In the evolving landscape of public procurement, the push toward modernization is not just a trend but a necessity. Effective contract management is at the heart of this transformation — a critical component that can significantly influence the efficiency and success of public sector procurement.
Unsurprisingly, improving contract management is one of the top 10 procurement priorities for 2024 by the National Association of State Procurement Officers (NASPO).
That said, according to KPMG’s 2023 Global Procurement Report, which surveyed both public and private organizations, only 35% of respondents rated their organization as having “high maturity” in contract management.
For public institutions, high maturity in procurement means having well-defined processes supported by technology that eliminates inefficiencies and enables greater collaboration and faster contract cycle times.
To move into a stage of high maturity, public organizations can use a proactive and performance-focused contract lifecycle management (CLM) approach that empowers them to increase the efficiency and impact of their procurement.
Here’s what we’ll cover:
What Is Contract Management in Public Procurement?
The Importance of Contract Lifecycle Management in Modernizing Public Procurement
How CLM Solutions Benefit Procurement in Public Institutions
In public procurement, contract management refers to the process of tracking contracts with vendors to ensure that both parties meet the agreed-upon requirements. It includes developing contracts, overseeing vendor management, checking the quality of deliverables, managing timelines, and paying vendors.
Because public contract lifecycles often span months or years, it can be easy to lose track of their performance and measurement until they’re right about to expire, particularly when dealing with multiple vendors and timelines.
That said, modern organizations can use full-lifecycle contract management to create an advantage for themselves by enhancing transparency and auditability, while improving overall efficiency.
CLM is a proactive approach that involves methodically managing a contract through each stage — from initiation to signing, contract execution, performance tracking, and renewal/expiration — to ensure the intended outcomes are met. CLM is a crucial element of procurement modernization as a whole, and it’s one of NASPO’s top procurement priorities for 2024.
Simply digitizing government contracts and signatures prevents institutions from monitoring and managing contracts proactively. While tools like e-signatures are widely used and valuable, they only impact the signing stage of negotiations rather than driving overall efficiency. The key to full contract lifecycle management is the ability to optimize pre- and post-signature processes.
As such, procurement teams must facilitate and streamline communication before the contract is signed. For organizations wanting to modernize, using technology specifically designed for CLM is the only way to optimize the contract process.
Leveraging CLM and supporting it with the right tools can help public organizations take significant strides in modernization by creating efficiency, improving communication throughout the entire procurement cycle, and ensuring that the full benefit or intent of the contract is met.
Driving Efficiency Through Standardized Processes
In the KPMG survey, 60% of respondents listed inefficient processes as a key factor holding back their CLM’s effectiveness. The good news is that there are steps you can take to make processes more efficient and turn CLM into a strategic asset.
Standardizing procurement contract management processes ensures consistency, reduces errors, and saves time. Following a methodical approach to contract monitoring and management makes it easier for sourcing teams to identify key metrics, collect performance data, and assign roles and responsibilities.
For medium- and high-intensity contracts, Harvard’s Kennedy School recommends using a contract management plan. A platform specifically designed for CLM can help generate further efficiency by reducing manual processes.
Turning Contract Management from a Burden to a Benefit
Taking a comprehensive approach to contract management from pre- to post-signature enhances progress toward organizational goals and objectives. Specifically, promoting early vendor qualification and collaboration leads to better outcomes for all parties.
For public procurement teams, that means facilitating efficiency and communication during the request for proposal (RFP) process, which has a large impact on contract negotiation. Traditionally, RFP processes have been prescriptive rather than collaborative in hopes that more detail will lead to procurement success.
An eprocurement and CLM software made for the public sector enables more communication and collaboration, which means organizations can draft RFPs that clarify specific objectives while giving vendors the freedom to provide creative and innovative solutions.
It also drives efficiency by creating a centralized contract repository, offering complete contract control, supporting compliance, and providing integrations with other systems, such as your RFP platform.
Enabling Continuous Improvement
A CLM platform is more than just spend reporting and contract digitization. It enables the efficient management of the entire lifecycle of the contract, from pre- to post-signature through to expiration or renewal.
A dedicated contract management software typically provides dashboards and reports that help procurement teams gain insights from previous contracts. These insights enable data-driven decision-making that allows for proactive risk management, supports strategic sourcing, and drives continuous procurement strategy improvement.
Identifying and measuring key performance indicators (KPIs) early in the process creates vendor accountability and increases adherence to contractual obligations. KPIs can include:
Contract data gives procurement professionals a baseline to use when defining contract terms and conducting vendor meetings to ensure both parties remain aligned toward the agreed-upon objectives. By monitoring past contract performance, you can also identify ways to build strong supplier relationships and improve outcomes over time.
ERPs and digital contract repositories don’t provide the necessary intelligence or contract management tools to modernize your procurement processes. With the support of dedicated CLM software, you can facilitate continuous improvement and cost savings without having to spend all your time navigating handmade spreadsheets.
To learn more about eprocurement and CLM tools designed specifically for the public sector, explore our government buyer solutions today.
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