1. BY
KRISHNA PRASAD JP
M.Tech, 2ND sem , CTM
ROLL NO : 151560
NATIONAL INSTITUTE OF TECHNOLOGY WARANGAL
EFFECTIVE CONTRACT MANAGEMENT

2. ABSTRACT
In today’s difficult and uncertain economic environment, organizations
have placed cost savings high on their agendas. The pressure from
organisations in both the public and private sector to reduce costs and
improve financial and operational performance have resulted in
recognition of significance of effective contract management which led to
adoption of more formal and structured contract management procedures
and increase in the availability of software applications.
However, without an ECM program savings will be captured but not
realised. The benefits of ECM do not end with cost savings. Also effective
contract management optimises the efficiency, effectiveness and economy
of the service or relationship described by the contract, balancing costs
against risks and actively managing the customer–provider relationship.

3. INTRODUCTION
According to Indian contract act, it is defined as an agreement which is enforceable by law. It creates legal
obligation between parties.
When it comes to construction, contracts are at the heart of everything the company does
Contract management: Contract management is the process that enables both parties to a contract to meet
their obligations in order to deliver the objectives required from the contract. It also involves building a good
working relationship between customer and provider.

4. PROBLEM STATEMENT
• Decisions are not taken at the proper time thus allowing potential risks to appear.
• The contractor executes the project based on the understanding that he has formulated
himself regarding the contract requirements, without realising the actual goals and results
expected from the execution of the project
• The project implementation described in the contract is underestimated by the contractor
both in terms of time and human resources required, leading eventually to deviations from
the initial planning and possibly to exceeding the initially estimated budget
• The project is implemented at a slow rate
• The opportunities to improve value for money are lost
• The handling of problems that arise during the execution of the contract is not conducted
timely and effectively, which usually leads to tension between the contracting authority and
the contractor
• Communication between the contracting authority and contractor is limited, increasing the
possibility for misunderstandings, misinterpretations and the drawing of incorrect
conclusions
• The contractor's performance is not evaluated throughout the execution of the contract
thus not allowing for actions to be taken to increase the performance and effectiveness of
the contract.

5. OBJECTIVE
• The objective of the study is to implement effective contract
management(ECM) in construction projects in order to avoid the above
quoted problems as well as to improve profits of the organisations and
to realize the same. Exploring the potential benefits of the available
softwares in market so as to implement ECM with ease.

6. LITERATURE SURVEY
•
Importance of contract management
CONTRACT MANAGEMENT LIFECYCLE

7. Contract Management Issues
Procurement Stage
•Resourcing
•Planning & Development
•Developing Tools
•Integrate Management
aspects in the contract
•Key Performance
Indicators
• Defining Governance
Responsibilities
Execution Stage
•Managing Performance
•Managing Relationships
•Managing Changes
•Managing Contingencies
•Managing Documents and
records
•Executing Governance
Responsibilities
Service Delivery
• Managing Performance
• Managing Relationship
• Managing Changes
• Managing Contingencies
• Managing Documents and Records
• Delivering Governance
Responsibilities

8. Contract Management Issues
Contract Closure
• Managing Compliance
• Maintaining Relationships
• Documenting Changes
• Regularizing Contingencies
• Saving Documents for Asset
Management
• Informing the Management of
the closure

9. Components of ECM
Upstream activities: Preparing the business case and
securing management approval
Assembling the project team
Developing the contract strategy
Risk assessment
Developing contract exit strategy
Developing a contract management plan
Drafting specifications and requirements
Establishing the form of contract
Establishing the pre-qualification, qualification and
tendering procedures
Appraising suppliers
Drafting ITT documents
Evaluating tenders
Negotiation
Awarding the contract
Downstream award of
contract
Changes within the contract
Service delivery management
Relationship management
Contract administration
Assessment of risk
Purchasing organisation’s
performance and effectiveness
review
Contract closure

10. FACTORS AFFECTING SUCCESS OF ECM
ECM will be successful if
• the arrangements for service delivery continue to be satisfactory to both
parties, and the expected business benefits and value for money are being
realised.
• the expected business benefits and value for money are being achieved.
• the supplier is co-operative and responsive.
• the organisation understands its obligations under the contract.
• there are no disputes.
• there are no surprises.
• a professional and objective debate over changes and issues arising can be
had.
• efficiencies are being realised.

