Most facility managers need to hire several suppliers: maintenance technicians, caretakers, security guards, electricians, HVAC companies… and dozens of other services needed in the day-to-day running of the company. Therefore, managing and monitoring all these contracts is essential to control costs and avoid breakdowns. So, how does contract lifecycle management work?
What is contract lifecycle management?
Contract lifecycle management is also known by the acronym CLM. CLM concerns the management of Facility Management contracts from the time they are signed until they expire.
Efficient and proactive management of all contracts can result in savings for the company as well as greater efficiency. It also helps ensure compliance and exposes the company to less risk.
What is the lifecycle of contracts?
CLM is considered to have five different phases, which are repeated over and over again:
- 1st – Contract creation: define the objectives and requirements of the contract. If you hire suppliers very frequently, you may have a template prepared in which you only need to add the services in question.
- 2nd – Negotiation: now, it is time to negotiate the terms of the contract with the suppliers. Get a team together to review each of the proposals and decide what concessions you are willing to make or not.
- 3rd – Execution: award the contract to a supplier. Each party has to sign the final contract (can be a digital signature). The responsibilities and rights of each party must be well defined.
- 4th – Contract administration: monitoring of the supplier’s activities, deadlines, and performance. At this point, you should use performance indicators to control supplier compliance.
- 5th – Contract termination or renewal: when the contract is coming to an end, you can let the contract expire or renew it. Have a deadline alert to look for a new supplier in time or renegotiate your contract… and start all over again.
What are the benefits of contract lifecycle management?
Just like monitoring the performance of technicians, monitoring the performance of suppliers is much more than “controlling” or “mistrusting” someone. It is absolutely indispensable to:
- Better coordinate all contracts and their costs;
- Better follow up on the deadlines of all contracts;
- Improve compliance and ensure legal obligations;
- Prepare reports more easily;
- Streamline the signing of new contracts;
- Terminate or renegotiate contracts that are not meeting targets.
Monitoring performance allows you to identify opportunities and processes that could be more efficient. Thus, you minimise waste, avoid disputes, and better control your investments.
Furthermore, by managing the contract over time, you can better assess the quality of services. In turn, this allows you to compare quality and costs – to determine the relative value of the services.
If one of the contracts is not meeting targets, you can terminate it and look for a new provider. Comparing all the options and renegotiating your contracts helps you control your maintenance costs.
Good practices for contract management
There are several good practices you should follow when working with your supplier. We highlight four to make it easier to communicate, negotiate, and manage the contract on a daily basis:
Be transparent about the objectives of the contract. Effective communication is essential to ensure a good negotiation and, later on, good contract management. By the way, check here our guide to communication.
It is always a good practice to define goals and accountability. Therefore, establish an SLA from the start, in order to align expectations and define performance indicators.
- Perform a risk analysis
Your suppliers take risks for you. Hence, do a risk analysis so that everyone you hire and subcontract is prepared and avoids unnecessary risks.
Most maintenance contracts are agreements that include a certain number of hours or a list of pre-stipulated tasks. Use digital signatures to save time when the unexpected happens.
Good contract management increases your agility, your ability to manage daily operations, and reduces your maintenance costs. While you’re at it, take a peek at 11 tips to reduce maintenance costs.