Only a few people mentioning the phrase “contract administration” seem to know what they’re talking about. We’re here to fix that.
The concept of contract administration involves multiple nuances, like how it corresponds to contract management, where the process starts, where it ends and others. And the deeper you dig the more complicated it gets.
The best way to make sure you understand a complex concept is by explaining it to a curious layperson. That person will ask you questions about the concept, and if you can answer those, then you likely have a handle on what you’re talking about.
We’ve prepared answers to four questions about contract administration that can stump even a professional manager.
What is contract administration?
Simply put, contract administration is the process where you plan a contract, create it, put it to work and ensure it achieves each of its stated goals.
The internet has plenty of detailed definitions to offer for this; for example, here’s one from the website USLegal:
Contract administration is the management of contracts made with customers, vendors, partners, or employees.
It refers to the management of all actions after the award of a contract. This is to assure that terms of a contract are complied with.
Is contract administration the same as contract management?
The terms “contract administration” and “contract management” are often used interchangeably. But they aren’t the same thing. Consider these differences.
Contract administration starts in your mind and ends when contract goals are fulfilled.
Contract administrators prepare the draft, turn it into a contract, ensure the parties can deliver on their responsibilities and monitor contract management.
Contract management is part of contract administration. It only begins after the contract has been signed and has taken effect.
Contract managers ensure that the parties stick to their contractual obligations once the contract has been executed.
In other words, when you say “contract administration,” you imply contract management as a subset, among other things.
And when you say “contract management,” you mean only the specific duties that fall under the umbrella of management.
Who does contract administration?
We’ve already mentioned the contract administrator, a role that a person or a team can take up.
But don’t confuse this with the legal team or expert, as they help create and fine-tune the draft and may pitch in to resolve disputes later. In contrast, administrators oversee every stage of the contract’s life.
Let’s consider what skills a contract administrator needs and what this person or team does exactly.
Contract administrator skills
1. Attention to detail
A contract administrator needs to ensure nothing has been overlooked — the Is are all dotted and the Ts crossed, as they say.
2. Leadership skills
Contract administrators work with experts, departments and decision makers across the board. They need to be able to organize and lead all joint efforts.
3. Negotiating skills
The best contracts factor in the interests of all parties. And to achieve those interests, contract administrators need to excel at communication skills.
4. Conflict resolution skills
The more people participating in contractual relationships, the higher the probability of potential conflict risks. (And guess whose job it is to mitigate those risks and resolve conflicts should they arise?)
Contract administrator responsibilities
The duties and responsibilities of a contract administrator vary from sector to sector and business to business.
Here’s an example of what they may include:
- Coordinate various construction project documentation, including bid package
- Interact with builders and project managers
- Manage owner contract review process through execution
- Ensure and process new job compliance including pre-lien filings, insurance certificates, OCIP enrollments, etc.
- Process and submit all forms to new customers
- Request certificates of insurance and submit our W-9, business licenses, and any other requested items for new and existing projects
- Provide contract summaries and ensure contract execution in accordance with company policy
- Keep project team and others informed about project status and issues that may impact client relations
- Verify contractual discrepancies and make corrections accordingly.
What are the key stages of contract administration?
Contract administration is a multi-stage process that includes contract management. There are different approaches to what those stages should include.
We’ve studied them all and created what we think is the most comprehensive framework.
Here it is, step by step:
Stage 1. Contract planning
Contract administration starts when there’s no contract yet — it starts with planning.
Moreover, planning is the most important part here and it involves the following hierarchy.
1. Define the objective, scope and deliverables
You need to determine what you and the other parties want to achieve through a contract first. Outline the scope, deliverables and key success metrics. Here’s how you could wrap the objective in a software development agreement:
The Client hereby engages the Developer and the Developer agrees to be engaged by the Client to develop the Software in accordance with the specifications attached hereto as Exhibit A (the “Specifications”).
3. Set a timeline
Contract administration is a project. And, as such, it requires a timeline. Set dates for all stages listed here and visualize them — for example, as a Gantt chart.
There are various project management software options for that, like monday.com, which we at PandaDoc love. In fact, we love it so much we’ve integrated our service with it.
Project timeline presentation in monday.com
3. Layout financial terms
Consider these details:
- Contract value
- Payment intervals
- Budget approval process
4. Plan the work
At this step, you need to get to the actual meat of the contract. It’s all about who does what and how you’re going to measure success along the way. Describe the following:
- Roles and actors
- Particular steps
- Interim success metrics
5. Factor in risks
Contractual relationships always involve risks, and you should do your best to determine early on what risks to expect and how to respond if a risk event occurs.
