Contract management with CATS CM® version 4 E-Book

Gert-Jan Vlasveld

• Herausgeber: Van Haren Publishing
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 282

Veröffentlichungsjahr: 2020

Beschreibung

This book describes version 4 of CATS CM®. This methodology for contract management can be used in both private and public sector organizations, and is valid for both demand and supply side. Contract management is the realization of intended contract objectives by proactively monitoring the fulfillment of all contractually established responsibilities, obligations, procedures, agreements, conditions and rates, resolving all ambiguities, contradictions and white spaces, managing all contract-related risks, and implementing all desired changes to the contract, during the execution phase. CATS CM® offers a methodical and scalable approach to contract management. It provides a description of the principles, roles, and main issues for the contract manager and the best way of working. In addition to a description of the methodology, CATS CM® version 4 also offers specific tools for implementing contract management, for policy as well as for processes. Increasingly, organizations recognize the importance of being in control of their business ecosystem. CATS CM® assists organizations to increase control of their joint responsibility both from a procurement and delivery point of view. A large number of organizations have chosen CATS CM® as the standard for their contract management processes. This new version of CATS CM® has been developed with these various practices in mind. CATS CM® version 4 is based on the principle that the management of a contract in execution has strong similarities on both sides of the contract, i.e. demand and supply; both can best be described as working in conjunction with each other. This book is intended for all who are responsible for, or deal with the execution of contracts: contract managers, business managers, delivery managers, project managers, service managers, facility managers, buyers, procurement managers, compliance managers, risk managers, account managers, sales managers and HR managers, along with their directors and board members on both sides of the contract.

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Contract management with CATS CM® version 4From working on contracts to contracts that work

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Title:

Contract management with CATS CM® version 4:From working on contracts to contracts that work

Authors:

Linda Tonkes and Gert-Jan Vlasveld

Publisher:

Van Haren Publishing, ’s-Hertogenbosch, www.vanharen.net.

ISBN Hard copy:

978 94 018 0686 2

ISBN eBook (pdf):

978 94 018 0687 9

ISBN ePUB:

978 94 018 0688 6

Edition:

Fourth, completely revised, edition, first impression, August 2020

Layout and Design:

Coco Bookmedia, Amersfoort

Copyright:

© Van Haren Publishing, 2014, 2020

For more information about Van Haren Publishing, email us at: [email protected].

No part of this publication may be reproduced in any form including printing, photocopying, microfilm or any other means without written permission by the publisher.

Although this publication has been compiled with great care, neither the author(s) nor the publisher accepts any liability for damages caused by any errors and/or imperfections in this publication.

You are looking at version 4 of the CATS CM methodology. CATS stands for Contract Administration and Tracking Scenarios. CATS CM offers a comprehensive contract management methodology that has the flexibility and scalability necessary to adjust its use to meet your organization’s specific needs.

This first English version of the CATS CM methodology has been preceded by Dutch books on three earlier versions of the methodology. The methodology is continuously tested against interactions with contract management professionals in the field. In recent years, CATS CM has also been regularly tested based on the practical experiences of the authors as well as the professionals in related areas of expertise such as procurement, legal specializations, and auditing. This has also contributed to the further development of the methodology.

We believe that professional contract management will continue to develop and be further validated and structured into detailed best practices. We are proud that CATS CM – as a contract management application methodology – is playing a role in the development of these best practices.

Contracts give form and content to the collaboration between clients and suppliers. Wherever contracts are used, there is some form of contract management. Organizations that have not structured the management of those contracts can be sure of one thing: they will never get the most out of the intended added value of those contracts. Structuring contract management based on CATS CM can significantly improve this. It is also exactly why ‘from working on contracts to contracts that work’ is the subtitle of this fourth version of the methodology.

We have made an effort to use gender-neutral language in this book and, as we look at the field of contract management, we notice that the number of female contract managers is growing rapidly. The same is true for us, now that Linda Tonkes – who has been giving CATS CM training programs for many years and very successfully – has joined our ranks as a partner.

This book could not have been written without the support of several people who are close to us. They know that we thank them with all our hearts. Moreover, this book would have looked very different and would not have been so easy to read without the positive feedback and input of Arjen van Berkum and Richard Steketee.

