The key benefits of effective contract administration November 7, 2017

Contract administration describes the process for ensuring that all the party's performance and execution of the agreed contract terms are met according to the defined requirements. This involves sitting down and discussing with the vendors and explaining what is expected beforehand and that there will be several monitoring and milestone reviews throughout the contract phases.

Many of the functions of contract administration involves the planning and development of contracts. These functions include an understanding of all the major components of the contract. The components can include delivery dates, disbursement dates and amounts and terms to accept or dissolve the agreement. Contract administrators often will include the means by which to measure the performance of both parties to determine if they are meeting their obligations, as well as procedures to monitor the performance of both parties.

Contract administration comprises a broad range of ongoing tasks, as mentioned above but these are key tasks that lead to key benefits:

Contract maintenance and change control
Charges and cost monitoring
Ordering, payment, and budget procedures
Contract performance reporting

Poor contract administration is likely to result in problems with the project, dissatisfied parties, and ultimately, claims and disputes, whatever the form of contract. The amount of money involved in such claims and disputes can be enormous.

The outlay on a contract administrator might seem to be an unnecessary expense at the beginning of a project when a contractor is seeking to keep the tender price competitive. However, an effective contract administrator can be the difference between a successful project and a failure resulting in disputes that drain time and money.

A contract administrator could therefore be said to be the first line of defense in a project’s dispute avoidance system, or alternatively, a priceless asset in the event that a dispute does arise. As such, the need for an efficient and pro-active approach to contract administration and management throughout the project lifecycle cannot – and should not – be underestimated.

Need to practice effective contract administration and not sure where to go for contract management courses? Contact us for information on our contract administration courses and find out more about contract management training we offer.