Contract administration is the management of contracts entered into with customers, suppliers, partners or employees. It refers to the management of all actions related to contracts.
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What is contract administration?
Contract administration involves the planning, negotiation, execution, implementation, and management of contracts. The purpose is to ensure that the terms of the contract are adhered to. Contract administration can impact all aspects of an organization, well beyond the legal team, from sales to purchasing to marketing.
Depending on the size of a company, contract administration can be assigned to a team or an individual who specifically handles contracts.
What is the difference between contract administration and contract management?
The terms contract administration and contract management are often used as synonym. But they are not the same thing. Below are the differences:
Contract administration starts in the head and ends when the contract objectives are achieved. Contract administration prepares the draft, converts it into a contract, ensures that the parties can meet their obligations, and oversees contract management.
Contract management is part of contract administration. It begins only after the contract is signed and in force. Contract management ensures that the parties comply with their contractual obligations once the contract is finalized.
So when you talk about contract administration, one of the things you’re talking about is contract management as a subset. And when one speaks of contract management, one understands only the specific tasks that fall under the term management.
Who is responsible for contract administration?
Generally, a contract administrator (also often referred to as a contract manager) is responsible for contract administration tasks. However, who this is depends on the size of the company and the number of employees. In smaller companies, contract administration tasks may instead be handled by contract managers or possibly even commercial teams that have been empowered to manage contracts themselves. In most cases, the contract administration task falls to legal teams.
Areas of activity for contract administration.
Below we have listed the main contract administration activity areas:
- Dispatching RFPs: Contract administration is often responsible for sending out Requests for Proposals (RFP).
- Negotiating favorable terms: Contract administration typically handles contract negotiations and finding the most favorable contract terms for their company.
- Assessing contract risk: contract administration is responsible for assessing the risk associated with specific contracts and responding appropriately to those risks.
- Establishing schedules and contract milestones: Contract administration includes evaluating the best timeframes to set in a contract and finding an optimal contract duration. This means determining when the contract should be renewed and when certain obligations must be met.
- Reviewing and updating existing contracts: Contract administration is typically expected to evaluate the success of existing contracts, often by analyzing contract data. These observations can then be used to improve existing contracts and make contract changes as necessary.
- Determining contractual performance: Contract administration typically must decide what obligations and deliverables each party must provide under a contract and how they will be met and measured.
- Preparing contract manuals: Contract administration is often responsible for establishing standardized contract language and documenting it in one place (usually using a contract manual).
- Internal communication of contract terms: Contract administration is typically expected to educate and advise business units on contract terms and conditions.
Contract administration starts with an idea, which later becomes a document, and ends with tangible results and self-reflection. This process includes contract management as one of its stages. The person who ensures that this process is successfully completed from A to Z is called a contract administrator (also often called a contract manager). To this end, he or she works closely with all contracting parties.
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