We hope you will enjoy reading this book.

Linda Tonkes, Gert-Jan Vlasveld

June 2020

Introduction

Part I A VISION ON PROACTIVE CONTRACT MANAGEMENT

Introduction

1 EFFECTIVE AND EFFICIENT CONTRACT MANAGEMENT

1.1 Organizational goals and contracts

1.2 Effectiveness of contract management with CATS CM

1.3 Efficient contract management

1.4 Balancing costs and benefits

2 CONTRACTS AND CONTRACT MANAGEMENT

2.1 Definition of contract

2.2 Contract components

2.3 Definition of contract management

2.4 Definition of contract manager

2.5 Types of contracts and the applicability of CATS CM

3 SUCCESSFUL CONTRACT MANAGEMENT WITH THE CATS CONTROL MODEL

3.1 Factors that affect the success of contract management

3.2 The CATS control model

4 CONTRACT LIFE CYCLE AND THE SCOPE OF CATS CM

4.1 The CATS contract life cycle

Part II THE CATS CM METHODOLOGY

Introduction

5 PILLAR 1: WORK TO BE DONE AND ALL OTHER CONTRACT MATTER

6 PILLAR 2: ROLES

7 PILLAR 3: CONTRACT MANAGEMENT ESSENTIALS

8 PILLAR 4: CONTRACT MANAGEMENT PROCESS AND CONTRACT MANAGEMENT SCENARIOS

8.1 Initiate step

8.2 Plan-Do-Check-Act/Adjust cycle

8.3 Conclude step

8.4 Using contract management scenarios

8.5 Establishing contract management scenarios

Part III APPLYING THE CATS CM METHODOLOGY

Introduction

9 INITIATE

9.1 Kick-off meeting with the contract owner

9.2 Contract analysis

9.3 Assessing whether the intended contract manager can manage the contract

9.4 Intake meeting with the contract owner

9.5 Contract implementation

10 CM ESSENTIAL 1: CONTRACT OBJECTIVES

10.1 Importance of managing contract objectives

10.2 Identifying and safeguarding contract objectives

10.3 Interaction with the realization and verification manager

11 CM ESSENTIAL 2: STAKEHOLDERS

11.1 Who are the stakeholders?

11.2 Stakeholder management within CATS CM

11.3 Interaction with the realization and verification manager

12 CM ESSENTIAL 3: CONTRACT RELATIONSHIPS

12.1 Identifying contract relationships

12.2 Managing contract relationships within CATS CM

12.3 Interaction with the realization and verification manager

13 CM ESSENTIAL 4: RISKS

13.1 Risks that require management

13.2 Risk management in general

13.3 Risk management within CATS CM

13.4 Interaction with the realization and verification manager

13.5 The contract risk profile, risk management tool

14 CM ESSENTIAL 5: OBLIGATIONS

14.1 Dealing with obligations from WTBD and AOCM

14.2 Ensuring fulfillment of obligations

14.3 Obligation management within CATS CM

14.4 Interaction with the realization and verification manager

14.5 Obligations assessment: obligation management tool

15 CM ESSENTIAL 6: FINANCES

15.1 Aspects of the financial management of a contract

15.2 Financial management within CATS CM

15.3 Interaction with the realization and verification manager

16 CM ESSENTIAL 7: CONTRACT GOVERNANCE

16.1 What is contract governance?

16.2 Contract governance within CATS CM

16.3 Contract meetings

16.4 Interaction with the realization and verification manager

17 CM ESSENTIAL 8: SATISFACTION

17.1 How to determine satisfaction?

17.2 Expectation management within CATS CM

17.3 Interaction with the realization and verification manager

18 CM ESSENTIAL 9: CONTRACT CALENDAR

18.1 Contract calendar content

18.2 Maintaining the contract calendar

18.3 Interaction with the realization and verification manager

19 CM ESSENTIAL 10: CONTRACT FILE

19.1 Contract file construction

19.2 Availability and accessibility of the contract file

19.3 Maintaining the contract file

19.4 Interaction with the realization and verification manager

20 CONCLUDE

20.1 Contract phase-out

20.2 Personal conclusion

Part IV Implementing, Measuring And Improving Contract Management

Introduction

21 ESTABLISHING A POLICY FOR THE CONTRACT MANAGEMENT PROCESS

21.1 Content of the contract management policy

21.2 Definition of contract management

21.3 Establishing which contracts must be covered by the contract management process

21.4 The desired maturity level of the contract management process

21.5 The relationship between roles and functions

21.6 Required competencies to fulfill the roles and functions

21.7 Positioning contract management

22 THE PROCESS OWNER CONTRACT MANAGEMENT

22.1 Positioning process ownership

22.2 The role of the process owner

23 IMPLEMENTING CONTRACT MANAGEMENT

23.1 Implementation: steps

23.2 Implementation: actions

23.3 What are the implementation success factors?

23.4 An existing contract administration system: pitfall or success factor?

24 MEASURING, CONTROLLING AND IMPROVING CONTRACT MANAGEMENT

