Good evening Abdullah - I'll contribute an observation on the first one. Perhaps others who have been doing contract management and procurement for longer than me might have a different view, or say it more eloquently, but here goes....
Purchasing is a subset of procurement. It is the giving effect to a lot of the procurement work that you've done earlier (i.e. establishing what you want, identifying suppliers etc).
That said, I think that you can purchase without doing procurement, and in fact, I'd go so far as to say that you can even get the same outcome.
However, only by procurement can you demonstrate that you've got the right outcome. If you only purchase, and don't understand your needs, identify the market and consider the offerings against your needs, you can't demonstrate that you've got the best outcome for the business.
And this is where I think we as a group can demonstrate our worth to the business. We can show with procurement the outcomes that we've avoided (goods not matching requirements, getting better pricing outcomes, repetitional damage etc) by running a fair and robust process ensures that the business is better off.
On many occasions I've seen my team has moved someone from their initial fixed ideas into better outcomes by taking the time to show them what's possible and what good looks like. Do that enough times, and you have more and more allies in the business to encourage others to use your services.
Check out this article in the IACCM Library, 'Procurement' and 'Purchasing' Are Different:
Having looked at this topic, there is actually already a lot written on the question of the difference between purchasing and procurement. As they observe, for the typical person they are probably the same, but apparently 'the experts' in procurement know the difference! Though once you start reading, there is plenty of contradiction...
When it comes to Supply Management, it is yet another variant and clear as mud whether it is actually different from Procurement. Supply Chain Management is certainly a more holistic activity of which procurement is part, but that's about all you can really deduce.
The net is, these terms are used with a high degree of variability and tend to mean whatever anyone wants them to mean; the only common factor is that they are all associated with the act of buying!
Years ago Procurement and Purchasing were often used interchangeability. These days they have very different meanings. Procurement refers to the end-to-end activities from strategic category management, through to the operational analytics of spend and performance, to the tactical buying and sourcing activities which can happen in-house or in shared services.
As the Procurement function has 'grown up'it has become far more strategic, so although the term Procurement refers to all the activities conducted by the function, it also implies more strategic perspectives. The scope is also overlapping with other related functions like Finance (Accounts Payable as part of the purchase to pay process) and supply chain (Supply Planning, product innovation and supplier performance management). The increasing focus on digital in Procurement is also seeing more collaboration with other functions for example, RPA (Robotic Process Automation) and machine learning, process automation and contract management, and predictive analytics.
Purchasing is clearly the administrative activity of raising a purchase order, managing the goods/service receipt notice and approving to pay. More advanced companies use on-line catalogues to support this along with automated workflow routing and defined delegations of authority. Put simply, Purchasing includes the tactical purchase and approval activities to support buying.
When we speak about supply chain today, we tend to talk about a value chain. Some organizations are now including supply chain and Procurement in one organization given the overlaps, but predominantly they continue to be separate, but related functions.
Supply chain will include demand planning and forecasting, distribution planning, warehousing and logistics, manufacturing (which may also be a separate function), supply planning and often new product development.
Where Procurement gets involved most is in supply planning and supplier performance management, for instance, using contracts to enforce performance, and collaborating with supply chain and marketing for product and service innovation by tracking supply markets and innovations.
Conceptually, the Procurement function has shifted from managing costs to providing value. Using advanced analytics of COGS and SG&A data, digital tools and advanced supplier market research, the function is working far more collaboratively with other functions. As business cadence increases, functions are becoming more linked and lines between which function does what is blurring.
In addition to particular responses from other members who may have noticed such a potential decline in remuneration, if any, I would encourage the poster of this forum entry to regularly check IACCM annual salary review. Please refer to our IACCM library, by clicking on www.iaccm.com/resources/contract-management-resources/
The performance of the Contract Manager role and the performance of the Contract Management Process in general is one of our key points in each one of our recent IACCM anual conferences and networking events, as the matter takes us to the question: "How should we measure and demonstrate success?"
