While some of the tasks and responsibilities in contract management and project management may overlap, these two processes may also vary widely. For simple contracts or projects, businesses may opt to use one team to reduce labor costs. However, more complex endeavors may require separate teams for contract management and project management. This is especially the case for projects or contracts that need content-specific expertise. 


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What is contract management in project management?

Contract management is the process of managing the creation, execution, and analysis of contracts to maximize operational and financial performance in an organization, all while reducing financial risk. Organizations face an ever-increasing amount of pressure to reduce costs and improve business performance in every project they undertake. As such, it is important to have a proper contract management system within the project management process.


What are the types of contracts?

Aside from the three most commonly used types of contract, contract managers may also encounter other forms of contract in their business dealings. Here are some other forms of contracts that a contract manager should know how to handle.


Express and Implied Contracts

The terms in an express contract are openly stated, in either writing or orally, during the negotiation. On the other hand, implied contracts can have terms that must be inferred by actions, facts, and circumstances that would indicate mutual intent from all parties involved to form a contract.


Unilateral and Bilateral Contracts

Also known as one-sided contracts, unilateral contracts refers to agreements in which only one party commits to take action or provide something of value. Meanwhile, bilateral contracts involve the participation and agreement of all the parties involved in the exchange of goods or services.


Adhesion and Unconscionable Contracts

Adhesion contracts occur when a bigger and more powerful party with more bargaining power drafts the terms in which the smaller party may only accept or not. It is different from unconscionable contracts, in which the terms are usually unjust or give more advantage to one side over the other. 


Aleatory and Option Contracts

Aleatory contracts are usually executed when an external event occurs. A perfect example of this would be insurance policies. Option contracts, on the other hand, allow the party to make another contract with the other party at a later time. 


More on this topic: What is the difference between a contract manager and project manager?


Why is contract management important in project management?

While project management is in charge of the overall monitoring of on-going projects to make sure that terms of agreements are met , it is the contract management team's job to define and negotiate said terms. Contract management helps project management minimize risk and cost by establishing beneficial and achievable parameters for key project business strategies, processes, and relationships. These parameters include payment terms, negotiations, workflows, compliance obligations, and service expectations.


Why do we need contract management?

Entering into a legally binding agreement without a proper contract management system in place may always lead to dire consequences that may leave the business in a tough spot. Poor contract negotiating, unorganized paper trail, and/or lack of monitoring often leads to disputes and project delays that may cause a business to spend more time, money, and resources than what is necessarily needed. 


Why is contract management so important?

Contract management is important for companies because it is the procedure of monitoring contracts through a system that allows easy tracking of its terms, transaction components, and restorations.


More on this topic: Why is contract management important?


Is contract management part of project management?

In smaller contracts or projects, it is possible that contract management may exist within the project management system or not exist at all. However, larger projects that involve external acquisition of goods and services may require two separate teams for contract management and project management. The contract management team is usually in charge of all deals relating to the contract lifecycle while the project management team is the ones responsible for anything related to the actual execution of the terms and contractual obligations. 


Who is responsible for contract management?

Contract managers cover a variety of industries, from government to technology to any company that has a large number of contracts. Regardless of the type of organization, one consistency is that contract managers are the primary individual responsible for creating and managing all the contracts that those organizations use.


What qualifications do you need to be a contracts manager?

Contract manager positions usually require a bachelor’s degree related to the job and a specific certification for contract management. To be an efficient contract manager, one should also possess at least basic knowledge of the legal system, business, finance, and IT. Great leadership skills, keen attention to details, initiative, and effective verbal communication are also a must. 


More on this topic: Why would companies use contract management?


Why do project managers use contract team members?

Contract management requires a very specific set of skills and know-how to become effective. Most often than not, project managers are only concerned with the success of the project. In some instances, project managers are able to finish the project without reference to the contract. However, the contract is a vital document defining the responsibilities and liabilities of different parties when things go wrong. As such, it is important for project managers to have a contract management team that can help in monitoring and tracking if the terms and obligations indicated in the contract are being met.


More on this topic: What are the top 5 contracting skills?


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