Project Contract Management: Common Pitfalls & Solutions

Content

• What does Project Contract Management entail?
• Why is contract management vital to project success?
• What are the common pitfalls in Project Contract Management?
• How do you streamline Project Contract Management?

Businesses undertake all kinds of projects as part of their day-to-day operation. Regardless of the complexity and scale, initiating, planning, and controlling these projects require comprehensive legal agreements. It ensures that all the tasks and people flow smoothly to achieve the results.

Contracts are the best way to guarantee that companies can complete projects on schedule, within budget, and with the least amount of hassle.  Deliverables, quality control, timeframes, and all other keystones of projects depend on how well businesses carry out the contracting process. Here’s how you can put special effort into project contract management, avoid the common pitfalls, and streamline tasks.

What does Project Contract Management entail?

Project contract management involves overseeing legal agreements throughout their lifecycle, from pre-award collaborations to post-award supervision. It starts with identifying the need for a contract, whether to procure goods, services, or employees for project completion. Then, companies clarify the scope, deliverables, rights, and responsibilities using the written agreement. The stakeholders can then negotiate, review, approve, and sign the final draft to get it up and running.

Following execution, the contract is operational and legally enforceable. This is the point at which all parties must become acquainted with their respective roles, duties, and deadlines as specified in the contract. A project's completion hinges on each party keeping their end of the agreement and carrying out their obligations.

Why is Contract Management vital to project success?

A project's completion depends on each party keeping their end of the agreement and carrying out their obligations. The written document serves as the project's blueprint for everyone involved, from contractors to service providers. It tells them what to do, when, and how. When they’re on the page, the project moves forward smoothly. There is a lesser chance of disputes and confusion among the parties regarding scope and purpose. 

Businesses can keep track of tasks, deadlines, and responsibilities by efficiently managing these contracts. It enables them to minimize risks of compliance and performance issues. There will be no disruption regarding tasks and payments. Moreover, efficient contract management leads to businesses making informed decisions regarding renewing, terminating, or renegotiating the contractual agreement.

Read more: A Closer Look At Contract Types In Project Management

What are the common pitfalls in Project Contract Management?

Most commercial projects involve a large number of people and moving components. Getting all of them to work together towards a single goal requires serious effort. When they are balancing several objectives, assignments, and details, any slip-ups in the contracting process can derail the whole project. It can cause litigation, sabotage contractual relationships, and disrupt productivity. Businesses must have comprehensive processes and advanced tools to avoid the common pitfalls of project contract management.

• Lack of clarity in contract terms

For successful project completion, everyone involved must know the whole picture and their role in it. That is why written contracts concisely state deliverables, timelines, payment schedules, and all other relevant details. Any ambiguity in the contractual terms and conditions can leave it open to interpretations. Parties will have a challenging time performing their duties as per the requirements. It leads to misunderstandings and disagreements throughout the lifecycle. Businesses will end up facing delays, litigation, financial losses, and reputational damage.

• Failure to monitor compliance

All the parties must adhere to and uphold contractual terms for the project to move forward without hurdles. Businesses failing to monitor compliance and performance can lead to unforeseen challenges, compromising the results. If a contractor fails to meet the specifications, the project may require additional resources to rectify the situation, leading to costly delays and rework. Parties may seek legal recourse for non-performance and breaches, which can prolong the project timeline and increase costs.

• Poor communication

Real-time communication and collaboration among stakeholders is vital to project success. It guarantees that everyone involved is aware of their rights, obligations, and roles. Moreover, stakeholders will have late information regarding tasks, performance, and deadlines. Or else businesses will have to deal with misunderstandings, disputes, and violations throughout the partnership. Delayed communication will also prevent parties from timely identifying and mitigating contractual risks.

• Inefficient documentation

Businesses must maintain a clear record of all the legal agreements, amendments, and communication. It can act as a reference in case of future confusion and disputes. Parties with easy access to these documents and information are less likely to deviate from the project specifications. It will guide them from start to finish, helping them stay on time and budget. Proper documentation also makes it easier to enforce performance and compliance standards. 

