My previous blog offered more information on the CATS CM® contract management process. This process has been subdivided into six steps and is part of the methodology’s fourth pillar. However, not every contract requires a similar amount of contract management attention within these six steps, which is why the fourth pillar deals with that through the contract management scenarios. These scenarios allow for tailored contract management processes without losing control over the process or lacking the aggregated supply of information.
Why contract management scenarios?
Not all contracts need the same amount of attention, which is why CATS CM® offers contract management scenarios. A contract management scenario is a fixed set of Contract Management Essentials (CM Essentials) that the contract manager carries out with a certain frequency for specific types of contracts. Based on which criteria it wants to use for categorizing and subdividing contracts, each organization determines which sets of CM Essentials and frequencies are allocated and which contractual and environmental aspects will affect the application of the scenario on a specific contract.
The basic scenarios
CATS CM® best practice categorizes contracts into four types. This categorization ensures that clusters of contracts that generally have the same complexity are managed in a similar fashion. Contracts are categorized based on the position they have within the processes they support or what they deliver to the client.
This results in the following four types of contracts:
- Contracts for process input
- Contracts for process activity
- Contracts for process output
- Contracts for process effect.
It goes without saying that contracts can be hybrid and include multiple components.
CATS CM® offers an example of an standard scenario for every type of contract: Basic, Adjusted, Intensive, and Highly Intensive. This standard scenario indicates which CM Essentials should be included in the Plan-Do-Check-Act steps of the methodology and with what frequency.
The Highly Intensive contract management scenario is the integral application of the methodology on a contract. All steps and activities are followed entirely, regularly, and in the right order. All instruments are applied correctly and at the right moment. Furthermore, meetings take place according to internal agreements, the contract file is fully and properly updated, and all is done with a proactive approach.
The Basic contract scenario is the simplest form of contract management. Only the basic principles of the methodology are applied. All steps of the process must be followed, but certain activities will not be carried out within that framework.
Adjusted and Intensive
The Adjusted and Intensive contract management scenarios are hybrid forms that fall between Highly Intensive and Basic contract management. Compared to the ‘Highly Intensive’ contract management scenario, several activities are omitted and the frequency of the activities can be reduced.
For organizations focusing on proactive contract management, the structuring, formally defining, and sharing of contract management scenarios is essential.
Taking contractual and environmental aspects into account
The type of contract is, of course, not the only factor that affects the contract management structure. Other factors play a role as well, such as:
- monetary scope;
- specifically applicable laws and regulations;
- political sensitivity;
- level of dependency on the supplier;
- measurability/observability of the WTBD;
- how frequently the environment changes (volatility).
When the basic scenario is determined, the organization will assess it against a list of contractual and environmental aspects. The effect of an aspects on the frequency of carrying out the Plan-Do-Check-Act steps for the CM Essentials has previously been determined. Moreover, a CM Essential can incidentally, and based on the aspects, be added to or removed from the CM Scenario.
Contract management scenarios and contract management policy
The basic scenarios and the contractual and environmental aspects jointly result in the contract management scenarios. How these contract management scenarios are structured is an essential part of every contract management policy. It helps organizations enable specific contract management without losing control over contract governance and, thus, the grip on contracts and processes as a whole.
This is the thirteenth blog of the series ‘Contract Management with CATS CM® in a nutshell’, in which we guide you through an overview of our vision and methodology. Do you have any questions for Linda Tonkes and Gert-Jan Vlasveld, the authors of the book Contract Management with CATS CM® version 4? Then please send an email to email@example.com!