Contract Management OR How to Get the Game to Play

For "42% of enterprises [...] the top driver for improvements in the management of contracts is the pressure to better assess and mitigate risks" and "nearly 65% of enterprises report that contract lifecycle management (CLM) has improved exposure to financial and legal risk.”

Contract Management: Optimizing Revenues and Capturing Savings". Aberdeen Group. May 2007.

By the time you want to scale up, things get more complex - so do contracts. You may feel overwhelmed and tempted to put pressure on others. But then ?

  • What if it fails ?
  • What if you forgot important things ?
  • What if you did choose the wrong partner or vendor ?

Let’s face it – bottom line it remains Your duty, Your money & Your business dream you want to thrive, and fallacies are more far reaching than in previous years. However,

Vast opportunities

open up for those who take action. So,

  • How do you get what you really want ?
  • How do you get this game to play ?
  • How do you develop the necessary sensitivity or adequate patience?

For a calmer approach to contract complexity, for you

  • to develop a feeling for the relationships & time schedules
  • to operate your contracts and adjust your expectations

we have put together a 5-Part-Guide about

What to consider the most ?

Contract Types

Your contracts will be of many types. We talk about complex contracts that are necessary for

  • construction projects
  • goods or services that are highly regulated
  • goods or services with detailed technical specifications
  • intellectual property (IP) agreements
  • outsourcing and international trade *

Preparatory Work

Many companies work with preferred providers and hold :

  1. Secrecy Agreements - also known as Non-Disclosure Agreements (NDA) or Confidential Disclosure Agreement (CDA) - to protect intellectual property.
  2. Master Service Agreements (MSA) – which contain the broader legal framework for multiple engagements & mostly also sub-categories like quality agreements.
  3. Work Order (WO Templates) – mostly an agreed template appendix of the MSA, provides a basis for single assignments & project related specifications and stipulations.
  4. Change Order (CO Templates) – an addendum of the Work Order to be worked out as things may evolve.

If none of these examples or a similar framework is put in place for the service (or the service provider) you desire, your work may have kicked off, immediately after informal acceptance of an offer without formal protection of your investments.

The entire process is much less likely to cause headaches if you follow a

5-Part-Guide on HOW to Operate Contracts
(Internal/ corporate steps (i) vs external negotiations/ commitment (e) steps.)


Activities & Remarks

i / e

anticipated timelines
(if to be managed by internal resources exclusively)

1. Provider spotting

Internal Alignment

  • Define the needs & desires
  • Spot / consult with internally accountable persons
  • Define a budget assumption (it will be subject to change)
  • Screen the market for potential partners
  • Contact those you’ve got on your shortlist (suggesting 3-5)
  • etc.


varies broadly

assume about 4 – 6 weeks at a minimum

CDA signature

Sign CDA (s) if sensitive information will be exchanged with the potential partners

i / e

A new Secrecy Agreement (1-4 weeks)

2. Provider(s) assessment(s) including due diligence


  • Elaborate providers capabilities & capacities
  • Evaluate their financial stability
  • Schedule perform, evaluate audits and due diligence steps [after which you may have to start your selection process again]
  • Standardize, develop and document steps & key indicators for future selection processes
  • etc.

i / e

Up to 6 months, rarely below 4 months

3. Negotiation Phase


Develop or have templates at hand for

  • Specifications
  • Cost proposals
  • Any kind of contracts


Ongoing (at the beginning – you can also use vendor templates)


Collate specifications into one overview deck that allows you easy comparison & differentiation.




  • Prepare
  • Negotiate
  • Conclude

If available consult with Legal & Compliance early enough to agree on what is required to make your project a success.

i / e

  • A new Master Service Agreement 3 -6 months
  • A Work Order around 6-8 weeks
  • A Change Order / Amendment approx. 4 weeks.


  • Elaborate and specify in close collaboration with your vendor.
    (We never see the full picture & can overlook important details.)

Know what you need and be diligent to document what you need to get to your milestones.

i / e

varies broadly


  • Ask -depending on the total volume to be spent- for more than one quotation (recommendation : 3)
  • Compare them for details and differentiators and find out what causes them (don't worry about unit fees at this stage. Different providers use different pricing models and may combine several aspects in a different way. You need to get to understand it).

