A review of a contract management model based on Beverly Honig’s book (Making Contracts Work, Language Studies, Ltd., 2018) Making Contracts Work (by Beverly Honig)

In her book, Honig introduces the life cycle of a contract, just as project management has a life cycle for a project.  This is an applicable model for use by managers for the benefit of an organization.

Note: The project definition of a contract in accordance with PMI® is: The Contract is a legally bonded document.

An agreement is a contract when it consists of six elements::

  1. Offer
  2. Acceptance
  3. Consideration
  4. Mutuality of Obligation
  5. Competency and Capacity
  6. Intention to create a legal relationship

Note: In some cases it is required that the contract be in writing, such as a real estate transaction.

Contract Framework.  According to Honig’s model, the contract life cycle is divided into four stages:

Planning – Identifying the need for an agreement, deciding how the contract will be designed to achieve the best result

Procurement – Signing the agreement

Management – Executing the contract

Review – Including contract changes, contract review and evaluation

The four stages of contract management can be grouped into two modes of work, work on the contract and work within the framework of the contract.

The first two stages of contract life management cycle: Planning and procurement deal with the work on the contract before its construction and implementation, while the stages of management and review deal with the work within the framework of the contract.

 

The framework of the contract defines four principles that focus on each stage of the life cycle of the contract and lead to significant contractual results:

Planning à First Principle:  Objective clarity

Why the contract is required, what it is supposed to achieve.

Procurement à Second Principle: Measurement

Determination of measurements (qualitative and quantitative) for compliance with the contract and achievement of results.

Management à Third Principle: Flexibility

Excessively detailed contracts do not allow for initiative or compliance with changes that occur during the life of the project.

Review à Fourth Principle: Sustainability

Examining the effect of the contract after its completion.  Continuous follow-up of party of interest satisfaction for sustainability testing.

In her book, Honig presents the methodology of contract management in the following table:

Note: There are “transition risks” in the transitions between the four stages of the contract life cycle.  In order to prevent things from “falling between the cracks”, it is recommended to define the responsibility of each of the parties involved in the contract so that everything is recorded and agreed upon.

One of the important things in contract management is not only to understand it in lay terms, but also to share your understanding with the contract partners.  In particular, the responsibilities and reporting obligations of the various parties.

After the most suitable supplier for carrying out the contract and achieving its goal is selected, this should be defined in the form of measurements, as to what in their case will constitute success of the contract / project (measuring qualitative and quantitative performance).  This activity is done during the procurement phase.

In the third stage, contract management is carried out and in practice this is done by managing communication with the parties and conducting ongoing negotiations during the life of the contract.

The fourth stage of the contract management methodology is the review stage, which includes:  managing changes and adding to the terms of the contract, monitoring the performance, and evaluating the contract upon completion.

In the review phase, the contract performance should be assessed for what could be improved and what lessons should be learned for the benefit of the organization.

 

In Honig’s book, she expands on the methodology of contract management, outlining tips and techniques for the proper management of the process.

 

Good luck!

 

Yana Furman, Attorney

Note: The Hebrew version of the book was translated by engineer Gary Schaffer, a renowned expert in contract and communication management.

 

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