Indeed, while transactional performance is clearly important, it rarely offers the insights that we need, if we are to raise our status and our contribution.
Our thinking and our measurements must start to focus on driving benefits at a portfolio level and relate directly to achieving the strategic goals of our business.
Value will be delivered through a process based view, through monitoring the outcomes of what we do, through generating measured innovation and continuous improvement.
This depends upon capturing and analysing performance data, through challenging established rules and procedures, through inspiring the new models and approaches we have discussed this week. And it also depends on courage - developing leadership and influencing skills.
Keep in mind one of IACCM survey findings: 'Contract Management is one of the least automated processes... and this results in inefficiency and weaknesses in PERFORMANCE oversight, as well as in the absence of management reporting and information'. Here we value the importance of Contract Management Automation and that´s why we are focused on this topic in recent Ask the Expert sessions and in our future events (Australasia and The Americas conferences).
Dear David, have you thought about listing out every task that contact managers are responsible for in your corporation then, assigning a numerical value to each task. Then, assigning a score to each task to analyse and create a quantified report on your overall contract management performance?
e.g. you mentioned governance, negotiation, change process as a few of the tasks. Perhaps you could write these tasks in a spreadsheet and assign values like so:
You could average each of the score values and weigh it against how important each of the tasks are (based on their numerical value). From a high level point of view, based on these numbers, you could create a percentage of "contract management performance efficiency" per quarter/month/week/day for each of your contract managers.
This is just one idea. As full disclosure, I work with a contract management software vendor where we help our clients effectively manage their contracts online. We don't have this particular feature built out on our software yet, but would be open to discussing further and building it our for you in our Analytics & Reporting function, if you'd be interested.
Feel free to contact me directly at firstname.lastname@example.org
Hope the above ideas help!
• Academy Sports + Outdoors
The less standardization you have on your services the greater the difficulty will be in establishing useful performance metrics that span your portfolio. For example, a BPO contract or a customer IT services agreement will have many specific considerations that can lengthen the time of negotiation and result in contracts that vary substantially from other contracts in the same portfolio.
There are a few disadvantages from the pass-through approach. First, the party bearing the cost is not in direct negotiation with the source of the cost. As such, some costs that might be more aggressively addressed are not fully addressed. The discussions around how to best manage and mitigate the costs will exclude the party who is ultimately most interested and invested in those costs. As such, there is seldom much innovation or break-through thinking generated in these discussions.
There are other disadvantages arising under pass-through approaches related to the contractual terms, which also impact costs.
That's what SI's do. You go to an SI to be a one-stop shop. It is inevitable that he wont be able to do it all himself so much will be subcontracted. Where this is done at zero margin (!) we call it pass through. It does make me wonder why an SI would want the admin and risk burden of such a large pass through without any reward and, I agree with Anonymous that you are distanced from the party actually completing the work, so you don't have direct control over half of your project.
Hire a good PM and split the SI contract into two and deal direct with both.
Not sure of the size of your proposed project nor of your organization. I just finished leading negotiation of a large, multi-year ERP implementation project that will span several countries and be vital to our company's future. We have a single SI who has the resources to complete the work themselves (we reserved the right to review and approve any proposed subcontractor/subcontractor resources prior to their use). Not sure why you have an SI that wants to, if I understand correctly, use one or more subcontractors to perform a significant portion of the work.
If you are using a smaller Systems Integrator, then I would want to make sure that the SI is responsible for consistency in how the work is performed and that consistent methodology is used; and that ultimately the SI is FULLY responsible for the work delivered. Depending on the size of the ERP work and your organization, you may want to hire a Project Management team or at least Project Manager to help oversee the timely completion of the work.
As to you question about whether or not the project is worth executing - without knowing the business case, the cost and understanding the risks, I'm not sure anyone can answer that, but I would be cautious with such a large percentage being subcontracted.