How do you streamline Project Contract Management?

Contract management determines how well business projects will play out. Whether it is incompetent terms or a lack of monitoring post-signing, any oversight during the contract lifecycle can adversely affect the outcome. It can cause schedule delays, cost overruns, and failure to meet specifications. These consequences do not bode well for businesses or commercial relationships. Hence, we’ll go through essential tools and strategies for optimizing project contract management.

Establish clear contract terms and expectations

Every contributor to a project must be aware of the objectives and expectations to achieve results at each stage. They have to lay the foundation for this during the pre-award phase of the contract lifecycle. All the parties must communicate their rights, responsibilities, and obligations while drafting the contractual agreement.

Concise terms and conditions will enable businesses to align everyone regarding the project requirements and specifications. Additionally, it facilitates the establishment of industrial, legal, and organizational standards. The project stays on course when stakeholders acknowledge the deliverables, timelines, and scope. Lastly, it diminishes the possibility of contract violations, scope creep, and disagreements. 

Solution: When multiple stakeholders and departments are part of a project, lining up their expectations and responsibilities can be a lot of work. Businesses can create a foolproof framework for their projects by using pre-written templates and clauses. They can provide uniformity in terminology, design, and language throughout the company. It reduces the time and effort required to draft legal agreements for every commercial undertaking.

Specify Roles & Deadlines

As we know, commercial projects involve multiple departments, stakeholders, and tasks. Consequently, keeping track of these components and establishing accountability can be overwhelming. The complexity and legal issues double if the data, people, and procedures exist across various platforms. That is why companies must define positions and responsibilities from the outset of the venture. This clarity prevents missed tasks and overlapping assignments.

Time is money in commercial arrangements. Project success depends on establishing a clear schedule for deliverables, payments, and task execution. Establishing deadlines keeps everyone on track and protects companies from incurring extra expenses because of unjustifiable delays. They can include clauses detailing milestones, deliverables, and other relevant dates necessary to meet project deadlines. Penalties within contracts for missing marks also encourage timely completion.

Solution: Assigning roles and deadlines and monitoring them can be overwhelming with manual solutions. Calendars and spreadsheets can be useful, but managing them still requires needless time and effort. Fortunately, automated contract management solutions enable businesses to assign legal tasks to specific individuals with deadlines. They can establish role-based permissions for every component of the contracting process to maintain data integrity. 

Availability and transparency of contracts

All parties involved in the project must have visibility into contracts, related documents, and data. Easy access allows businesses to take timely action to identify opportunities, mitigate risks, and establish compliance. Transparency in the contract lifecycle prevents unnecessary delays during negotiation, monitoring, and renewal. When parties depend on accurate and latest information, they’re much more likely to make informed decisions.

Multiple storage locations, shared drives, and paper contracts are counterproductive to maintaining integrity and transparency in contract management. It means parties spend endless hours looking for a particular information or document. Their productivity suffers, and they might lose track of deadlines and milestones.

Solution: Centralizing contract storage is one of the most efficient ways for businesses to instill transparency and availability in their project contract management. Digital repositories allow parties to store, sort, filter, and secure contractual agreements and related documents. This facilitates easy tracking of renewals, obligations, payments, and milestones.

Constantly review contract terms

Contracts are integral to completing projects successfully. Every party must know and comprehend the terms, conditions, and responsibilities. They must constantly review them to understand requirements, identify abnormalities, and enforce rights. As a result, they can fulfill their obligations and maintain compliance and performance standards. 

Consistent reviews are vital to cost and risk management in commercial projects. Businesses can pay close attention to relevant clauses throughout the lifecycle, including confidentiality, termination, and payment. They can regularly optimize financial and operational performance by closely examining it. 

Solution: As the complexity and volume of contracts increase, manually reviewing them can be taxing for scaling businesses. AI contract management allows parties to automate clause extraction, summaries, and reviews. They can go through contractual agreements in no time to identify patterns, discrepancies, and opportunities.