What Are the Key Differences Between Contract Administration and Contract Management?

Contract management and contract administration are two terms that are often used interchangeably in organizations. They share similarities in terms of their functions and are crucial for the success of any business. Their primary goal is to safeguard the resources of the organization. Contract administration and management involve managing agreements with employees, partners, vendors, and customers. Negotiations of the contract terms, ensuring compliance, documenting the terms and conditions, and agreeing to changes that may arise later during the implementation stage are all part of the systematic process. The ultimate objective is to enhance operational and financial performances as well as productivity.

A well-crafted contract that is legally binding and mutually beneficial is essential for all parties involved. The contract administration department plays a crucial role in ensuring its success, as any issues arising during this stage can have a significant impact on the later stages. The terms and conditions established by the contract administration team determine the implementation and working relationship within the contract.

Difference between contract administration and contract management

While contract management and contract administration may seem similar and are often handled by the same team, they do have distinct differences. Contract administration is the initial stage of the process, where the focus is on executing the terms of the contract. Contract management, on the other hand, comes into play after the contract has been executed and involves ongoing monitoring and optimization of the contract to ensure maximum value is delivered.

The team responsible for contract administration handles all tasks leading up to the signing of the contract, while the contract management team takes over once the contract is signed and ready for implementation. Each team has distinct duties, responsibilities, and workflows that do not overlap. Contract managers frequently communicate with contract administrators to obtain information regarding the initial negotiation and the intended language of the contract.

Effective management of contractual obligations with external parties requires both contract administration and contract management to ensure a seamless process and avoid legal disputes. Maintaining open communication channels between the two teams is crucial, even if they operate independently, to address any potential issues that may arise during the contract process.

Contract administration vs contract management

Contract administration

During the contract administration phase, the contract team is responsible for planning and developing contracts. This involves identifying potential contracting partners that align well with the company's needs and objectives. Requests for proposals are then sent out to a variety of sources to gather proposals and assess the best fit for the company.

It is crucial for those involved in the process to possess a comprehensive understanding of all pertinent aspects of the contract, including the commencement date, payment disbursement date, acceptance terms, and dissolution clauses. The contract administration team is tasked with carefully scrutinizing the details and resolving any discrepancies or issues that may arise at the outset. This team collaborates with prospective partners to negotiate important factors such as performance expectations, delivery timelines, and pricing.

During the initial stage of the contract cycle, there is an administrative aspect to it, but it is also crucial to negotiate terms and conditions that are equitable and beneficial to your business. This requires a strategic approach. The person in charge of this stage is responsible for finalizing the contract language and addressing any requested revisions.

The contract administration team is responsible for working with both parties involved to establish the terms and conditions, as well as outlining procedures to measure performance at regular intervals to ensure both parties are meeting their obligations. Additionally, the team is responsible for overseeing automatic renewal clauses and defining what constitutes a material breach of the contract.

The role of the contract administrator is over once the contract is signed.

Example of contract administration

As ABC Limited competes for a new project, the task of sending out a request for a contract proposal falls on the shoulders of its contract administrator. It is their duty to reach out to potential vendors or contractors and request their proposals for consideration.

Contract management

Once a vendor is chosen by the company, the contract administrator takes on the crucial task of drafting and refining the language that will outline the specific terms and conditions of the contract.

Effective contract management begins with the signing of the contract by both parties. This marks the start of the process where the contract management team takes on the responsibility of ensuring that all obligations stipulated in the contract are met within the agreed timeline.

The contract management team holds the responsibility of verifying all details pertaining to the fulfillment of the agreement. This includes ensuring the efficient use of resources such as personnel, equipment, and relevant expertise required for completing the contract. In the case of a business entity producing a product with retail partners, it is the contract manager's duty to guarantee that the retail partner has the essential marketing materials and signage. Furthermore, the team is accountable for training and educating salespeople to ensure proficiency in their duties.

Example of contract management

Flexibility is crucial during implementation as unforeseen circumstances may arise, leading to necessary adjustments to ensure timely completion of the project. The contract management team plays a vital role in identifying and facilitating any required amendments or modifications to the existing contract. Their expertise and knowledge of the project make them best suited to determine the necessary changes for a successful outcome.

After the contract is signed between ABC Limited and the vendor, the contract management team takes on the responsibility of executing the terms of the agreement diligently. This involves ensuring that the products are delivered to the retailers and retail outlets in accordance with the agreed-upon terms and that the retailers are equipped with the necessary resources to effectively sell the product.

It is the responsibility of the contract management team to track sales and figure out the way of dispersing revenues.