Communications is a repeated source of success or failure in contract management (as with so many other pursuits!). Unfortunately, communications are treated as a step or action item. Successful contract management programs often cite their sustainable communication strategy, and not merely an occasional tactic, as the key driver of their success.
It would be interesting to see whether any members have examples of sustainable communication strategies that they can share across the IACCM membership base.
• Academy Sports + Outdoors
I've noticed generally that younger, less mature organizations have a less enthusiastic view of the contract management function, whereas a large, mature organization usually has realized at some point that it is essential. To a certain extent, I think that we in legal or contract management roles are unreasonable if we expect that others will really "get" what we do. Normally they just want answers or results. But time and time again I've seen the greatest successes come in situations where the legal/contracts function sits down and works directly with the business leads as partners. Once the business leads feel supported, they will become evangelists, that is, provided that the support we give is creative, responsive, and timely.
• Zensar Technologies Ltd.
Contract Management needs to be driven as strategic initiative, with top down approach to see success. Integrating the activities of contract management with existing quality audit process and project execution norms may give the required boost or importance. Continuous improvement with revision in tools and checklists, creating extensions of contract management process within the stakeholders like sales and operations, by providing enough ammunition through trainings and continuous dialogue to resolve issues. Management attention and involvement in the process can be increased by helping in provisioning of visual metrics depicting risk analysis, risk profiling without consuming the precious hours.
• Fokker Aerostructures BV
I would like to reply (after two years :)) to the second comment here below which starts with a great observation on the effect on maturity of organisations on how they perceive contract management bu then states that "Normally they just want answers or results. But time and time again I've seen the greatest successes come in situations where the legal/contracts function sits down and works directly with the business leads as partners. Once the business leads feel supported, they will become evangelists, that is, provided that the support we give is creative, responsive, and timely."
Actually my view is that if this would be sales-side contract management this exactly describes the way less mature organisations look at contract management. Contract management 'only' as supporting function and not as performance monitor, 'checks and balances' of sales and delivery, profit maximizer and risk reducer which goes much further then working together with other functions but actually keeping them on track.
Hello Ayyub, I can only speak to how the titles you list up above are being used in North America, and only given my experience so far. Contracts Manager and Contracts Specialist are sometimes used by companies interchangeable, i.e. their job profile are quite often identical. The Contracts Administrator supports the Contracts Manager in his/her role and therefore is below Contracts Manager. I'm not familiar with the title Contracts Engineer and I have not seen this title or profile in job postings in the US and in Canada.
Hope this helps.
There is no hard written rules, but some are the tips and this is again based on your organisation size, business and structure;
Contracts Manager - Who processes exceptional skills and knowledge about various types of contracts, starting from pre-qualification of vendors, tender exercise, contract award, administration and contract close-outs, audit queries, and able to supervise, coach and advise the management and his staff, monitor good governance and compliances.
Contract Administrator - can be an assistant to contracts manager or post contract administrator, invoice processing, issuing call-off and variation orders, documentation, maintaining correspondences.
Contracts Engineer - ideally an engineer, who has exceptional skills to develop tendering and contracting activities and can negotiate, interpret the scope and changes, can develop pricing strategies and formulas, peer reviews, planning and costing knowledge as well as effectively interface with end-users etc and etc,
Contracts Specialist - can be a category specialist such as drilling, production and maintenance, vessel chartering etc and etc,
I can understand contractor reluctance and potential difficulty. Do you allow contractors to share details of their contracts with you?
In my view, best practices are to ask specific ques tigons regarding contractor's performance under contracts, focusing on areas you care about. You might also require references. In both cases, you might make clear that you are depending on these representations.
• Praxair Inc. a member of Linde Group
The contractors are right to push back on your request for obvious legal reasons. I'll suggest that you ask them for references from their past and present projects and get in touch with those references that are of interest to you in order to confirm the contractor's performance on the projects
• Nexen Energy ULC
There is an organization in Alberta Canada called Construction Owners Association of Alberta. I am a co-chair of the Contracts Committee and we have a number of best practices under our committee and are developing several more (like a standard format for a EPC scope of work).
