5 Ways to Effectively Manage Vendor Contracts

Negotiating, creating, storing, and keeping track of vendor contracts is what vendor contract management is all about. The 5 ways to effectively manage vendor contracts is often a standardized process that ensures two things; offering control of contract risks and streamlining contract renewals when required.

Outsourcing is getting increasingly popular in facilities management and building maintenance, so it is expected that more and more facility managers will have cause to work with vendors for the maximization of physical assets they are paid to look after. Such collaborations will require the drawing up of different contracts, and must be managed by an efficient vendor contract management process.

A large portion of the operational budget of most facilities managers is most likely tied to what e call multiple service contracts; cleaning, waste management, lawn care, escalator maintenance, etc. It will only aid the FM to get every single contract set up properly from the start. Here are 5 tips aimed at assisting them to achieve a good balance and help to oversee every aspect of the vendor contract process successfully:

  1. Plan Adequately

The outcome of any contract depends on how it is put together and its implementation. A solid foundation, the basis of any successful contract usually clarifies vital issues such as:

  • The specific needs that the contracts intends to fulfill for the facility must be clearly outlined.
  • A thorough understanding of the risks and liabilities
  • KPIs: how relevant is the contract to achieving key performance indicators?
  • How and when performance, efficiency, and standards are evaluated.
  • Contract execution: are the resources readily available?
  • Whether service quality is prioritized over cost.

A thorough understanding of these issues will better inform whether to proceed with the contract or not. Potential problems are easier to spot when there is careful planning.

  1. Outline clearly priorities and explanations

All terminologies and technical language used should be made simple. All details should be spelt out as much as possible and assumptions should never be made concerning the other party’s understanding of these terms.

The obligations of each party should be described in detail. Any verbal discussion or consensus arrived at which is neglected in the written contract is a grave error. Such omissions may be impossible to enforce later. To remedy this, a short-written amendment, signed off by all parties will do. This must be made a legally enforceable part of the contract.

Prioritize frequent communication with vendors and other concerned parties about expectations, when and how, including performance appraisal, deep into contract execution. Deliverables, scope, timelines must be especially communicated to all parties.

A popular issue of contention is money, so important specifications about money must be clearly stated, such as when payments are expected, who pays whom, medium for payment, notice of any installment payments, and any specific conditions, if any, to be met before funds can be released. Taking pains to make this clear will eliminate confusion and disagreements from all quarters as the contract progresses.

  1. Take advantage of Automation

Creating, negotiating, and executing contracts can be cumbersome. Manual management of the vendor contract employing paper, spreadsheets, emails, filing systems leaves much room for errors. Therefore, automated tools should be employed when they can. There are a host of dedicated solutions adopted by organizations to manage their vendor contracts. These include vendor management software and modern maintenance software. These assist tremendously in creating and managing robust vendor databases, from regular maintenance contracts to specialized agreements with other service providers.

  1. Keep your end of the bargain

Non-performance by either the client or the service provider can lead to the breakdown of the contract. The facility manager, who is in this case the client must make sure to keep his end of the bargain, particularly when the service provider is upright. He must fulfill all obligations regarding payments, support, resources, and the like.

A win-win situation is created for all parties and stakeholders involved when the facility manager keeps his part of the contract agreement, and is being upfront with vendors when problems that could hinder performance objectives. Transparency is key when dealing with vendors, to gain their trust and making them more inclined to supporting contract objectives.

  1. Expect and Manage Disruptions: Foresight

Vendor contracts are drawn up and go into executions with the optimistic expectation that everything will go as planned. In reality however, many of them will fail, for differing reasons. It is therefore prudent to be prepared for eventualities, breaches, etc. The many ways a contract could go sour are varied.

Most unexpected breaches that do occur are a result of the FM overlooking vital aspects of the vendor contract management process. This will result in problems such as productivity issues, financial ruin, loss of customers, and maintenance that is poorly executed.

Facility managers with foresight will be better placed to make provisions to identify and address any major issues early on. In doing this, they spare their organizations the embarrassment and ruin of worst-case scenarios and protect assets, the facilities, and reputation of the business.

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