Definition of 'Contracts' and 'Commercial'

Published: 13 Jun 2016 Average Rating: 3.7 / 5 Print

Author: Tim Cummins

'Contract management' and 'commercial management' are terms and job titles that are often used interchangeably. Yet in many environments, they mean different things. As the global body for contract and commercial management, IACCM provides definition for both.

The challenge of divergent functional names and job titles is certainly not unique to this field. For example, what is the difference between a project manager and a program manager, or a project manager and project engineer? How does Procurement differ from Supply Management or Purchasing?

IACCM's brief definitions are as follows:

  • “Commercial management' is the activity which defines the overarching policies and practices that provide a framework for trading relationships
  • “Contract management” is the discipline through which those policies and practices are implemented and within which individual transactions are agreed and performed

Both activities need to be undertaken in a company. Often they are performed by the same function. They are also interdependent because the information generated by one feeds the other. For example, commercial policies and practices are influenced by the market experiences encountered during contract management. At a functional level, commercial management is strategic and contract management is operational.

Why does definition matter? Quite simply because without it, there is confusion. As mentioned at the beginning, different groups may undertake the same work, yet have different names; or equally, those with the same name may perform different work. So definition ensures common understanding.

It should be noted that the IACCM definition in both cases reflects a full life-cycle role. There are those who see 'commercial management' as covering only pre-award activities and 'contract management' covering post-award. Again, we accept that there may be division of job roles, but suggest it is wrong to lose the integrated view of process. Indeed, research into 'best practice' contracting makes it clear that such divisions are a source of weakness and value loss. High performing organizations have a consolidated end-to-end process.


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