One of our best practices is for Contractor Prequalification. I think you will find it of some help to you. the link is www.coaa.ab.ca/ Let me know what you think.
• Kaman Precision Products
I have to agree with the post that talks to requiring past performance as well as reference checking. As a sidebar, if you are in the process of pre-qualifying a contractor how well defined can the period and scope be? There are times in my current role where we are in the pre-qual stage and know nothing more than a rough order of magnitude and have a rough period of performance. Sometimes these are not nailed down until 50% CD or later.
It depends on the objective of your pre-qual process. For our company, pre-qual only identifies if a prospective bidder should/should not receive an RFP across just 5 key risk areas (safety, finance, quality, technical, legal. Suppliers answer either yes/no or provide a number to each pre-qual question. We then allow these suppliers to attach any documents they believe strengthens or clarifies their answers. We do not force them to provide confidential contract info to us at this time. That might come later in either the RFP or negotiations.
If you are requesting specific contract sections from your bidders, you are most likely doing much more than pre-qualifying them. Before asking the supplier to provide contract sections, you should discuss this type of request with your legal counsel and counsel of the country in which the supplier resides.
• ATCO Electric
From my experience, we have been asking contractors to provide contract completion letter or reference letter from previously completed jobs. Experience letter from similar industry are scored higher than others. Some smart contractors take good reference letters from their satisfied clients and use it freely for pre-qualification, which same time helps the project owners in their pre qualification process.
As the vendor I would push back as already mentioned by other contributors here. Asking for references is fine, asking for value of contracts delivered to check whether a vendor has a capacity, skills, experience is also acceptable. Vendor's contracts and even customer's portfolio is simply treated as a trade secret. Unless a customer provides the vendor with references the contract very often prohibits a disclosure that the deal was done.
This said, I'm pretty sure that "Procurement" is the term commonly used in PM circles (It's certainly the term used in PMBOK) so I would question whether the re-brand is the way to go.
Is your procurement team centralised / remote from the projects? Any prospect of co-locating resources? (Even if it's only one or two days a week - it's harder to hurdle a real person!). Any road-shows / team building events in the pipeline?
Any idea if the Contract Management team feel like there is a similar issue between themselves and the PMs?
Thanks for your reply, useful comments. Something cosmetic like a name change would certainly not help on its own, but I was interested to see if anyone had done it successfully as a starting point of wider culture change. We've tried lots of things over the years, and our Commercial team on the sales contract side do indeed have the same problem. We have different offices, but the majority of project staff are in the same building as us. I think part of the problem is that because people are so busy, they don't stop for 2 minutes and just think about what they need to do, it's not deliberate bypassing (on the whole). It's an age old issue that I know many contracts staff face.
• Seiersen Enterprises
I like to think that effective procurement delivers the right deal with the right supplier. If you are really committed to doing that, to making your internal "client" successful, you will be less likely to be bypassed. That is very much in the way you engage with them, and what you do for them, If you help them see risks and opportunities they had not yet identified, and find a smart way to handle them, word will get around, and you may have to turn away business!
A new name might not be the way to go - but a new tag line might.
I'm not sure what it would look like in your business, but maybe along the lines of "Making your deals happen" or just "the right deals with the right suppliers"
It's a great question!
Many functions struggle with this same issue - and in the end, it's about behaviour more than a name. Of course, the Procurement 'brand' may be tarnished, but re-naming usually doesn't fix it. It's a visible - and perhaps shocking - change of behaviour that makes people start to think differently.
I've led and witnessed transformations and I'd be happy to chat with you if you would like to discuss ideas.
• Ricardo-AEA Ltd
Thanks for the further replies, much appreciated.
Tim - I'll take you up on that offer, thank you. I'll talk to my boss as I'm sure he'd like to be in on the conversation. Will be in touch.
