Contract management with CATS CM® version 4. Gert-Jan Vlasveld
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Figure 3.1 Factors that affect the success of contract management
Figure 3.2 The CATS control model
Later in this section, we will come back to the terms strategic, tactical, and operational, with the activities that take place on these levels. At the strategic level, the organization decides what to do. At a tactical level, it decides how to do this. Who is going to do which activities and when is decided at an operational level.
In the CATS control model at a strategic level we use the term Contract Policy. At a tactical level, we talk about Contract Control and at an operational level, we use the term Contract Management Process.
A solid control model consists of a good policy that ensures consistency with contiguous processes and agreements at the strategic level. It is structured in such a way that it offers a fluent reporting flow from the operational to the strategic level in which systems, reports and procedures are seamlessly linked.
Strategic level - Contract Policy
At a strategic level, we talk about Contract Policy. First of all, it is at this level that the organization determines how to structure contract management at the strategic, tactical and operational levels. Organizations make decisions regarding the nature and type of contracts they enter into. Naturally, the general company policy affects the contract policy. As part of their general policy, suppliers determine which policy decisions they make regarding in which market segments the organization wants to be active, which forms of collaboration they aspire to, the services they want to offer to achieve the targeted position in the market, and the clients they absolutely want to serve or not serve. Clients use their general policy to determine which goods and services they consider to be of strategic interest to ensure the continuity of their organization, and the type of market players they want to do business with. A decision to outsource services is also part of this general policy.
It is at this level that organizations determine their policy when it comes to entering into contracts. This may include:
■ What type/form of contract do I want to have?
■ What type/form of contract do I not want to have?
■ How do we manage the contract risks?
■ What are the rules for contract management?
■ How do we draft a business case for contract management?
■ What are the principles and procedures for contract ownership?
■ What is the definition of tasks, responsibilities and mandates (including procurement)?
■ What information must be provided to control the flow of contracts at a strategic level?
The strategic level determines which elements are necessary for the tactical level. The strategic level also provides the tactical level with a budget.
Tactical level - Contract Control
At a tactical level, the Contract Policy is further elaborated to create manageable processes. The organization is structured based on the choices made on this level. The way to approach these processes, which we present in this book, is CATS CM. Tactical level management ensures that all contracts entered into by procurement or sales departments are in line with the Contract Policy. The tactical level is responsible for managing the operational level, so operational-level management must also be structured by the tactical level in such a way that the operational process can be measured, assessed, analyzed, improved, and adjusted in a timely way.
Management protocols have to be established and available for identifying tasks, responsibilities and mandates, for creating rules for the way Contract Boards are formed, and for internal rules on the frequency of meetings with standardized agendas. The development or selection of methods and systems for contract, project and service management is part of the tactical level, as is the responsibility for full implementation and adequate facilities to apply them. The roles involved in the contracts should be clearly defined within the organization, and the internal allocation of people and resources, as well as training and education, must ensure that the contractual obligations can be met and that compliance can be verified.
Operational level - Contract Management Process
At an operational level – the Contract Management Process – the decisions made at the tactical level, regarding measures, agreements, and obligations, are being carried out, thereby fulfilling the strategic level. CATS CM provides the methods, techniques, procedures, guidelines, and tools that can be used at the operational level to contribute to the cohesion and consistency of the global contract control of an organization.
Administrative measures are necessary at an operational level to ensure that contracts always remain in line with the choices and objectives defined at the strategic level and carried out at the tactical level. The information provided to the tactical-level manager must be such that the timely and effective monitoring of and adjustments to the operational process are ensured.
This approach is designed to enable the contract manager to implement the contract management policy correctly.
A process model is a simplified representation of a real situation used to shape the direction of the presented process. CATS CM uses the CATS contract life cycle (CATS CLC) as a process model. The contract life cycle is a model that describes the processes used during the creation and execution of a contract. CATS has its specific contract life cycle model that makes the application of CATS CM clearly visible.
This chapter describes the CATS contract life cycle and focuses on the scope of the CATS CM contract management process in relation to this life cycle. We also further explain the responsibilities of the various roles involved in the contract life cycle during its different phases.
■ 4.1 THE CATS CONTRACT LIFE CYCLE
Contract management is not performed in isolation. A contract is the result of a more or less parallel procurement and sales process that consists of multiple phases. These phases can be formalized in a process description or they can be more ad hoc based on the insights of the parties or people involved. The contract life cycle encompasses all phases involved in the creation and execution of a contract.
Formally speaking, the term ‘cycle’ is not entirely accurate. A contract has a beginning and an end; however, when one contract has been closed out, another contract often takes its place because the underlying need still exists. This is why the term ‘life cycle’ is used.
In this chapter, we discuss the different phases of the CATS contract life cycle. We will also give a step-by-step explanation of the phases in which the contract management process based on CATS CM happens. The description of the CATS CM contract management process activities is based on these steps and they are included in parts II and III of this book.
4.1.1. The CATS contract life cycle
The CATS contract life cycle can be schematically represented as follows:
Figure 4.1 The CATS contract life cycle
Every contract has a life cycle consisting of multiple phases. The CATS CLC as depicted in figure