24.1 Measuring, controlling and improving the contract management process

24.2 Measuring, controlling and improving contract management on one contract

24.3 Consulting with colleagues

24.4 Improving contract management

25 THE CATS CM MATURITY MODEL

25.1 The scope of the CCMM

25.2 Maturity levels

25.3 Differentiating process, policy and systems

25.4 Applying the CCMM

Afterword

About the authors

Appendix A Possible content of a contract file

Appendix B List of Terms CATS CM version 4

Index

A constantly changing world

Change is nothing new. It is continuous and eternal. Technological and social changes rapidly follow one another, which is why revised policies and goals are coming out of corporate boardrooms at an increasingly faster pace. Even though long-term plans were commonplace in every sector when we published earlier versions of the CATS CM methodology, we now see that the strategy has changed from a comprehensive multi-year plan to a multi-year vision that focuses much more on the options for making additional and faster adjustments.

Nobody can and wants to do it alone

Responding adequately and timely to this fast-changing environment is crucial for the organization’s operations and continuity. Moreover, in recent years both suppliers and clients have been involving more and more parties, resulting in new collaboration models to facilitate this. Both clients and suppliers have seen the number of contracts increase and/or have become part of complex contract chains. There is also an increasing awareness that an organization’s overall contract portfolio has become an ecosystem rather than simply the sum of those contracts. As an ecosystem, the cohesive whole is aimed at delivering added value to the entire system. Consequently, the way the collaboration works towards a joint goal can be more important than the implementation of an objective linked to an individual contract. Creating value is a joint effort. Being open to external influences is essential for the proper functioning of the ecosystem. This requires flexibility and strong control measures on the overall contract portfolio within this ecosystem.

Changing times require different contractual relationships

The acceleration mentioned above also means that the relationship between client and supplier often needs to change as well. As the initial situation in which the contract was created remains the same for increasingly shorter periods, the need to allow for adjustments within the existing contract increases. This growing need for and frequency of change demands contracts that offer scope to do that. Moreover, the contract manager’s input and expertise have only become more urgent during the phases before the finalized contract is signed, which is why this version of the CATS CM methodology describes the contract manager’s role and involvement, in this pre-award phase, even more extensively.

Contract management has become a strategic necessity

Shareholders, legislators and supervising bodies all demand transparency. In public organizations, there is an ever-increasing call for a demonstrable structure of responsibilities. Besides, executive boards and directors in the public domain have gained a better understanding of the fact that entering into contracts can be a risky enterprise. Whereas financial risks used to be the main concern in contracts, today, aspects like continuity are increasingly often identified as a risk. In a society specialized to a large degree, outsourcing has become fundamental. The result of this specialization leads to contracts covering a much larger part of the process, while organizations no longer have the in-house expertise to adjust for any possible discrepancies. Suppliers almost always use contracts to structure their relationships with clients. Most of all, the rise of the customer-success function, which has an even more intense focus on delivery, indicates the increasing importance of the contract management function. The same applies to timely and adequate risk management. With the increased demand for transparency and responsibility, as well as the fact that timely and adequate contract risk management is quickly becoming more relevant, the importance of proactive contract management only grows, and is being added to the organizations’ agendas on a strategic level.

In version 4 of the CATS CM methodology, which is significantly extended and offers many practical tools, we respond to the changes and issues in the market, for which we can draw upon our experiences with the many organizations that have allowed us to share our expertise on contract management in recent years.