Take your cue from this risk analysis framework.
6. Draft the contract
Once you’ve hammered out the essentials of the contract, present it as a draft that looks like an official document. PandaDoc has a drafting tool you can use as a standalone application or as part of software like Salesforce, Zapier, HubSpot and Google Drive.
7. Legal review
Finally, get your legal team on board to tackle any ambiguities and uncover hidden dangers.
And this is easy to do if you’re using the above-mentioned collaboration tools, as they allow people to work on a document together remotely.
Stage 2. Contract negotiation
Once the draft is ready, it’s time to get it out to the other party.
They’ll likely suggest a few tweaks to ensure their interests are taken into account, and your contact administrators will need to, if required, defend your ground.
This process is known as redlining and involves a lot of negotiation. And the best way to negotiate a contract is, again, by using contract management software.
If you’re familiar with Google Docs, you know how convenient it is to use comments and suggestions. And software like PandaDoc has all that plus electronic signatures and many other features to streamline contract management.
Stage 3. Contract execution
So, you’ve agreed on contract terms with the other party. The draft is in its final version, and the only thing left to do before it comes into effect is contract execution.
Contract execution includes two parts: signing the dotted line and letting all involved know the contract is now effective.
Thanks to the pandemic, most businesses have stopped considering wet signatures (the ones made in pen) as a must.
In turn, electronic signatures are increasingly becoming a new norm, simplifying remote collaboration.
PandaDoc allows you to create, collaborate on and sign documents.
There are other tools for that as well, like DocuSign or HelloSign for example, so check out our article about DocuSign alternatives if you’d like to learn more.
Once the contract has been signed, you need to notify all the parties involved. Again, contract management software comes to the rescue, allowing you to automate the sending of notifications using all channels.
Stage 4. Contract management
Contract management is all about ensuring the contract works. At this stage, a contract manager steps in and works under the guidance of the administrator.
This work includes:
- Monitoring how the parties achieve the project milestones
- Solving issues arising along the way
- Seizing on unexpected opportunities
- Making amendments and revisions to the contract
- Taking care of contract renewals
- Keeping upper-level management posted on the progress.
For more information about this process, please check out this article on contract management.
Stage 5. Contract closing
Every contract has specific goals.
And once those goals have been met, you’ll have exhausted the benefits of the relationship and may be tempted to move onto other things immediately. But that could be a mistake.
In addition to goals, your contract describes the obligations you and the other parties have taken upon to uphold.
For example, the contract could state that you should provide maintenance for the software you’ve built for the client.
But perhaps the client has changed the product, making it difficult for you to do so now, and has forgotten to let you know.
If you sit with the client to go over a checklist of things to consider before closing the contract, you’ll surface those potential roadblocks to continued, smooth operation.
If not, you’ll likely get a serious headache should the software break and the client asks you to fix it. And that’s why you shouldn’t short-shift contact closing.
Stage 6. Post-contract review
Almost done, but no, it’s not over with the contract closed. You still need to calculate how much the relationship cost you and how beneficial it was.
This includes figuring out the following:
- How much you paid for changing the contract along the way, sorting out claims and resolving disputes
- How the actual schedule has been different from the plan, and how this has influenced your overall agenda
- Whether the key performance indicators (KPIs) have been met, and how the overall performance has played out with respect to your ultimate objectives
By examining these points, you’ll learn vital lessons and do an essential reality check to adjust your further plans accordingly.
Over to you
Contract administration begins with an idea, one that later becomes a document, and ends with tangible results and self-reflection. This process includes contract management as one of its stages.
The person who ensures the successful completion of this process from A to Z is called contract administrator. To do so, they work closely with all parties of the contract.
Today, when communications are increasingly digitized, you can’t imagine successful contract administration without document management software.
PandaDoc provides all the digital tools you need to streamline this process, including templates, signatures, and a collaboration environment. If you haven’t checked it out yet, start your free trial now.
Frequently asked questions
Contract administration is the top-level oversight of all contract-related activities, from planning the contract to closing it and reflecting upon it afterward.
Contract management is a subset of contract administration, or one of its stages.
Contracts should be administered by people who possess strong skills in leadership, negotiation and conflict resolution. These people are usually called contract administrators.
The key stages of contract administration include contract planning, negotiation, execution, management, closing and post-contract review.