11. CRITICAL SUCCESS FACTORS (CSF’S)
• The right contract
• Single business focus
• Service delivery management and contract administration
• Relationship management
• Continuous improvement
• People, skills and continuity
• Knowledge
• Flexibility
• Change management
• Proactivity
• Flexibility

12. EXPERIMENTATION
ESSENTIAL TOOLS FOR ECM
Classification of Contracts
classifying the contracts strategy and execution plan for contracts
a contract with low sensitivity and low spend (i.e., “Frequent” contracts) will require only basic contract
management. This means that the organization’s focus for this contract should be on contract
administration and supplier performance. On the other hand, if an organization has outsourced activities
that are key to the organization’s daily operations (a “Tough” contract), then the organizations focus
should include contract administration, relationship management, risk migration, strategy, innovation and
development of the supplier

13. PARETO CHART
• A Pareto chart, also called a Pareto distribution diagram, is a vertical bar graph in which values are plotted in
decreasing order of relative frequency from left to right. Pareto charts are extremely useful for analyzing
what problems need attention first because the taller bars on the chart, which represent frequency, clearly
illustrate which variables have the greatest cumulative effect on a given system.
• The Pareto chart provides a graphic depiction of the Pareto principle, a theory maintaining that 80% of the
output in a given situation or system is produced by 20% of the input.
• 80 percent of problems come from 20 percent of causes
The Pareto chart is one of the seven basic tools of
quality control. The independent variables on the
chart are shown on the horizontal axis and the
dependent variables are portrayed as the heights of
bars.

14. ABC ANALYSIS
• Inventory optimization is critical in order to keep costs under control within the supply chain.
• ABC analysis is an inventory categorization method which consists in dividing items into three categories, A, B
and C: A being the most valuable items, C being the least valuable ones. This method aims to draw managers’
attention on the critical few (A-items) and not on the trivial many (C-items).
A-items are goods which annual consumption value is
the highest. The top 70-80% of the annual
consumption value of the company typically accounts
for only 10-20% of total inventory items. (tightly
control)
B-items are the interclass items, with a medium
consumption value. Those 15-25% of annual
consumption value typically accounts for 30% of total
inventory items.(moderately control)
C-items are, on the contrary, items with the lowest
consumption value. The lower 5% of the annual
consumption value typically accounts for 50% of total
inventory items. (negligible)

15. KRALJIC PORTFOLIO PURCHASING MODEL
The model involves four steps:
• Purchase classification.
• Market analysis.
• Strategic positioning.
• Action planning.
Purchase classification
Strategic items (high profit impact, high supply risk).
These items deserve the most attention from purchasing managers.
Options include developing long-term supply relationships, analyzing and
managing risks regularly, planning for contingencies, and considering
making the item in-house rather than buying it, if appropriate.
Note that step 3, below, provides detailed options for the best purchasing
approach for these items, after considering other factors.
Leverage items (high profit impact, low supply risk).
Purchasing approaches to consider here include using your full purchasing
power, substituting products or suppliers, and placing high-volume orders.
Bottleneck items (low profit impact, high supply risk).
Useful approaches here include over ordering when the item is available
(lack of reliable availability is one of the most common reasons that
supply is unreliable), and looking for ways to control vendors
Non-critical items (low profit impact, low supply risk).
Purchasing approaches for these items include using standardized
products, monitoring and/or optimizing order volume, and optimizing
inventory levels.product purchasing classification
matrix

16. MARKET ANALYSIS
Here, you investigate how much power your suppliers have, and how much buying power you have as their
customer. A good way of doing this is to use Porter's Five Forces analysis.
STRATEGIC POSITIONING Exploit – Make the most of your high buying power
to secure good prices and long-term contracts from a
number of suppliers, so that you can reduce the
supply risk involved in these important items. You
may also be able to make "spot purchases" of
individual batches of the item, if a particular supplier
offers you a good deal.
Balance – Take a middle path between the
exploitation approach and the diversification.
Diversify – Reduce the supply risks by seeking
alternative suppliers or alternative products.
ACTION PLANS
Finally, develop action plans for each of the products and materials you need on a regular basis according to
where those items are placed in the Purchasing Portfolio Matrix.

17. KEY PARAMETERS FOR ECM
RISK MANAGEMENT
Risk is defined as the chance of Something happening that will have an adverse impact upon objectives . It is
measured in terms of consequence and likelihood.
overview of the risk management
process
A systematic methodology for identifying, assessing, treating and
monitoring risks is a must in order to have ECM , the risk
management process should be applied to each step of the contract
management lifecycle. A comprehensive approach to risk
management considers risk treatments both actively (designing and
implementing controls to prevent the risk events occurring) and re-
actively (to mitigate the consequences should the risk events actually
occur).
Risk management, through structured decision making and a
comprehensive analysis of business processes, provides opportunities
for innovation and enhanced outcomes.

