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Thoroughly read all your contracts. I mean

thoroughly.

Bret Michaels

Module Two: Defining Contract Management

Every business relationship relies on contracts. Contracts are made
with vendors, employees, customers, partnerships, etc. These
agreements must be managed carefully, which is where contract
management comes into the picture. In order to effectively
implement contract management, however, it is necessary to
understand what it entails.

What is Contract Management?

Contract management is not just contract administration. Rather than simply
drawing up the contracts, the manager works to ensure that the entire process runs
smoothly. The contract manager is involved in, not just the planning and
development, but also the execution of the contract and beyond to the point of
renewal. Typical contract management activities include:

• Contract creation

• Negotiation

• Assessment

• Relationship management

• Contract amendment

• Audits

• Renewal

Over the course of this instruction, you will develop a better understanding of these roles.

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Estimated Time 7 minutes

Topic Objective Review the definition of contract management.

What is Contract Management?

Topic Summary
Discuss the different aspects of contract management.

Materials Required Flipchart/board, marker

Planning Checklist None

Discuss the characteristics of contract management. Consider the different

Recommended Activity activities that apply to contract management. Write some of their answers
on the board/flipchart.

Stories to Share Share any personal, relevant stories.

Delivery Tips Encourage everyone to participate.

Review Questions What is not contract management?

Contract Types
All contracts are legal documents that establish the right and responsibilities of the
parties involved. Contracts can be created for almost any situation, and will ideally
involve legal. There are four basic contract types, and they are chosen based on the
factors and data available. While the list is not exhaustive, it is a good starting point.
These common contracts are:

• Fixed Price Contracts: The price of the item or service is usually fixed and will not change, which
benefits the buyer. Variations of this contract include firm fixed price, fixed price with
adjustment, fixed price with incentive, fixed price with downward price protection, and fixed
price with redetermination.

• Cost Reimbursement Contracts: These contracts benefit the seller. The buyer agrees to pay a
price, fee, or partial fee. Common types of these contracts include cost-sharing and cost without
fee.

• Letter Contracts: These contracts allow the suppliers or vendors to take action before the
details of the agreement are finalized. The buyer is at risk if liability limits are not clear.

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 • Partially Defined Contracts: Created when one or more aspects, such as goods, services, and
deliveries, are not known ahead of time. These include value contracts, quantity contracts, and
time and material contracts.

Estimated Time 8 minutes

Topic Objective Review the types of contracts.

Contract Types
Topic Summary
Discuss the different characteristics of independent agent marketing.

Materials Required Flipchart/board, marker

Planning Checklist Bring in examples of each type of contract, and pass them out to the class.

Consider the pros and cons of each type of contract, and list them on the
Recommended Activity
flipchart/board.

Stories to Share Share any personal, relevant stories.

Delivery Tips Encourage everyone to participate.

Review Questions What are the four common contracts?

Contract Elements
Every contract is unique, but there are three basic elements most contracts
need to be considered legal and binding. These elements are the offer,
acceptance, and consideration.

• Offer: The offer is the promise of goods or services in exchange for agreed upon rates or
exchanges. An offer is different than a negotiation because an offer is binding once accepted.

• Acceptance: The offer is accepted based on words or actions required by the individual making
the offer. A counter offer occurs when the offer is not accepted, but new conditions are
proposed.

• Consideration: This happens when the exchange is made based on the accepted offer. Payment
is an example of consideration.

These definitions are not all-encompassing, and there are exceptions to every rule. The legal
department should always be consulted when creating a new contract. Still, these elements are useful
starting points for all contracts.

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Estimated Time 8 minutes

Topic Objective Review the basic contract elements.

Contract Elements
Topic Summary
Discuss the basic contract elements.

Materials Required Worksheet 1: Offers

Planning Checklist None

Complete the worksheet individually. Share your answers with the rest of
Recommended Activity
the class.

Stories to Share Share any personal, relevant stories.

Delivery Tips Encourage everyone to participate.

Review Questions What are the three basic contract elements?

Risks of Poor Contract Management

Poor contract management is not just weak negotiation; it can occur at any step
of the contract cycle. It also costs business relationships, delays projects, causes
litigation, and damages the bottom line. Common problems identified by the
International Association for Contract & Commercial Management include:

• Over commitment

• Contracts lack full scope

• Agreement disputes

• Pricing arguments

• Subcontractor issues

Effective contract management will address the contract process from its creation through the renewal
or end. Preparation and ongoing management of contract relationships are essential to the success of
any business.

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Estimated Time 7 minutes

Topic Objective Review the effects of poor contract management.

Risks of Poor Management

Topic Summary
Discuss the effects of poor contract management.

Materials Required Flipchart/board, marker

Planning Checklist None

Discuss poor contract management experiences as a group. List some

Recommended Activity situations on the flipchart/board and consider actions that could prevent
them as a group.

Stories to Share Share any personal, relevant stories.

