compliance: Upholding of service quality standards. Change order frequency: Number of contract amendments, indicating potential scope creep or issues. Compliance with legal and regulatory requirements: Adherence to applicable laws and regulations.

One of the main tenets that I find when I start an audit is that contracts may not contain a schedule. This is beyond unacceptable as subcontracts may contain language tying it to a prime, there are no discernible durations given, therefore holding the sub or vendor to a deadline becomes near impossible. It also creates conflict when a sub states they will need a change order to increase manpower when delays stall production. Managers must take the time to build the documents to protect the builder or manufacturer so that you don’t bleed out when you have to supplement for convenience in lieu of non compliance.

In my opinion, compliance rate is mutual and comes with certain balance in cost, value and terms. Bottom-line is weighing the best fit than fitting all terms should be the approach of both the parties. When it comes to contract negotiation, contract owner should clarify and ensure that other party understand and buys the requirement precisely before any contract initiation, this would tremendously improves compliance rate.

Sometimes knowing how many contract renewals are coming up and getting notified at the right time to start the renewal process is key. One of the keys to increasing your renewal rate would be access to data on your obligations and how you fared on the performance.

Contract risk assessment is critical for contract management success. In some cases, a thorough analysis of contract risk could lead to avoiding entering a contract due to the significant risk exposure and liabilities imposed by this type of contract. Understanding the contract type, the legal and regulatory framework, contract law and regulations that should govern the relationship between parties is crucial to quantifying financial risk exposure.

As a contract manager, monitoring key metrics is vital to mitigate contract risk exposure. Track contract compliance metrics to ensure adherence to terms and conditions. Evaluate supplier performance against predefined benchmarks to identify potential issues early on. Keep a close eye on contract cycle times to enhance efficiency and reduce delays. Financial metrics such as cost variance and payment terms adherence are critical for fiscal control. Additionally, assess risks through metrics like contract deviation frequency and resolution time to proactively manage and minimize potential disruptions.

Risk exposure is closely related to the effective assessment of the contractual compliance areas and associated actions, accepted risks at the time of contract negotiations, and internally agreed mitigations. In the absence of any comprehensive mechanism for risk control the monitoring of relevant data points and timely review of such controls, the organization may face several repercussions such as damages, penalties, or litigations. To avoid such repercussions and build upon an organization's reputation, monitoring risk exposures and performance against the agreed mitigations becomes critical for every organization.

Risk minimization can be achieved in a lot of forms such as incorporating clear and practical variation procedures, determining the contract type (SOR, lump sum, cost plus etc.) during the bid stage. However, to manage the uncertainty, it is critical for contract managers to understand the nature of the works to be performed, even the minute technical details. I think asking questions is a key component in minimizing risk exposure. As a contract manager with a legal background, it is impossible to know the technicalities of complex works. Therefore, just being curious, and asking open ended questions from the right professionals can help a lot for managing the uncertainty.

As a contract manager, monitoring key metrics is vital to mitigate contract risk exposure. Track contract compliance metrics to ensure adherence to terms and conditions. Evaluate supplier performance against predefined benchmarks to identify potential issues early on. Keep a close eye on contract cycle times to enhance efficiency and reduce delays. Financial metrics such as cost variance and payment terms adherence are critical for fiscal control. Additionally, assess risks through metrics like contract deviation frequency and resolution time to proactively manage and minimize potential disruptions.

It is important to track contract savings with each contract negotiation. The primary responsibility for measuring contract savings lies on the contract owner i.e. the relevant business unit, and the contract manager's role is to co-lead negotiations and give support by tracking contract savings. It is important for business units to be aware of what margins they are aiming for with contract savings in order to enable contract managers to fight for a clear goal in contract negotiations, and also track appropriate contract savings targets.

Savings are becoming more and more important in these challenging financial times. But...whilst we should always maintain focus on this, there is a balance to be achieved between this and quality of the service delivery or product. Relationship Management plays a vital part here. Suppliers who have an excellent working relationship with their commissioners are far more likely to be keen to deliver efficiencies and look to reduce costs without impacting quality than those who have a transactional relationship with their commissioners. Investing in relationships will always be of benefit to the bottom line in my view.

Contract satisfaction - Rewards - Referrals - Goodwill. This is an area that is usually overlooked or non-existent during a contracting process. Oftentimes, parties to a contract would place a lot of time and effort to negotiate on terms concerning penalties and limitations to said penalties/liabilities. We fail to view contracts between businesses in the same light as contracts between employers and employees. How would you feel if you were to receive an employment offer that focuses on consequences and penalties? Not with anticipation and excitement, I suppose. It is time for us (Contract Managers) to place equal emphasis on rewards for consistent and outstanding performance - to nurture real partnership between contracting parties.

As a Contract Manager, the following should be considered for tracking 1) Contract Timeline - Project Completion timeline, Contractual milestones in terms of cost completion and time completion 2) Contract Compliance - adherence to different terms and conditions mentioned in the contract in terms of monthly submission, weekly submission, master construction program, securities, warranties, mobilization advance and payment cycle, approvals of client and contract on defined timelines, insurances 3) Contractual Tracker- Maintanence of important dates of milestones, payment cycles, Contractual correspondence and timely reply of the same. Timely raising of warning / claims which may impact time line and cost of the project.

Every Contract Management tracker should include 1. Risk analysis in line with global practices. 2. Contract timeline. 3. Capping on liabiliites 4. Control on Margin erosions 5. Keeping track on the key events in Contract which will support the Time Extension case along with claim management. 6. Tracking Bonds expiry.

It depends on which side resides the contract manager ( Client side or Supplier side) For the client side the CM responsibilities include, 1- Monitor and control service compliance to contracted rate, volumes, quality and SLA 2- Execute Contract change management 3- Tracking and reporting service compliance 4- Resolve contract disputes 5- Monitor and approval of PO and invoicing

Some other relevant metric which are important based on my experience: 1) How far the contract is from standard template? 2) How many provisions were internally escalated and what are fallback positions? The data point on the above two topics will help in devising effective negotiation strategy for future contract negotiations.

I would focus on 1 thing primarily: the usual points as mentioned are clear and correct, but it would be great to focus on a real partnership for both sides, instead of the typical buyer and seller attitude. That will create value for all involved. Remember that contracts are there traditionally to safeguard everyone if things go south. That part is still important, but I would love to see a slightly different approach