18. STEP ONE: ESTABLISH CONTEXT
ensuring the contract is understood, by all parties, in the overall context of the organisation , that is:
• the outputs that the contracted services support;
• the critical success factors to the delivery of the outputs; and
• the internal input necessary for the delivery of the outputs.
STEP TWO: ASSESS RISKS
In this step the organisation needs to:
• identify all non-trivial business risks (risk identification);
• analyse those risks (risk analysis); and
• design treatments that reduce the risks to an acceptable level (risk treatment design).
RISK IDENTIFICATION
There are at least two levels of risk associated with contracted service delivery:
• contract risk—the risk associated with the delivery of the service; and
• contract management risk—the risk associated with the management of the contract.
RISK ANALYSIS
Once the organisation has identified the contract risks, they need to be analysed.
The criteria should be established on an escalating scale (low to high risk) against which the impact can be
assessed.
RISK TREATMENT DESIGN
The final step in risk assessment is to design appropriate risk treatments for the identified risks. The treatment
options available to an organisation range from accepting the risk (where it cannot otherwise be cost-effectively
managed), controlling the risk, through to transferring at least some of the risk

20. outline of the risk assessment phase of the risk management
process
STEP THREE: IMPLEMENT TREATMENTS
This requires organisations to establish a plan
for implementing any new treatments,
additional controls, or modifications to existing
controls arising from the risk assessment
phase. The implementation plan should
address contract risk management policies and
procedures if they do not already exist.
STEP FOUR: MONITOR AND REVIEW
The objective of the final step in the risk
management process is to monitor the risks
and the effectiveness of the controls over time
to ensure changing circumstances do not alter
risk priorities or weaken the operation of
controls.

21. THE APPLICATION OF RISK TO CONTRACT MANAGEMENT:Risks associated with the transition phase,
ongoing management, and succession phases of the contract management lifecycle should be considered against
the various steps in the framework for risk management.

22. PERFORMANCE MANAGEMENT
• It is a systematic approach which improves the goals through an ongoing process of establishing strategic
performance objectives ,measuring performance ,collecting ,analysing ,reviewing and reporting performance
data.
Measure: it involves defining necessary
perspectives for performance management
based on the balanced scorecard (BSC)
concept, and setting the objectives of
performance. after this step, it deducts success
factors, sets the target of performance and
measures the data with assessment of
measurable index.
Store: it is a step where loading of
performance data into data warehouse takes
place .it defines fact table and dimension table
former contain measured data latter contains
descriptive information about fact and it sets
link for every table.

23. Analyse: it is a step where multi-dimensional analysis applying OLAP with performance and related stored
data in DW takes place.
Report: it is a phase of creating appropriate pages from result of previous step using table and picture.
information will be analysed by user through interaction with system and it displays its report to screen.
Use: this is used for problem solving and decision making with analysed data.
RELATIONSHIP MANAGEMENT
A successful relationship must involve the delivery of services that meet requirements. The commercial
arrangement must be acceptable to both parties – offering value for money for the customer and
adequate profit for the provider.
The three key factors for success are:
• mutual trust and understanding
• openness and excellent communications
• a joint approach to managing delivery.
There must be mutual trust between customer and provider if the relationship is to work

24. Establishing relationship management structures
Senior Management Support; Peer to Peer communication; separation of roles; Defined roles and
responsibilities; escalation paths
Understanding one another
Objectives and expectations; future plan and directions; concerns about wider relationship; Opinion surveys
Establishing and using communication channels
Formal and informal contact points; horizontal and vertical communications; documenting verbal
communication
Relationship management and succession planning
Monitoring the Relationship

25. CHANGE MANAGEMENT
• Changes are almost inevitable during the period of a contract, particularly in the case of large, complex
construction and service contracts.
• During the lifecycle of any project, it is likely that a number of changes will occur, requiring proper
management.
• Changes may be contemplated at the time of procurement and provided for in the contract, or not
contemplated during procurement but seen as desirable or necessary alterations to services or the contract.
• Good change management processes incorporate the following features:
– Appropriate protocols are in place to manage change
– Appropriate staff have the authority to request and authorise changes
– Potential changes are assessed thoroughly by suitably experienced personnel, having consulted with all
relevant stakeholders
– Changes are appropriately prioritised and their implementation is properly resourced
– The implementation of changes is controlled and tested
– Changes are appropriately documented
– Changes do not compromise value for money outcomes

26. SERVICE DELIVERY MANAGEMENT
• This activity is concerned with the fundamental aspect of contract management, that of ensuring that the
actual service provided by the supplier is in accordance with the agreed standards and prices. The ability to
measure the performance of the supplier – sometimes called vendor rating - and to provide feedback is
critical to successful contract management and supplier development.