■ INTRODUCTION

Companies are entering into a rapidly increasing number of contracts, driven in part by specializations and niche players in the market, as well as acceleration caused by technological developments. For quite some time now, the make-or-buy decision clients have to make is not being made based on an individual need that must be fulfilled. Ever more frequently, companies are choosing to make a strategic choice to ‘buy’. Sometimes, this is even necessary because organizations no longer have in-house expertise in a broad range of areas.

It is not just the number of contracts that is increasing, but the form of collaboration is changing as well. Consequently, this increasingly results in the ecosystem described in the introduction to this book. That means that the relationship between client and supplier must be structured in a different way. As a result, this changed relationship requires contracts that are more flexible and more focused on value creation and the adjustment of contracts that do not yet offer that flexibility. Furthermore, contracts are increasingly contributing to the full implementation of processes. The effects of a possible discrepancy in the contract agreements increase and the response time to deal with them gets shorter. This is why contract management must become more proactive. Proactive contract management means: focused on activities linked to the execution and modification of a contract while concentrating on anticipating specific situations where possible or necessary.

Entrepreneurship is inextricably linked to having contracts. Contracting parties are increasingly aware that entering into contracts with due care is not sufficient to control the realization of the desired results, and it offers insufficient direction to the above-mentioned collaboration dynamics. This makes effective and efficient contract management crucial. The first chapter of this book explains what effective and efficient contract management entails and how CATS CM helps to achieve this. CATS stands for Contract Administration and Tracking Scenarios.

Our vision on proactive contract management is based on the idea of having effective and efficient contract management. Chapter 2 lists the most important definitions and explanations. Chapter 3 is a description of the determining factors for successful contract management and its implementation at a strategic, tactical and operational level. Last but not least, Chapter 4 describes the CATS contract life cycle, the role of contract management during those stages, and it delves deeper into the other processes that sustain this contract life cycle at an operational level.

As soon as an organization enters into contracts, each one of those specific contracts requires specific actions. This is a form of contract management. So, it is not a question of whether or not organizations need to use contract management but how they can execute the already existing contract management more effectively and efficiently. Applying CATS CM results in effective and efficient contract management through optimizing realizing of the contract objectives, minimizing possible contract risks, achieving costs savings and avoiding unnecessary costs. This chapter explains the correlation between organizational goals and contract objectives, and the elements of effective and efficient contract management.

■ 1.1 ORGANIZATIONAL GOALS AND CONTRACTS

Every organization has a mission and vision that determine its organizational goals. To realize those goals, the organization establishes a strategy that also takes laws and other regulations into account. Based on this strategy, the organization describes its goals for the short, medium and long term. When the organization enters into a contract with another party to realize its own organizational goals, these goals will also determine the contract objectives. The contract will describe how the objectives, for which the contract has been set up, are to be translated into performance. This performance can involve the delivery of both products and services. Figure 1.1 diagrams the relationship between organizational goals, contract objectives, and contract performance.

Every client uses suppliers, and therefore contracts, to carry out its activities to a lesser or greater extent, in order to realize its goals. Suppliers make choices when it comes to the products and services they offer and the markets in which they want to operate. Since the 1990s, the percentage of ‘contributions from suppliers’ relative to overall operations has been increasing significantly. Studies indicating that more than 70 percent of the total costs incurred by organizations can be attributed to the purchase or procurement of goods and services only confirm this. One of the main indicators that procurement has become even more important is the fact that Management Boards of both large and small organizations are choosing to appoint a Chief Procurement Officer (CPO), so that a solid embedding in the financial column is becoming the norm rather than the exception.

Figure 1.1 The relationship between organizational goals, contract objectives and contract performance

■ 1.2 EFFECTIVENESS OF CONTRACT MANAGEMENT WITH CATS CM

As described above, contract objectives are derived from the organizational goals. Such a relationship can still be a perfect match at the time the contract is finalized, but this balance may shift over time. The organizational goals may change and, partly influenced by the rapidly changing environment, the way contracts are executed is also in constant flux. Relationships between contractual parties can change, the required technical solution may already have been outstripped by the market, and contracted volumes may no longer meet the need.

