A business encompasses a wide variety of relationships, and contracts are at the center of it all; whether it’s with clients, employees, vendors, or even partners. In the case of contract management and contract administration, it is crucial to understand that although people commonly use both terms, in reality, they deal with different sides of the contract lifecycle. It is very important to understand the difference between these two roles to ensure systems are in place to maximize the value of the contracts utilized.
This article will explain the contract management and contract administration business functions, their respective duties, as well as emphasize the importance of these roles toward effective contract performance.
What is Contract Administration?
Contract administration is the activity that manages contracts from the signing stage to the fulfillment stage. This is predominantly an operational function which involves ensuring compliance to the terms of the contract by both parties.
Key Responsibilities:
Safeguarding that all contract documents and their copies are executed and stored.
Tracking timelines, deadlines, deliverables, and performance milestones.
Liaising with internal departments and external stakeholders.
Managing communications and any clarifications that need to be addressed after the signing of the contract.
Making changes or amendments through addendums if need be.
Contract administrators customarily function as the facilitators of contract administration; they help the contracting parties adhere to the prescribed timelines while ensuring that the agreed-upon deliverables are achieved.
What is Contract Management?
The strategic discipline of contract management extends beyond just contracts. It includes every step relating to the lifecycle of a contract, namely pre-award tasks such as drafting, negotiations, and getting necessary approvals, as well as post-award administration and monitoring of performance. The objective is to maximize value, ensure compliance, and mitigate risks.
Key Responsibilities:
* Preparing and conducting reviews of the contract template drafts.
* Negotiating terms of the contract and reducing legal exposure.
* Ensuring the contract meets all legal and regulatory requirements.
* Controlling Renewals, Expirations, and other Obligations under the agreement.
* Assessing and evaluating the performance and deriving business intelligence.
Contract managers are proactive. They address not only operational compliance, but also strategic oversight, risk management, and continuous improvement.
Why the Distinction Matters
In small organizations, these are often combined into a single role. In larger firms, however, making a distinction is crucial for clarity and efficiency. Contract administration focuses on ensuring that contracts are fulfilled as planned. In absence of effective contract management, organizations may overlook risks, negotiation leverage, or renewal opportunities.
Investing in both areas of the business functions—supported by a robust CLM system—enhance compliance, mitigate disputes, and enable companies to function more seamlessly.
Conclusion
Both contract administration and contract management are important activities in the contract lifecycle, however, they differ in focus. Administration is concerned with the enforcement of a contract post signing, while management adopts a more holistic view, tactically analyzing the entire process.
Distinguishing between these two roles enables organizations to better configure the legal and procurement arms of the business, resulting in improved relationships, reduced legal friction, and enhanced value derived from the partnerships and contracts.