27. POTENTIAL BENEFITS OF AVAILABLE SOFTWARES
List
1. EasyBuild
2. Eque2 EVision
3. Explorer Eclipse
4. GenieBelt
5. Goldenseal by Turtle Creek Software
6. INAXUS
7. Jonas Premier
8. Knowify
9. Pro DBX
10. RENOMii

28. EasyBuild
EasyBuild is a construction ERP solution
that can easily oversee construction
projects from end-to-end. On the contract
end, EasyBuild offers a customer
relationship management (CRM) and
document management module built right
into the system, so that workers can attach
notes and contracts with clients. The
construction software also allows
subcontractor document management.
Each of these contract management
systems are easily searchable; you won’t
ever lose your contracts in your sea of
contacts.
Pros: Document scanning software, high-quality debtor reporting, and the software acts as a
complete end-to-end solution.
Cons: Only runs on Windows, only available in English, and a limited number of reviews, so there
isn’t a lot of customer feedback for this software just yet.
Price: Starts at £1,750 (about $2,500) per license.

29. Eque2 EVision
EVision bills itself as construction accounting software, but it’s much
more than that. The product is based off of Microsoft Dynamics NAV,
Microsoft’s ERP system for small and mid-sized businesses, so it
integrates with all of your Microsoft products. One cool feature that
EVision offers is embedded reporting. I talked with Chloe Leigh,
EVision’s marketing director, who explained, “Embedded Excel reporting
tools allow you to create and deliver reports in your own format and are
directly linked to source data.” For construction companies with lots of
interconnected data that are tied to contracts, this organizational tool
definitely stands out.
Pros: The whole system covers everything from project management to cost control. Users can easily run
reports and find out which contracts affect the operational and financial health of their construction company.
Cons: Pricey, to the point where small and midsize companies may do better with a cheaper option.
Price: Starts at £50,000 (about $72,000).

30. Explorer Eclipse
Explorer Software document
management of this construction
management software is excellent. The
end result is pretty cool; documents are
tagged with Optical Character
Recognition(OCR) and GPS tagging so
users can tag, file, store, and find
important documents easily—regardless
of if they were initially electronic or not.
As an important addition feature, when
documents are updated, all related items
are updated as well. Explorer Software is
an awesome option for heavy
construction, general contractors,
specialty contractors, sub-trades,
architects, and engineers.
Pros: Full ERP solution; Explorer Software doesn’t rely on plugins to function well.Outstanding customer service and
in-depth reporting features.
Cons: Requires an extra spend for the document manager and business analytics units. Website is incredibly
opaque to new buyers looking for information.
Price: Starts at $19,000 and scales with the number of users and units.

31. GenieBelt
GenieBelt stands out as a personal favorite of
mine because they have a free version, are
extraordinarily easy to use, are consistent in
offering high-quality customer support, and
are hell-bent on reforming construction. They
are more focused on the middle and smaller
range of construction businesses, claiming that
they’re best for companies between 5 and 299
contractors. For contract management, their
document management system automatically
creates a new folder for each project served.
The system provides a full audit trail and
differing permissions levels, so everyone
involved in the project stay informed.
Pros: Intuitive for all users, easily track contracts with a Gantt layout, full-featured mobile app for iOS
and Android, well priced. Reviewers tend to be happy with the overall product.
Cons: Isn’t a full ERP solution, meaning that it’s missing some features found on other options in this
review (ex: accounting) nor does it offer the functionality to sync with third-party solutions.
Price: Starts at £20 (about $30) a month and scales with project size.

32. Goldenseal by Turtle Creek Software
If your construction business is on the smaller
end, consider Goldenseal. The software’s
database manages the existing status of your
contracts and continually updates it. You can
use Goldenseal to not only balance your
contracts with your clients, but also with your
subcontractors and heavy-machine rentals. The
software is integrated with accounting and
estimating features. While it’s not a complete
construction ERP software, Goldenseal will
definitely get the job done at a cheaper price
point than any other solution on this list.
Pros: Reviewers rave about their satisfaction with the software, excellent software option for companies with a
limited budget, provides full construction management functionality.
Cons: Website is off-putting and software start-up can take a while.
Price: Fixed at $295 to $695 for a single user and $995 to $2,195 multi-user.