Effective contract management ensures that the contract realizes the intention, for the correct compensation, with acceptable risks, and with the efforts planned by the organization. Whenever an organization’s needs change, effective contract management ensures that these changed needs lead to changes in the contract. The effects of good contract management contribute to achieving the contract objectives, the best possible relationship between contractual performance and contract value, as well as to savings and avoiding costs incurred by the organization in executing the contracts. The more contracts, and the more complex they are, the bigger the advantages of contract management.

1.2.1. Improved realization of contract objectives

The contract objectives describe what the organization wants to realize with the contract, and this applies to both purchaser and seller. Contract management following the CATS CM methodology is primarily focused on contract objectives and so it contributes substantially to achieving them. Sometimes, this contribution can be directly demonstrated in monetary terms, but there may also be a qualitative contribution.

A unique category of contract objectives are those related to compliance, meaning that the organization complies with laws and regulations. This is something every organization has to deal with. Even though there are many different areas in which laws and regulations are applied, there are some elements that apply to a broad range of laws and regulations to which good contract management contributes:

■ Adequate documentation is very important.

■ An organization is held responsible for structuring and implementing a quality system that guarantees compliance with laws and regulations.

■ The compliance control measures carried out by the organization must be defined and their execution and conclusions must be visibly documented.

■ Non-compliance has severe consequences (financial, reputation, continuity).

Considering these elements in advance, while the contract is being drafted, ensures that there is adequate focus on the completeness of the documentation, the control measures that must be implemented, and the assessment of these measures as soon as the contract comes into effect. This is even more applicable when some of the documentation or control measures have been outsourced as part of the contract.

Due to the abovementioned reasons, compliance officers and internal audit department staff are increasingly promoting contract management implementation.

1.2.2. Relationship between performance and contract value

The contract value is the sum of the client’s budgeted expenditure based on the contract with the supplier. The contract value reflects the compensation for the deliverables. The supplier benefits from a higher compensation while a lower compensation is a financial advantage for the client. This might lead to the assumption that a supplier focuses exclusively on achieving the highest possible contract value and the client the lowest. However, things are not that simple. For suppliers who invoice their budgeted sales to the penny and achieve exactly the expected return, contract management does not seem to have gained them anything on paper. However, without proactive contract management, they might not have achieved the expected return. For the supplier, contract management can have a substantial impact in terms of client satisfaction, more efficient use of internal resources, or the opportunity to try new innovations.

A client who pays the agreed amount to the supplier while, at the same time receiving a modified service that still meets the changing user needs, does not save on expenses but will have a more satisfied organization. If this same level of satisfaction would have been achieved without contract management, the client might have had to pay for additional work. In that case, we are not talking about cost savings but about cost avoidance.

1.2.3. The organization’s contract costs

The contract will cost the supplier more than just the cost price of the products and services provided. Other costs that may have to be included are costs for making the proposal, contract management, quality control on delivery, and storage. It goes without saying that suppliers are very much aware of the fact that the contracted delivery costs more than just the people and resources involved, and that this must be included in the cost price calculation on which the quoted price is based. Suppliers understand this concept very well. We now see that clients are also becoming increasingly aware of this. The costs incurred by a client for entering into and performing a contract include more than just the amounts payable to the supplier. Such costs can include activities related to the procurement department, legal advisers, contract management, quality controls on receipt, and the financial department.

The contract value plus the operational costs incurred by the party’s organization to ‘own’ the contract is called the Total Cost of Contract Ownership (TCCO). In addition to the contract value, TCCO also covers the costs of entering into the contract as well as contract execution and termination costs. The supplier has to include the sum of all these costs in the cost price of what is to be delivered. The client needs to include the TCCO in the make-or-buy decision: the business case based on which the decision for buying goods or services is made.

To understand the concept of TCCO, the organization must know which and how many employees are involved with the contract, in addition to the direct costs incurred in paying the supplier or spent by the supplier on the delivery to the client. These may include the employee responsible for the contract, the co-workers who have to be consulted regarding the contract, and colleagues who spend time ensuring the optimal execution of the contract. To this, costs for legal advice, financial administration, and the organization’s own project and service management must be added. Furthermore, the TCCO may also include costs for materials storage, workplaces for the supplier’s staff, and costs related to providing access to the organization’s locations. As the contract value grows, and with the increased variability of the environment, correspondingly larger budgets must be set aside to cover the costs of contract governance, contract extensions, continuing modified contracts, or terminating them. The termination of a contract also means that the supplier’s involvement with the client must be terminated organizationally. This contract phase-out also involves costs that are part of the Total Cost of Contract Ownership.

