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Is Contract Administration Important?

October 30, 2012

It is about three years now since Professor Leslie Willcocks of the London School of Economics wrote about the growing importance of contract management. He outlined the evolution of the discipline, which started with ‘contract administration’ and ended with a new era of ‘collaborative innovation’, driven by a fresh understanding of the role of contracts and the skills of commercial practitioners.

Professor Willcocks used an alternative term for contract administration; he called it ‘negativity’. That view was based on the fact that organizations which view contracts as purely administrative instruments lose the value that comes from a proactive and holistic approach.

I am writing about this today because on LinkedIn, Tony Yuan posed a question about the importance and influence of contract administrators. I suspect this was driven by a sense that the role should be gaining status, but often does not in organizations where it is seen only as a support function for the project manager.

Good contract management within a project is critical to its success. Indeed, this has been illustrated time and again in public sector audits of failed projects and in research undertaken by groups such as the International Centre for Complex Project Management, as well as the important findings of IACCM which has placed specific financial values on improvement.

A couple of the things that go wrong are:

– the absence of any over-arching contracting strategy results in tools, process and contract models that are frequently inappropriate for the nature of the project to be undertaken. That is not typically something any individual project manager can fix because it goes to the heart of corporate policy and practice.

– compounding the fact that the process and the contract often fail to offer the right framework is that many project managers lack rounded contract and commercial skills. A majority come from technical backgrounds and many have been led to believe that contracts (and those associated with them) are bureaucratic obstacles to getting the job done.

My list of issues could continue. But the truth is that many of today’s projects are far more commercially complex than technically complex. There are many situations where the project manager should in fact be providing support to the contracts or commercial expert, not vice-versa. For organization’s to flourish in today’s complex business environment, we must take note of the ideas of Professor Willcocks and others like him, who are calling for an end to ‘contract administration’ and the development of true contracting and commercial competence.

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