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What’s the Fuss? Contract Management is Nothing New to Public Entities

Recently there’s been a shift in focus by the analyst community and Chief Procurement Officers to what’s generally called “Contract Management”.  But if you’ve ever worked for or with a publicly-funded entity, you’re probably wondering why this is suddenly a ‘hot topic’. The software industry has spent the last 10 years perfecting delivery of high-volume, low-value procurement processes. Eventually it was bound to recognize there’s more to ROI than catalogs and what is nebulously called “sourcing” – it’s also about reducing costly lawsuits that interfere with your ability to fulfill requirements, and maintaining a complete history of your complex, multi-year contracts, from requirement through completion, that documents your decisions and actions and manages changes.

Public sector entities’ regulations, mandatory reporting, and oversight drove them years ago to standardize these activities – so to hear “Contract Management” as a buzzword gives me hope that finally(!), the industry recognizes that procurement is not just about transactions and data and automation.  It’s not just the process of creating a document, or filling out a form, or allowing the legal department to edit clauses during negotiations.  It’s about negotiations and phone calls and e-mails and ‘living’ documents that change over time.

Contract Management, done effectively in the context of software, is a Best Business Practice that allows your organization – public or private – to bring the *entire lifecycle* of a procurement into your Enterprise landscape.  Only by having a complete record of a procurement, can a professional purchaser or buyer effectively manage suppliers and maximize ROI on large contracts.
Procurement professionals – your time has finally come: Join the debate!

Is “Contract Management” a misnomer?
Shouldn’t we really be talking Procurement Management?
Is the functionality in SAP Procurement for Public Sector addressing these requirements?

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    • Hi, Fred -

      The group of functions SAP officially calls "Contract Management" in SRM does NOT address the entire lifecycle of a procurement. It literally is functionality for working with SRM Contract business objects.

      It focuses on specific Contract-related functions for that Business Object, such as creating SRM Contracts from Auctions, or changing released Contracts. You can see the SAP definition of Contract Management in the "Solution in Detail Contract Management with Supplier Relationship Management" PDF document.

      SAP Procurement for Public Sector current release, based on SRM 5.0, with enhancements to it, and with integration to NW Records Management, interprets contract management more liberally, beginning with creation of a "contract file" (which can include requisitions, market research, etc.) and follows through solicitation/tender/bid invitation creation, evaluation of bids/suppliers/contractors, amendments/changes to those bid invitations, the actual contract award (which could be a PO or Contract), plus any amendments/ modifications/ change versions made to released POs and Contracts, any orders against Contracts, including terminations, claims, protests, etc., and then finally we provide a new program called "Closeout", which takes SAP's standard concept of "closed" or "complete" documents, and requires more stringent rules to be met that takes into consideration Funds Management and other follow-on document statuses.

      This 'program' also links the Business Objects (PR, BI, CON, PO) and the Contract File (overall record for the procurement lifecycle), so that you 'recreate' the concept of a single paper file that has the physical procurement documents, as well as the historical documents, forms, etc.  This means for the first time, we relate the non-transactional activities that happen during the lifecycle of a procurement with their technical business objects (PO, Contract, BI, PR).

      There are some features that were developed through the PPS project, which were taken into Standard SRM 5.0, which also are part of what we consider contract management processes, which are not discussed in SAP's "Contract Management" functions, such as Novations (changing the physical vendor assigned to a released contract). You shouldn't forget to look at the overall functionality in SRM standard, that may not be categorized the same way as we use terminology from a business perspective.

      FYI, the next release of SAP Procurement for Public Sector (ramp-up targeted to start in December) will take this even further, enhancing the core structures of Shopping Carts, BIs, CONs, and POs, to address typical contract administration requirements such as "incremental funding" of orders - the ability to add money to an existing line item, when your line items cross over multiple years that don't have funding assigned yet.

      Anyway, now that you've heard what I have to say - I'd very much like to know what YOU consider "lifecycle contract management", because maybe there are things we're still missing, or maybe your interpretation differs even from mine?
      I don't see you in our corporate address book, so I'm not sure if you're a customer or partner, but I'd be happy to e-mail you the Solution in Detail if you want to e-mail me with your address.

      Thanks for the feedback!

      • P.S. there is also a new product xCLM - Contract Lifecycle Management - which is not generally available yet.  It will also focus on the business object Contract, versus the entire lifecycle of a procurement from requirements definition to administrative closure.

        There were some 2007 ASUG and SAPPHIRE sessions on xCLM - if you would like to learn more about it, I think you can find information on SAP's website.

  • Hi Rebecca,

    Do you have any info. of what exactly are the enhancements in SRM 7.0 with reference to SRM 5.0 for contract management for a process industry?

    This is a good blog which opens up the discussion about the contract management. I could get more info. from your answer rather than you blog 🙂