33. INAXUS
INAXUS is targeted at civil and infrastructure construction, though it
also focuses on oil and gas, manufacturing, and power generation.
The construction ERP solution is well-known within Asia and the
Middle East, and it’s working to get a foothold in Europe and the
Americas. With that said, it’s earned its popularity in the Far East.
This complete software offers flexible contract features, such as
version control and document search. When I spoke with Andrea
Lopez, the head of marketing, she stressed, “[Our contract
management system] enables proactive tracking, avoids delays on
project deliverables, and speeds up project tasks. [Our] workflows
also have a proper escalation matrix and approvals for an efficient
and effective project management throughout the project course.”
Pros: Offers consulting and personalized customer support and regularly conducts “surprise” audits, so you
never need to worry about compliance issues.
Cons: With so many ways a company can use this product, INAXUS can quickly get too heavy and features go
unused.
Price: Variable based on project.

34. Jonas Premier
Because Jonas is located on the cloud, it’s
able to provide its users with unlimited
storage space for their contracts. They
also integrate seamlessly with Microsoft
Word, Outlook, and Excel, allowing users
to create their own custom forms and
push them directly into the program.
They’re focused specifically on general
contractors, so if your construction
company needs a program with a greater
scope, Jonas is definitely not for you.
Pros: Great customer service, unlimited storage, and super easy to use. It also has a great mobile app and
syncs with Microsoft Project, Quickbooks, and more!
Cons: Training delays when users can start using the product and some documents require manual sorting.
Price: $6,500 one time training fee, $150 per user per month, and $25 per APP user per month.

35. Knowify
Commercial subcontractors need construction
management software too, and that’s where Knowify
steps in. The fully-functional software seems to have
thought of everything to become one of the best
contract management software for construction. Its
contract functionality allows users to quickly submit
and electronically sign change orders, while also
managing all maintenance and accounting materials
in one place. Knowify is great for subcontractors who
want a no-nonsense approach to bidding, contract
management, change orders, and project
management
Pros: Offered at a great price point, mobile timesheets, and free training.
Cons: If you don’t have Quickbooks, you won’t be able to take advantage of all of Knowify’s accounting
features.
Price: Starts at $68 a month and scales up with the number of users.

36. Pro DBX
Pro DBX is a great contract management software
option for all-sized business. The software offers
digidocs—a system that keeps all contracts and
forms immediately available and searchable online.
Pro DBX also allows users to track their materials
with GPS, take inventory and cover purchase
orders, manage payroll and timecards, and offers
task management capabilities
Pros: With an emphasis on CRM and reputation management, this system is great for construction
companies looking to make the sale.
Cons: Doesn’t have as robust project management or change management features as other software
options on this list.
Price: Starts at $15 per user per month (with a minimum of $150 per month purchase) and scales up
based on your company’s needs

37. RENOMii
RENOMii is largely used by small and medium-sized
homebuilders—though subcontractors can easily
use this software to manage commercial contracts.
Where RENOMii really shines is with change-order
requests. The system tracks the status of the
request and automatically adds all approved
change orders to the running total contract cost, so
they eliminate cost and time negotiations RENOMii
also offers unlimited free cloud storage and
outstanding user permission customizations. Its
emphasis on clear communication does not go
unnoticed by its users, who tend to cite
communication improvement as RENOMii’s greatest
ROI.
Pros: Excellent communication features, allows users to quickly address change-order requests, and keeps
all areas of the business—from time cards to project management—in line.
Cons: Users need to create new projects for every contract and relationship which can quickly get clunky.
Price: $399CAD per year (or about $280USD) or $43CAD per month (or about $30USD).

38. If we could implement the above methods/ procedures in contract management system then the efficiency,
effectiveness and economy of the service can be enhanced.
Relationship could be improved, balancing costs against risks could be reduced and can actively manage the
customer–provider relationship. Effective Contract management aims for continuous improvement in
performance over the life of the contract.
Advantage of available softwares can be taken which in turn reduces the time as well as improves efficiency of
the construction project

39. Recommendations & Scope for future study
Recommendations
• As the above suggested methods necessitates the investment of money and time from the design team as
well as management team ,there might me constraints to implement but if implemented savings can be
realised.
• Since effective contract management is complex ,many softwares are available with potential benefits at
reasonable cost (some are for free also) so can be made use of those , to enhance the construction projects
overall performance.
• Design alternatives are properly assessed and most feasible one is selected ,as infeasible would result in
adverse results to project .
Scope for future study
• Effective contract management has a lot of scope ,as it helps in realising the captured savings , and hence
results in increased profits for the organisation.
• Further study can be done in using the softwares available and identifying their potential benefits and
selecting the best which would give better results and versatile in nature .
• Existing methods could be optimised by rectifying the defects /limitations if any so that efficiency and
effectiveness of it can be improved and hence improving effective contract management.