Enterprise Contract Management

Table of Contents

Introduction .................................................................................................................................................. 2
Benefits of ECM ............................................................................................................................................. 3
Quantitative Savings ..................................................................................................................................... 4
Evaluation Criteria ......................................................................................................................................... 5
Costs, Who to Involve, Process ..................................................................................................................... 6


Enterprise Contract Management
Introduction

Public Works and Government Services Canada, i.e., public service
(http://www.tpsgc-pwgsc.gc.ca/)
Compliance is rapidly emerging as one of the most important factors in contract management.
Information management is at the heart of compliance management. If Public Works has ECM, we can
manage and control our information in compliance oriented framework are best positioned to avoid
problems and remain competitive.
Issues Currently Experienced by Public Works
- Maverick (unsupervised) spending by buyers. Some studies estimate that this activity occurs in
17% - 27% of purchases.
- Overcharging by suppliers (deliberate or inadvertent). In some studies, 10% of transactions
involved price discrepancies.
- Unwanted/Unnecessary automatic renewal of products and services. Studies indicate that 10%
of contracts renew automatically.
- Inability to verify if payments and deliverables are accurate and timely.
- Inability to analyze actual against planned or contracted spending.
- Inability to track Accounts Payable. This includes inability to enforce discounts and dealing with
time consuming and complex rebate calculations.
- Inability to monitory effectiveness of contract management in terms of cycle time and contract
quality (e.g., deliverables against plan, profitability, competitiveness).
- Lack of insight into supplier performance vis--vis contractual obligations.
- Inability to enforce supplier contract performance, or to enforce consequences for policy and
regulatory violations.
- Significant losses in time and resources due to inefficient contract authoring, editing,
negotiating, and monitoring.


Enterprise Contract Management
Benefits of ECM

1. Enhanced visibility: An organizations need for contract visibility presents a serious challenge
an organizations contracts must be simultaneously secure and accessible. ECM allows for
improved visibility without compromising security, permitting improved communications among
stakeholders from internal staff and management to customers and suppliers. Enhanced
visibility into an organizations contracts leads to contract convergence and leveraging which
helps the organization consolidate spend and drive better prices with its suppliers and other
business partners. It also enables contract administrators to view deviations from negotiated
terms and conditions proactively and therefore undertake remedial actions before minor issues
turn into show-stoppers.
2. Increase revenue (reduced costs): The strong contract authoring and collaboration capabilities
of ECM solutions enable contracting professionals to focus their time and efforts on negotiating
better contracts for an organization and identify an increased number of up-selling and cross-
selling opportunities. Automated reminders, notifications, and alerts enable accounts receivable
personnel within an organization to invoice for all services rendered and collect penalties and
charges where applicable and appropriate.
3. Reduce costs: An effective ECM solution can reduce costs for an organization in a wide variety of
ways. As organizations begin consolidating their procurement contracts from different divisions
or business units scattered across multiple regions within and across continents into a single
repository within an ECM solution, they invariably find opportunities to convergence of
contracts and leverage global pricing and discounts. This leads to direct cost savings as better
prices are negotiated with suppliers. The capabilities of an ECM solution to pre-flag automated
renewals, automatically notify appropriate personnel in case of deviations from agreed terms
and conditions help an organization in avoiding overpayment to vendors and reducing hidden
costs and penalties. By providing an audit trail of critical business transactions within the
contracting processes and strong reporting capabilities, ECM solutions assist an organization in
reducing the overall cost of audits as well as the risk of regulatory penalties from non-
compliance.
4. Streamline processes and improve efficiency: The net effect of an effective ECM solution is to
simplify and streamline the communications process among and between all partiesinternal
as well as external to the organization. This leads to more accurate and timely exchange
between employees and business partners, improved coordination of activities and resource
allocations, and reduction of waste and duplication of effort. For example, an ECM solution
leads to more efficient and effective use of an organizations legal resources, who can review
contracts on an exception basis versus reviewing all contracts. Such solutions eliminate
duplication of contracts and the need for shadow systems and tracking mechanisms.


Enterprise Contract Management
Quantitative Savings

According to AMR Research, "Automating purchasing contracts delivers significant ROI Companies are
implementing targeted projects in two to three months that deliver a 150% to 200% payback within a
year." Also, Aberdeen Group has recently reported that the ROI for an organization with $750 million in
annual revenue and $200 million in annual spend from an ECM implementation is more than 3X in the
first year! 7 Table 3 (on the next page) provides Aberdeen Groups quantitative view of the benefit
realized by ECM solution implementations. While the estimates vary by organization and by industry, it
is evident that research groups and organizations agree that implementation of an ECM solution, if done
correctly, can help reduce costs, maximize revenues minimize risks, and in general, improve business
insight for any organization.
Improvement Area Performance Impact
Compliance Management Improve compliance by 55%
Rebate/Discount Management Improve 25% - 30%
Material/Service Costs Reduce 2% - 7%
Revenues Improve 1% - 2%
Evergreen Contracts Eliminate auto-renewal terms
Contracting Cycles Cut contracting cycles in half
Documentation and Reporting Cut reporting cycles from days to minutes
Contract Analysis Analyze and maximize performance
Administrative Costs Reduce 25% - 30%


Enterprise Contract Management
Evaluation Criteria

ECM- Nice to have in ECM systems:

1. Content and document management capabilities, including access control, workflow, change
management, audit trail, and version management.
Public Works has a lot of employees, so it is very important to keep track of who makes
what changes.
2. Collaborative contract development capabilities that provide support for contract development
process and workflow.
Everyone at Public Works will be able to access same templates, follow the same review
process.
3. Contract configuration capabilities , including clause template library, wizard functionality to
automatically create contract framework based on a users responses to a set of questions
related to the contract
4. Resource planning capabilities , including capability to plan, schedule, and control all tasks
associated to a contract, capability to track actual time and cost incurred in managing a contract
5. Capability to reconcile terms and conditions , including capability to negotiate online or via
email with trading partners
6. Performance and compliance management capabilities , including capability to monitor and
report on performance of contracting partner against the contract, track compliance against
terms negotiated as part of the contract
7. Comprehensive integration capabilities, including integration to transactional systems such as
ERP, SRM, CRM, BW, Document Management etc. on an enterprise-wide basis.



Enterprise Contract Management
Costs, Who to Involve, Process

How much does it costs? Who needs to be involved in the discussion?
What strategy will we be going to market with? https://buyandsell.gc.ca/
Process:
- RFI first
- Lead to RFP
Whose involve and evaluate criteria:
(2 representatives from each department)
- Senior Management
- Departmental Manager
- Legal Counsel
- Risk
- Fairness Committee
- IT
- Executive Team
- Finance
- Strategic Sourcing
- End User, contract manager , Project manager (??)