Don’t Let Poor Contract Management Lead To Shocking Fiscal Waste

Think contract management is straightforward? Not really something businesses should be worrying about in 2016?

So what about the employee of a Western Australian public sector organisation who went over their allotted AUS$100,000 (£58,000) spending budget to the tune of AUS$40,000,000 – £23,000,000.

What that meant was that an IT services contract that was meant to come in at AUS$44m actually cost the Australian taxpayer AUS$81m. A stinging audit of the organisation’s failing contract management practices found other errors, like it spending AUS$90,000 per month to store AUS$3.3m worth of unused IT equipment.

In the words of the local auditors, “Numerous weaknesses in the management of the contract were identified, including no dedicated contract manager, no clear policies and procedures for contract variations, ineffective financial management and limited asset tracking and management” (see its February report, here).

On top of all your compliance

The Western Australia issue was discussed in a US article in CIO magazine. It’s a great overview of the issue, and it makes the point we see over and over again around this issue: “Poor IT contract management can cost your business time, money and legal fees… the effects of mismanaged contracts adds up, from legal fees and costing businesses large sums of money that they don’t need to lose.”

So, I think we can agree contract management isn’t straightforward – and is most definitely something businesses should be worrying about right now.

When it comes to getting contract management back up to the level it needs to be in your organisation, we have found that the best response is a combination of reformed business practice and judicious use of technology.

In terms of the process part of the puzzle, you really need to be working off a single, electronic repository to drive through consistency and transparency.

You also need to be totally on top of all the compliance aspects of your contracts in all relevant jurisdictions.

And you need to put the right people, empowered by a document management approach, at the key checkpoints in your internal contracts process to ensure visibility, auditability and security. One of the key points in the Australian case was that no one was looking at what a certain employee was doing, which turned out to be tasks well above their pay grade.

Affordable and effective contract management is yours – you don’t need a Magic Quadrant solution

We’re finding not enough organisations have cottoned on to this fact yet, as our on-going work with the professional global body in the contract management space, the IACCM has found.

Others have noted this as well, such as Gartner.

However, I would caution that there is simply no need to spend megabucks and invest in huge IT systems to do contracts better – which tends to be the response to business issues that enterprises that buy into heavyweight Gartner programmes exemplify.

The great news is that with solutions like our own, great contract management is not just practical and affordable for any sort of organisation – it’s also something you can start implementing tomorrow.

And given that you can’t be sure there’s not someone on your team making the same sort of mistakes as the employee in Western Australia, can you afford not to?

Howard

Howard Frear is Sales and Marketing Director at EASY SOFTWARE UK

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