• New Zealand Defence Industry Association (NZDIA)
Commercial has much more positive connotations but it is going to be deeds and actions rather than titles that will change perceptions. The IACCM research on the Future of Contracting is a good thought provoking read about what needs to change.
In one of the previous organisations I worked for, the whole procurement and contract management division was called "Enabling Services" and this was quite effective in creating a "helping" culture for our operational areas. In fact, we had a "customer service" attitude and this was quite transformational - Of course, culture is more than just having a name change and a new slogan.
Our organization refers to the staff negotiating and writing the agreement as the Contract and Sourcing Consultant. This implies a higher degree of service and consultation than merely drafting something that someone else authors. As a result, the staff that hold these roles have higher expectations on them to provide such consultation to stakeholders.
IACCM undertook research on this subject and identified the range of titles being used. If you contact Katerine Kawamoto (email@example.com), she can send you the report
• Woodward, Inc.
Contract Specialist, Sr. Contract Specialist & Contract Manager- these titles are used at my current company (Energy/Aero Industry) and at my previous company (Financial Industry) for they type of role that you are describing.
• Eren Enerji Elektrik Uretim A.S.
I established the commercial department in our organization of an energy company with a difficulty on determining the job titles. I recruit mostly industrial engineers like me and we are now 4 personnels. In my mind, I am planning to make the organization as "commercial and contracts director" at the head of the department, "commercial and contracts manager" just under the director. Under manager position, "commercial and contracts specialist" will come. At the bottom position I have a difficulty to specify the title. I think two options. One of them is "commercial and contracts professional" suitable in English but professional has same meaning with specialist in Turkish. "Commercial and Contracts Engineer" is the other option but I am not sure that "commercial engineer" is suitable. Could you give idea about this bottom position? What do you have in your organization? Thank you.
• SAP East Africa
In my organization there are contract specialists who do the actual drafting and also Deal managers that manages the whole contracting process- who in most organization are referred to as contract managers
I've seen the following contract titles:
Global Contract Manager, Standards and Governance (strategic role)
Contract Manager (negotiator role)
Contract Specialist (drafting/redlining role)
Contract Administrator (tracking/reporting/database management role)
Typically, people in these roles have some sort of Legal and Business acumen to different degrees relating to contractual risks and contract language to address those risks.
Commodity Managers solely manage the commodity, project, pricing, supply chain and supplier relationship. They do not have legal experience.
To achieve successful contracts, both the Commodity Manager and the Contract role(s) need to collaborate closely and leverage each other's experience in the negotiation process.
• B+G&S Nigeria Limited
In my organization we have a Contracts & Procurement Manager who oversees the activities of the department. We also have a Senior Contracts Engineer who reports to him. He also in-charge of reviewing contracts that have been drafted by the Contracts Administrator before their approval and release. He heads the negotiation team too which comprise himself and the Contractor Administrator. The Contracts Administrator has legal background while the Senior Contracts Engineer is an engineer by training.
Hi Peter - I think this is a useful survey to capture the views of people. From across the other side of the world, the two that resonate significantly with me are very similar to this list, with I think defining value right near the top.
I think the easiest thing for people to measure their success used to be cost reduction. But I think that mindset is a long way from the current movement of being strategic, and running perhaps even against the push towards social or environmental outcomes.
Without an easy measure, from my perspective, the best way to measure success is the feedback from your end users which includes suppliers. Did they understand the process, did it work for them, and post contracting, are they happy ? Sure, it gives people less ability to compare across organisations, but I think it's that competition, rather than co-operation, that sometimes stops us from achieving better outcomes.
• Simoons & Company
From a customer-supplier perspective I agree with your observation that cost reduction has most often been the measure of success. However cost reduction on that side often leads to rising hidden costs elsewhere in the organization. In strategic partnerships we not only look at value, but also at the full relationship to measure success. To do so we interview, and/or survey, stakeholders at both sides.
Most important element of measuring success however, is not the measurement itself, but the action plan connected to it to improve the elements that lag behind.