1.2.4. Quantifying the effectiveness of contract management

Only limited research has been done into the quantitative aspects of what contract management yields. Without exception, these studies look at the correspondence between performance and compensation and leave all other aspects aside. However, the results of these studies are consistent and indicate cost savings and cost avoidance between 5 and 10 percent of the contract value. Our experiences with businesses using CATS CM show that the implementation of CATS CM during the onboarding of already existing contracts can instantly achieve significant advantages.

■ 1.3 EFFICIENT CONTRACT MANAGEMENT

Efficiency means reaching a goal by using as few resources as possible. These resources may be related to the time spent on the contract, raw materials, or available systems. They can be translated into money and, thus, into costs. Contract management costs are those incurred in the deployment of the required staff to deal with contract management, the costs for support systems, and the indirect costs associated with these such as office, insurance, and workplace costs.

These costs for the entire organization depend on various factors:

■ the number of contracts;

■ the complexity of the contracts;

■ the structure of the contract management scenarios;

■ the extent to which the contracts are critical to business operations.

Once a contract manager has made a contract management plan for an individual contract, it is possible to estimate the time required to manage the contract based on this plan. The hourly rate can be used to calculate the estimated costs. Recording the time actually spent, and analyzing the differences between that and the estimated time, ensures that the organization continuously improves its own experience figures on which subsequent estimates are based.

When preparing their business case, suppliers often calculate a form of TCCO in advance, in which they include costs such as contract management, relationship management, project management, and service management. When structuring their contract management, they will often take into account the structure chosen by the client.

■ 1.4 BALANCING COSTS AND BENEFITS

Organizations with contracts who want to professionalize their contract management to make sure that they realize their intended contract objectives, choose to what extent they want to professionalize contract management. This is established in the contract management policy. This policy also identifies the choices that have been made regarding the desired effectiveness and efficiency of the contract management process. For some organizations, compliance with certain laws and regulations is reason enough to implement intensive, full-scale contract management. Other organizations want to see a monetary result related to contract objectives or contract value.

When the choice to apply contract management must be made, every organization makes its own evaluation of risks, costs and benefits. Regardless of the result of those evaluations, the following always applies:

Contract management pays off when its execution leads to added value, better risk management, and/or better (demonstrable) compliance with laws and regulations.

In the previous chapter, we explained the effectiveness and efficiency of contract management. When organizations decide to use CATS CM to organize their contract management more effectively and efficiently, it is best to know the definitions used in CATS CM. This chapter defines the most important terms related to contract management. These terms are the foundation for the rest of this book.

■ 2.1 DEFINITION OF CONTRACT

A book about contract management must, first of all, define the term ‘contract’. Laws and regulations in different countries give definitions of the term contract that may seem to differ in nuances but which largely share a common foundation. This common foundation is expressed in the following definition:

A contract is a written agreement, the result of a multilateral legal act, in which one or more parties enter into an agreement with one or more other parties.

When we delve deeper into this definition, we see that the definition indicates that compliance with the terms of the contract can be legally enforced. This is meant by the term ‘legal act’. The ultimate form of enforcement is that a dispute arising from the contract can be brought before a court of law. There are other ways of resolving disputes as well, such as mediation, which can be agreed upon in the contract.

The definition also mentions the fact that a contract is a written agreement. Most legal systems offer the option of entering into a contract by verbal agreement. Because it is crucial, from a contract management standpoint, for the agreements to be in writing, the definition uses the words ‘written agreement’.

In practice, supply agreements between different parts of the same organization are also called internal supply agreements or internal supply contracts. As disputes about these agreements can’t be brought before a judge (but rather taken to the higher management levels) and are subject to entirely different forms of dispute resolution, we don’t consider them to be ‘real’ contracts. This is also why we are especially careful when applying contract management to this type of internal agreement. In addition, the implementation of contract management for internal agreements means the costs double for the organization as a whole and the benefits for one party are the additional costs for the other. This means that monetary yield for contract management is zero while the organization still has to pay the costs.

