You’ve negotiated a contract with a vendor or customer, all key parties have signed, and now you’re ready to execute the agreement. But how do you make sure the contract goes according to plan after the ink dries?
You implement a contract administration plan.
Contract administration plans are working documents that summarize the contract details both parties need to know in order to fulfill their contractual obligations. A well-crafted plan should answer four key questions:
- What are the deliverables?
- Who’s responsible for delivering them?
- When are they due?
- How will they be delivered?
In this blog, we’ll explain why contract administration plans are critical for contract success, and share our best practices for creating one:
Why Do You Need a Contract Administration Plan?
Considering that contracts are the leading cause of legal disputes, having a contract administration plan in place is a smart way to avoid costly disputes and hold both parties accountable.
Contract administration plans prevent misunderstandings, breaches, and litigation by ensuring both parties understand their contractual obligations — and how to execute them.
Unlike contracts, contract administration plans are typically shorter and written in plain language so all stakeholders, including executives and project managers, clearly understand their roles and responsibilities. By outlining the contract’s logistical details, these plans make it easier for teams to stay on track with their milestones, monitor performance, and address issues before they escalate.
For example, consider this scenario: Your team has just executed a new contract, and they’re ready to kick off the project. All that’s left is to set up a meeting with the other party’s point of contact, align on a timeline for the first couple of deliverables, and then communicate the calendar to your team. But then, your contract manager or administrator gets sick.
With a contract administration plan, your team members can keep things moving forward even when your contract manager is unable to. All the details your team needs to fulfill their obligations — from deliverables to key dates to budget — are clearly defined in the plan so they can execute the contract without confusion.
Now for the next question: How do you create a contract administration plan?
Best Practices for Creating a Contract Administration Plan
When creating your contract administration plan, always remember what these documents are intended to do: Make contract execution easier.
With that in mind, consider these questions when mapping out your plan:
- Who: What roles will be involved in each phase of the contract?
- What: What is the scope and what are the key deliverables associated with this contract? What are the performance metrics?
- When: When will the project begin? How long will the contract last? What are the key delivery dates?
- How: How will you address potential risks? How will you adapt to changes?
Let’s take a look at these in more detail:
Assign Roles and Responsibilities
This is where you start to integrate the “whos” with the “whats” — what are your key deliverables, and who’s responsible for them?
Oftentimes, those responsible for carrying out the contractual obligations are not the same individuals who negotiated the contract. In your plan, compile a list of the team members who will be working on each contract deliverable, along with a description of their responsibilities and their contact information. Note: As you begin thinking through who’s responsible for the work on this agreement, consider their capacity to complete the work as well as how long the work is expected to take.
Establish Scope and Deliverables
It’s much easier to avoid scope creep when everyone has a shared understanding of what they’re expected to deliver at the end of a contract.
In order to avoid disputes, clearly define what the contract deliverables entail, including any technical specifications or other special provisions. Also, make sure to include a checklist for each deliverable and the methodology you’ll be using to evaluate delivery quality.
Map Out the Timeline
Your plan should summarize key dates — like project start and end dates, milestones, and deliverable deadlines — to ensure your team is upholding its end of the agreement. In this section, you’ll also want to indicate how often progress updates will be sent out for each deliverable.
Bonus: If you’re struggling to keep track of deadlines across all your contracts, an AI-based CLM platform can help. With these platforms, you can create automatic email reminders to ensure you never miss a key contract date or deadline again. You can also view upcoming deadlines in a dashboard, so you can have greater visibility into your contracts and track everything in one location.
Pinpoint Your Risks
No contract is immune to risk, but identifying the risks — and mapping out a contingency plan — can prevent your contract from failing.
In your plan, address the risks that are most likely to occur with the project, as well as the countermeasures to take if they do occur. Also, build in some wiggle room in your work plan so you can recover from unexpected delays without missing deadlines or endangering contract completion.
Signing a contract is only half of the contract management battle — the rest requires meticulous planning, tracking, and monitoring throughout the contract’s lifecycle to ensure both parties are adhering to the terms of their agreement. That’s why contract administration plans are your best bet for keeping your teams aligned on what, when, and how deliverables are completed.
Looking for more ways to streamline your contracts and successfully execute more agreements? Visit our blog for more contract management insights, tips, and trends.