Last updated on 

May 30, 2022

Contract management vs. Contract administration

Contract management vs. Contract administration
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Contract management vs. Contract administrationContract management vs. Contract administration

Using the terms contract management and contract administration interchangeably is very common. However, the two ideas are actually quite succinct and different to one another. Understanding both fully and knowing how they are both separate parts of the contract lifecycle is key. Here, we look at contract administration vs contract management by identifying how they vary and why. 

What is contract administration?

Contract administration is the setting up of the contract management process so that process can effectively create and complete a contract. It therefore requires the pulling in of all relevant parties required to bring a contract to completion. For example, if companies bid or pitch for work, contract administration will implement the winning bid’s claims and help both sides set up the process to reach a mutually beneficial agreement. It is also a monitoring process that ensures that all parties involved are fulfilling what is needed of them. From there, it may be necessary to amend any discrepancies that arise either before or, sometimes, after a contract is signed. 

Contract administration vs. contract management 

In short, contract administration initiates the contract management process. More and more, contract administration is the process of implementing software that can help the contract lifecycle process as well as alerting all sides to the start of the process. In fact, while the term contract administration may sound like the lesser administrative side of the world of contracts in comparison to contract management, it is in fact the crucial first step to ensuring the management process will go smoothly. 

Service contract administration

Service contract administration is a specific branch of contract administration pertaining to the services industry. It is worthy of a separate explanation due to the nature of the sector and therefore what is required in terms of contract administration. 

The service industry is one that does not build a final product or produce a certain amount of goods. Instead, it provides people to carry out a service that answers customers’ needs. While that may sound obvious, it makes it less tangible to charge money for. For example, when is the service in question complete? How should that service be provided? 

Service contract administration will help iron out such issues from the very start. If companies have bid to be a service provider, then the contract administration will start the process of having that bid put into a contract that is legally binding. Administration will also take into account reviews and renewals as well as ensuring all targets are met during the provision of the service in question.  

Construction contract administration

Construction contract administration is a particularly pertinent and important part of a business arrangement in the construction industry. That is because it often requires expert knowledge of the field as well as the legal framework. The parties involved in the contract itself, may not necessarily have any legal expertise which is where a contract administrator comes in. 

For example, in the building of a home, you have the company funding the building process and the company actually building the homes. The business arrangement between these two entities needs to be documented in a contract that is legally binding. Effective contract administration will allow that to occur far more easily and productively. 

Contract administration can mean that both parties have their needs and requirements recorded in the contract protecting both sides. The arrangement, through successful contract administration, is likely to enhance the final result as the contract management process would have been set up so it is effective. 

Steps in the contract administration

Competent contract administration is a complex task, however if it is broken down into bite size pieces it becomes much easier to implement. 

Firstly, outline what is required of the contract process and how the stages within it will be identified and met. As a result, it can be highly beneficial to produce a projected timeline for the contract project to ensure that all parties know where they stand in the entire process. 

Communicate all aspects of the contract negotiation to relevant people and ensure all parties know the financial terms of the agreement. For example, how much the contract is worth and when payments are due to be made. The actual work needs to be outlined through thorough contract administration too as well as highlighting any potential risks that may occur. 

Overall takeaways to contract administration vs. contract management 

Skilled and effective contract administration can make all the difference to contract management. By setting up the contract management process properly from the start, the entire lifecycle of a contract can be improved as well as any by products that come from the seamless contract completion process. For example, working relationships can be strengthened through improved communication and legal risks can be materially reduced when effective contract administration and management is employed. 

In short, contract administration is complicated so it is a task that can be materially helped through the use of automation and software. Packages such as that offered by Contractbook are highly beneficial. Contractbook provides contract administrators with all the tools needed to help optimize and automate much of the contract process, leaving administrators and the companies with which they work the ability to harness the true power of contracts.

Enhanced relationships, seamless contract completion processes, and effective collaboration are all possible through Contractbook’s end to end contract management platform. Explore the benefits of a contract management software today, by simply book a meeting with us.

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