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Contracts intertwined with primary processes
Linda Tonkes |
February 17, 2023 |

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The contract management profession will not be known to everyone or will immediately evoke exciting associations. Nevertheless, the subject plays an important role in every organization, because after all, no one can do it alone. To get more clarity about contract management, we asked Linda Tonkes, next to Gert-Jan Vlasveld author of the book ‘CATS CM® – version 4′, to elaborate.

For people who are not familiar with the contract management profession, what does the profession entail and what role does it play within organizations?

Contract management, also called commercial management, is a relatively young field of play and is partly undervalued. It should be part of every business program, Master or MBA, but it is not that far yet. It is a real profession, ensuring that the contracts contribute to an organization and its objectives, because that is essentially what contract management is all about. For companies that outsource their primary processes, contract management even automatically becomes a primary process itself. Contract management is all about realizing the contract objectives, that in their turn contribute to the overhauling organizational objectives. This is done by ensuring that agreements are clear, complied with and adjusted when and where necessary and managing the risks associated with the contract. Cooperation between contract management and procurement or sales, who often draw up the contract, is essential for this.

Is there a difference between contract management in the public sector and private sector and if so, is that reflected in the book?

There are similarities in the work, but there are also differences. To begin with, the public sector often does not have a sales side as the private sector does. Another important difference is that procurement and contract management in the public sector have to work together early on in the contract life cycle, because the options for change are limited later on in the process. In the private sector, drawing up a contract can take place much later, because changes can be made at any time, as long as both parties agree. But even then, an early collaboration can pay off. In the book we have chosen to reflect the differences as little as possible, because we want to offer public and private, client and suppliers, a universal method with a common language. This is the only way to create the necessary clarity and structure. If we had not done that, our method would have lost its power. We do mention the aforementioned difference in timing when drawing up contracts, because the procurement side in the public sector is subject to mandatory tendering and the private sector is often not.

What is the importance of contract management for both these sectors?

For the coming years, organizations within the public and private sector will work together to achieve objectives in the field of sustainability and circularity. Together, in partnership. And how do you work together? Through the contracts, and that explains the importance of the CATS CM® methodology that is explicitly intended and set up for both clients and suppliers. With this methodology you can ensure even better that future generations will soon be able to do the things that are important for a pleasant life. That you make the world a little better, that you follow the legislation at the most appropriate price. This is an example of the importance of contract management for both sectors.

When it was published, the book CATS CM® version 4 was suddenly number 1 in the top 10 of Management books in the Netherlands. What did that mean for you and what did that mean for the contract management profession?

It is a methodical book for people working in the field of contract management. A book also with not the world’s most appealing title and not the sexiest subject. Then it makes you proud that it is number 1 and has reached the same sales figures in the past year as more widely readable books such as ‘Number 1’, ‘Discover your strengths 2.0’ and the management classic ‘The seven habits of highly effective people’. So, there is a lot of demand for the book. The sales figures for 2022, reaching the overall top 10 of management books for that year, confirm for us that it is a sustainable performance and not a one-off and short-term thing. It is also particularly good for the contract management profession, because it draws managers’ attention to the importance of contract management for the organization and their business. That the change in that area must come from within the organization and that CATS CM® method offers the tools for this.

For whom is the CATS CM® book important or relevant?

In fact, for everyone within an organization who has to deal with contracts and performance recorded therein. Contract managers, business managers, delivery managers, project managers, service managers, facility managers, buyers, purchasing managers, compliance managers, risk managers, account managers, sales managers and HR managers, their directors and steering committee members on both the client and supplier side. From strategic to operational level. That is a broad target group and that probably explains the large number of books sold. Many people within an organization have an interest in ensuring that the right performance is delivered because, together with the other agreements in a contract, they make an essential contribution to the realization of strategic organizational objectives.

Last year you published the book Contract management in project and service management, written together with Richard Steketee. Is that an extension of the CATS CM® book or can you see it as a completely independent book?

It is a completely independent book to read, it also includes parts of the CATS CM® methodology. That makes sense, of course, because project and service managers need to know how their work interacts with the work of contract management. That is why the book is thicker than CATS CM version 4. The book was created because the disciplines of project and service management asked how they could give substance to contract management within their daily work. In methodologies such as ITIL, IPMA and PRINCE2, contract management is mentioned, but there is no guidance on the “how”. CATS CM and RVM do give substance to this.

In the title there is mention of the CATS RVM method? To start with, what do the letters CATS, CM and RVM stand for? What is their connection?

CATS is the abbreviation of Contract Administration and Tracking Scenarios, CM means Contract Management and RVM stands for Realization and Verification Management. The latter role is often carried out by project and service managers at an operational level. The service or project they are responsible for are often broader than one contract and therefore the role of project manager and service manager goes beyond solely managing that contract. But they participate in it. And the how of that involvement is what CATS RVM is all about. With the book Contract management in project and service management we build a bridge between the project and service managers on the one hand and the contract managers on the other. We ensure that they speak the same language when they start working with contracts.

What is the added value of contract management? Do companies and organizations recognize this sufficiently?

The world is changing faster and faster. This also has an effect on contracts. After all, you do not always know what the details of those agreements should be. You can partly anticipate changes and partly not, so you will have to respond to them in the course of the contract. This has been the case for some time, but in the last three years the added value of contract management has become exceptionally clear. Due to the various crises, such as COVID and the war in Ukraine, but also the ship blocking the Suez Canal, organizations have become aware that continuous monitoring of the objectives and adjusting the objectives and contracts that realize them is essential. These crises have put the added value of contract management on the agenda. Be flexible and agile, both private and public. Managing the relationship with your suppliers has become more important for clients. Suppliers must be able and willing to deliver to you. You are dependent on it and that is where the added value of the contract manager comes into play. That managing contracts always plays a role and that it is always relevant. That it is therefore good to know about contract management and how it works.

How will contract management develop in the future? What does it take to reach that spot on the horizon?

There are more and more contracts and the pace at which the world is changing will not decrease. Also, unexpected things will continue to happen. The contract management profession will therefore increasingly intertwine itself with (primary) processes and will then be fully recognized. With this development, the profession will require other (soft) skills that will form a larger part of the profession. It will make the contract management profession more interesting and fun. New techniques such as AI and robotization will certainly contribute to this. From the registration of what is in the contract, it shifts to what impact this contract has on the strategic objectives. And of course the speed with which you have insight into this as an organization. In order to reach that spot on the horizon, the awareness among the upper management layers must grow even further. That managing contracts is a core process, that having a uniform language and approach and a flexible design of contracts are essential conditions for success.

Author: Linda Tonkes

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