Over the last 20 years, procurement has moved in many organisations from being perceived as a back-office or administrative function into a core business activity. In the private sector, procurement is attracting high-fliers from other functions, and is mentioned at annual results time as a driver of bottom line profit. The change has been even more dramatic in the public sector, where commercial directors now sit at or just below board level in most major departments, and procurement issues are regularly discussed at the highest level.

But there is one nettle that procurement in some organisations still seems reluctant to grasp, in both the public and private sector, and where practice varies considerably between organisations — that tricky issue is contract management. There is little accepted best practice in terms of how procurement, as a function and an activity, relates to, and gets involved with contract management.

Any experienced procurement person asked to draw a picture of the end-to-end procurement cycle will include a box headed ‘contract management’. So why do many organisations still see procurement as being totally divorced from post-contract management? And why do procurement leaders seem to perceive that contract management is ‘someone else’s responsibility’?

This approach too often leads to poor contract management and overall business performance. The contract may be ‘thrown over the wall’. Procurement personnel complete the supplier selection and contracting phases and then lose interest, handing contract management responsibility on to any person who happens to volunteer — or is just standing in the wrong place at the wrong time. This is no exaggeration; I have seen examples of exactly this random process.

Even where the contract manager is more formally identified and appointed, too often, there is little consideration of the skills they need, or effort made to ensure they appreciate the drivers behind the contract or that they understand the contracting process that has been followed during the procurement phase. This lack of real understanding, such as inflexible adherence to detailed contract terms, can lead to dysfunctional contract manager behaviour. As one supplier to a major government department said to me: ‘We know this key performance indicator (KPI) is meaningless, and so do the end-users of the contract, but the contract manager insists that we continue to measure it because “that’s what it says in the contract”.’

There are, of course, exceptions where procurement does take some serious ownership. In some UK government departments (the Department of Work and pensions comes to mind) the commercial function plays the lead role in the contract management of many of the most important contracts. This appears to work well — there is a strong focus on performance and value improvement from these contracts, not merely day-to-day delivery.

It is also true that when no-one else wants to manage the contract, or there is no clear single point of ownership, procurement is forced to take responsibility for contract management — stationery contracts being the classic example.

And, to be fair to procurement, there can be other potential ‘owners’ for contract management activities. It is likely that the chief information officer will be very interested in making sure the contract for supporting the physical IT estate is well managed; and his or her staff is probably best placed to track KPIs and provide performance management of the supplier. No-one would suggest that procurement should try to exclude the CIO from playing a key contract management role.

But even here, there is a clear overarching role for procurement. Why? It is to encourage a consistent organisational approach to contract management, to look more widely than the CIO’s interest in the contract, and to apply learning and leverage more widely across the organisation. All of these activities go well beyond the CIO’s sphere of interest, and it is hard to think of anyone other than the procurement (or commercial) director who is likely to have the capability or interest to drive these wider contract management issues.

It is interesting that the procurement profession has staked a claim to one post contract activity — supplier relationship management (SRM). Why has this attracted the profession’s interest? SRM does tend to be applied (rightly) to the most strategic suppliers, where the organisation may have multiple contracts. So there is a need for an overarching approach; and, again, there may be no other obvious owner for such activities. To be cynical, perhaps there is also an element of SRM being fashionable and therefore more attractive to procurement leaders than the hard grind of day-to-day contract management.

So what could (and perhaps should) the procurement director be doing to improve overall the contract management performance? There are five clear areas of opportunity.

One of the most frequent causes of contract management problems is the lack of continuity between the procurement phase and the operational contract management phase. Often, contract managers are not appointed until after the contract is awarded, or in some cases well into delivery. The contract manager is then not aware of the underlying intent of the contract, how relationships have developed during the procurement process and, in the worst case, may not even understand the contractual terms and conditions. It should be procurement’s responsibility — both in terms of owning the process, and practically for each contract — to see that contract managers are involved through the procurement process. Where this is just not possible, procurement must make sure there is a full and structured transition from procurement to contract management, including briefing and knowledge transfer.

The dispersed nature of contract management in large organisations means that training and development is still too often an afterthought. Indeed, many contract managers are appointed with no real analysis of their suitability or aptitude for the role. Someone, and again, the functional head of procurement seems best placed, needs to take responsibility for ensuring that contract management skills are appropriate and that enough resources of the right quality are available to meet the needs of the organisation.

Governance covers a number of issues that together are absolutely critical in ensuring major contracts are successfully managed. Is there clear senior responsibility for the contract; someone to take ownership and act as a point of accountability and escalation? Are issues reported to the appropriate level? Is risk managed properly and professionally, with risk plans and registers, mitigation strategies, and escalation of key risks? The procurement functional head is not the appropriate ‘owner’ for all contracts, but is the person who can ‘enforce’ proper governance.

Most organisations have a procurement manual covering a combination of policy, process and best practice guidance. It is more unusual to find the same for contract management activities. While guidance in itself does not guarantee success, it can help. And the ad hoc way in which many contract managers are appointed and trained means that such guidance may be of great value to an inexperienced manager dropped into a difficult contract situation.

Finally, contract managers often feel disregarded in their organisations. They usually work closely with colleagues and suppliers, but may have little contact with other contract managers. There are opportunities to improve their skills, motivation and performance by developing a sense of community through the contract management pool inside the organisation and more widely; professional networking, knowledge transfer, sharing best practice, learning from success and failure. But again, someone has to take responsibility for making this happen.

This is not a plea for procurement leaders to take full line responsibility for all aspects of key contract management. But if they are willing to take strategic ownership of these activities, through the five levers described above, the benefits could be significant for organisations, and indeed for the leaders themselves.

Procurement is often perceived as either a back office function, or a more valued ‘professional’ but still non-line activity, divorced from core organisational delivery. Taking responsibility for overall contract management performance would put procurement leaders close to the front-line of their organisations, would expose them to a range of senior colleagues, and would give them the chance to demonstrate both strategic and operational value. So this seems to be a huge opportunity for improved organisational performance and improved reputation for procurement people and functions. If you are reading this as a procurement leader, and you haven’t embraced contract management already; what are you waiting for?