■ 2.2 CONTRACT COMPONENTS

When considering contract management, the content of every contract can be divided into two parts: The Work To Be Done (WTBD) and All Other Contract Matter (AOCM). The distinction between these two components forms the foundation for the CATS CM methodology for defining and identifying the different tasks and responsibilities during the execution of a contract, and to allocate them to the different roles.

Figure 2.1 The Work To Be Done and All Other Contract Matter

The WTBD describes the performance to be provided by the supplier, which the client wants to receive. This includes how this must be done, the other aspects such as location, time of delivery, and how parties measure and account for the WTBD. Other aspects of the WTBD are the matters that the client has to arrange to ensure that the supplier can meet the performance obligation.

CATS CM categorizes all elements that are not part of WTBD as AOCM. These include, in any case, the agreements about compensation, agreements about how to act when the WTBD is not delivered according to the contract, agreements about interaction and collaboration between both parties, and also the applicable procurement or delivery terms and conditions.

■ 2.3 DEFINITION OF CONTRACT MANAGEMENT

The contract life cycle, which will be extensively explained in Chapter 4, represents the phases that every contract has to go through. The contract life cycle has an important transition moment, which occurs when the contracting parties finalize the contract by signing it. Contract management is the managing and monitoring of a contract from the moment the contract has been signed. With this in mind, the CATS CM definition of contract management is as follows:

Contract management is the realization of intended contract objectives by proactively monitoring the fulfillment of all contractually established responsibilities, obligations, procedures, agreements, conditions and rates, resolving all ambiguities, contradictions and white spaces, managing all contract-related risks, and implementing all desired changes to the contract, during the execution phase.

The AOCM described in Section 2.2 can be recognized in the definition as the ‘contractually established responsibilities, obligations, procedures, agreements, conditions and rates’.

■ 2.4 DEFINITION OF CONTRACT MANAGER

The definition of contract manager can clearly be derived from the definition of contract management.

The contract manager is the person appointed by the contract owner to ensure that all activities arising from the contract management process are carried out.

This book is about contract management; so, it explains in great detail the tasks, responsibilities and mandates that CATS CM assigns to the role of the contract manager. We have listed several examples by way of illustration:

■ The proactive management of all agreements, obligations, conditions, assumptions, expectations and objectives relating to the contract, within an established authority or mandate, from the moment the contract has been signed until its conclusion.

■ The elimination or reduction of defects, white spaces, ambiguities, and differences of interpretation in the above-mentioned aspects.

■ The management of risks that may occur during the execution.

■ The timely provision of the most accurate information to the stakeholders – according to the agreement – regarding the status, progress, finances, and realization of the contract objectives.

■ The organization, conduction and administration of meetings with other parties involved in the contract.

■ Ensuring the insightful administration of the contract file.

■ The management of non-contractually established (secondary) objectives that are still important for the contracting party.

■ 2.5 TYPES OF CONTRACTS AND THE APPLICABILITY OF CATS CM

The applicability of CATS CM is very broad. In terms of applicability, we only find some distinctions in the types of contracts when we consider the parties involved in the contract:

■ Contracts between individuals.

■ Contracts between individuals and organizations, generally referred to as B2C (Business to Consumer).

■ Contracts between organizations, also referred to as B2B (Business to Business).

Marriage contracts and, frequently, sales contracts for housing are examples of contracts between individuals. Contracts between individuals and organizations include contracts such as employment contracts, insurance, and mortgage loans. The third type of contracts, those between organizations, can include contracts for the delivery of goods, services, or for the development or production of a new company asset.

The first two types of contracts are beyond the scope of this book. They need contract management, but they will often be handled very differently than contracts between organizations. Organizations can be businesses but they can also be government institutions, foundations, associations, etc.

CATS CM does not distinguish between the different ways of structuring the WTBD and can be used for all B2B contracts. Needless to say, not all contracts require the same level of contract management. CATS CM addresses this issue by offering contract management scenarios. These contract management scenarios are described in Chapter 8.