Delivery Tips Encourage everyone to participate.

Review Questions What organization monitors contracts?

Practical Illustration
Cameron is looking for vendors for his retail space, and Daniel seems to be a
good fit with his company. Daniel met with Cameron, and they discussed the
ideas. Daniel informed Cameron that he wanted 900 square feet of space and
signs a contract. Cameron, however, only provided 750 square feet of space in
the building. The contract is not clearly worded, and Daniel demands an
increase in area. Cameron already promised the space to someone else, but he is not sure what his
options are. He considers releasing Daniel from the contract to prevent any problems.

Estimated Time 6 minutes

Topic Objective Outline the Defining Contract Management Practical Illustration.

Practical Illustration
Topic Summary
Discuss the characteristics of contract management.

Materials Required None

Planning Checklist None

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 Discuss the outcome of the Practical Illustration. What could Cameron have
Recommended Activity
done differently?

Stories to Share Share any personal, relevant stories.

Delivery Tips Encourage everyone to participate.

Review Questions What type of space does Cameron have?

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Module Two: Review Questions
1.) What is Not involved in contract management?

a) Advertising
b) Negotiation
c) Relationship management
d) Assessment

Contract management involves the entire contract process, which includes contract creation
negotiation, assessment, relationship management, contract amendment, audits, renewal. A
contract manager does not directly oversee advertising.

2.) At what point in the contract cycle does contract management stop?

a) Assessment
b) End
c) Audit
d) Negotiation

Contract management oversees the entire contract cycle. The end of the contract relationship is
when contract management ends. If the contract is renewed, the process begins again.

3.) What is a cost sharing contract?

a) Fixed price
b) Cost reimbursement
c) Letter
d) Partially defined

Cost sharing contracts are cost reimbursement contracts. In these contracts, the buyer agrees to
pay a price, free, or partial fee, and they typically benefit the seller.

4.) What type of contract is used when there are unknown elements?

a) Fixed price
b) Cost reimbursement
c) Letter
d) Partially defined

Partially defined contracts are used when there are unknown elements. Examples of these
contracts include value contracts, quantity contracts, and time and material contracts.

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5.) What is true, once an offer is accepted?

a) There are 30 days to change it

b) The negotiations begin
c) Cannot be changed
d) Counter offer

Offers may be changed by the offeror before they are accepted. An offer is binding, however,
once it is accepted.

6.) What is an example of a consideration?

a) Payment
b) Negotiation
c) Counter offer
d) Communication

When the exchange is made based on an offer that has been accepted, it is a consideration.
Payment for goods and services is an example of consideration.

7.) Besides preparation, what will prevent poor contract management?

a) Subcontracting
b) Ongoing management
c) Over commitment
d) Nothing

Effective contract management will address the contract process from its creation through the
renewal or end. Preparation and ongoing management of contract relationships are essential to
the success of any business.

8.) What is NOT associated with poor contract management?

a) Over commitment
b) Communication
c) Pricing arguments
d) Subcontractor problems

Proper communication will benefit contract management. Common issues with contract
management are Over commitment, Contracts lack full scope, Agreement disputes, Pricing
arguments, and Subcontractor issues.

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9.) Every business relationship relies on _________.

a) Friendship
b) Money
c) Contracts
d) None of the above

Every business relationship relies on contracts.

10.) Which of the following are included in contract management?

a) Creation
b) Negotiation
c) Amendment
d) All of the above

Typical contract management activities include - Contract creation, Negotiation, Assessment,

Relationship management, Contract amendment, Audits, Renewal

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Sample Worksheet 1

Offers
Use the spaces below to quickly write a brief offer. It does not have to relate to work and can be about
anything.

_____________________________________________________________________________________

_____________________________________________________________________________________

_____________________________________________________________________________________

_____________________________________________________________________________________

After the class discussion, refine your offer below.

_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________

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Icebreaker: Related Topic
Include a short activity here that is related to the topic of the workshop. You can use the one below if
you like.
1. Ask the participants at each table answer the following:

a. Why are they here?

b. What is their level of experience with contract management?

c. What they hope to get from this class?

d. What was their most memorable vacation or trip?

2. Have someone be designated a scribe and have them jot down the answers to question C above.

3. On a separate piece of paper, have the scribe write down the most interesting or exotic vacation
or trip from only one table member.

4. Have the scribe hand the note with the answers to question C to you.

5. Have the scribe stand and introduce the table to the class.

6. Then have the scribe share the most interesting vacation or trip from their group.

7. Have the class guess the person that had the most interesting or exotic trip or vacation.

8. Go around to each table until all have given you their answers to question C and shared their
most interesting trip or vacation.

9. Debrief by sharing all the answers to question C with the class.

10. Thank participants for sharing.

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CERTIFICATE OF COMPLETION
[Name]
Has mastered the course

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Contract Management
Awarded this _______ day of ______e____, 20___
Presenter Name and Title