Up-font payment - if requested it should be ideally linked to something that costs the provider money up-front. Try to stay below a certain percentage (7.5 % are mostly reasonable)

Financial “Cap / Ceiling” – consider one of up to 10-20 % and define & agree under which circumstances it can be touched.

Financial outliers – challenge them as a last step, before you grant approval. By nailing down what you NEED, you will deliver „savings“ and stay below anticipated budget (20% on average).


Considered at provider selection and/ or at negotiation phase

Fine- print

It is there for a reason, and if you can’t sort it out during negotiations and you can’t live with it, cross the vendor out from your list and walk away. However, if you can, consult your advisor prior to walking away.


Considered at Contract Conclusion


  • Ensure breakdown of fees and define deliverables to be provided at pre-defined milestones.
  • Invest sufficient time to detail all deliverables as specific as possible.
  • Involve the ultimate project owner to obtain endorsement that deliverables are defined sufficiently so no surprises occur when service performance is not as expected.

i / e

Considered at negotiation phase

Sign off

  • Have a Secrecy Agreement signed before you disclose any confidential information.
  • If you need to start working immediately and cannot wait for contract to be negotiated,

a) Get a Letter of Intent and

b) Work in parallel on the final contract version, and finalize once specifications have been confirmed.

i / e

Considered at provider selection and / or at negotiation phase


If you are very good and have the capacities ~ 6 months

More likely 9 – 12 months

4. Maintenance

Internal Reviews

Watch it and schedule frequent internal reviews from scratch and throughout the project.

Make sure nobody spends for “nice to haves”.

Set up a formal process for changes to be agreed upon.

Set up a process to check progress as agreed upon vs money spent.

Set up a formal process of accepting deliverables.

Control invoices

(Be aware that quite a few invoices may need revision.)


Ongoing throughout performance

Amendments & Renewals

Agree upon a contract review circle

Some collaborations require continuous adaptations and depending on the complexity of the projects it may be difficult to keep control of change orders put in place. Therefore, consider agreeing on an end date or date for contract renewal.

(That way you regain project and spending control.)

i / e



Wrap up

Compare what was agreed upon vs. what was delivered in total. Then have a final invoice with an overview breakdown (outlining provided deliverables and actually invoiced and paid costs).

i / e

approx. 4-6 weeks

Final output

Consider that one for any (more precise) future prediction.



Some more practical hints :

"Processes and systems, written and unwritten rules shape [y]our workforces behavior." (Leandro Herrero, Daily Thoughts)
Therefore, create policies, processes or systems about set up, involvements, budget approvals, signature rights & more.

  • The timelines above are estimations that reflect an excerpt of guided experiences made in various industries. What may look unrealistically long - if we consider the different expectations & the many people on both sides + maybe even 3rd parties, it simply comes down to it.
  • Some information is always missing and may have an impact on your contract closure.If you cannot agree upon a final contract in time, you still can agree upon e.g. a Letter of Intent (LOI) that limits activities and associated costs but fits for the purpose to keep the project rolling.
  • You can agree upon contract signature that signature date and effective date differ.
  • Keep cool & make good decisions. Stick to maintenance and keep control – actively !
    • We really often see signed contracts with no signature date – which could mean in worse case that they could be even considered invalid!
    • No plan goes according to plan; no contract goes according to initial assumptions. Agreements are living working documents until agreed activities are completed.
    • If you find out that your initial assumptions aren’t matching your needs - that's fine. That’s normal. Develop your contracts gradually.

What if things don't work out?

If one can't pay or can't deliver, or wants to walk away, then what? When you contractually agree with the other party on fair exit possibilities, you're almost certainly investing in a better future, because you know in advance what the options are....

All in all

What may sound overwhelming is not that bad at all as your duty is to

  • gather disparate pieces of information
  • process them as a group
  • evaluate options
  • and decide

Collectively you will make better decisions than anyone could make on one’s own.

You need to MAKE things happen – as much as needed, and as simple as possible.

Happy Negotiation !

* adapted from

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