Managing contracts and the financial control of the contracts is critical to contract-intensive businesses. The ability to manage contracts with revision control and manage revenue using progress billing is typical.
It is vital that the process of responding to and creating tenders of work is recorded for future reference. It is used as the basis for monitoring the negotiation progress, as well as for tracking the conversion of the tender to contract. Contracts need to be cost controlled, the progression of the work recorded, and allow revisions of contract baselines while managing applications for payment and cash collection activities.
The contractor will receive tenders from prospective customers and will have to create bids or quotes within the constraints of the tender, and also manage the cash collection.
The Contract Management feature includes the following key capabilities:
The contract normally goes through the following stages.
Enquiry
When receiving an invitation to tender (ITT) or receiving information about potential contracts by other means, a Sales Contract is created in the Enquiry status. The customers expected response date to the tender is also registered and used for tracking tender response dates.
The contract may or may not at this stage have any deliverables connected to it.
Estimating
If the ITT is interesting, the contract may go into an estimating phase where additional information is obtained and a more detailed estimate is needed. This is also the time where different estimates are produced, possibly by doing simulations of possible estimates. During this phase, it is common to make a decision on whether the potential contract is worth bidding for or if it ends up as a no-bid contract.
Submit Tender
If the decision was to continue bidding for the contract, a tender is sent to the customer. The tender should be based on the estimated contract, and usually consists of documents created in a format requested by the customer. When sending a tender, the date and time of submittal is logged directly on the contract, and it is possible to connect the tender documents directly to the submittal.
Negotiate
It is likely that the supplier and customer go through multiple negotiation processes throughout a contracts life cycle. An additional status—a sub status, is available to identify such processes and they can be defined globally in the system.
Award
Once an agreement has been reached with the customer, the contract is awarded. From this point onwards, it is possible to create Applications for Payment, although it is not possible to submit an application until the contract is activated. When awarding the contract, you can also register the reason for winning the contract.
Review
It is common to go through a review phase to discuss contract contents, make amendments, handle contract change orders (variation orders), etc. that were not covered under the contract when it was awarded. Before activating a new contract revision for these amendments any connected contract change orders must have been approved and activated. Such changes can be done throughout the life cycle of the contract if necessary. It is possible to by-pass the review stage and go directly to activating the contract if necessary.
Activate
Once the contract contents have been agreed, it is time to carry out the work according to the contract. This is normally when you initiate work and do your progress billing. If you are using applications for payment to handle your billing, you can submit payment requests.
Complete
Once work has been completed according to the contract, it ends in the Completed stage. It will still be possible to send out payment requests, create invoices, and receive payments.
Close
Once the work and billing is completed, the contract will be closed. It will no longer be possible to send out payment requests, create invoices, or receive payments.
Cancel
If for some reason the contract is not valid anymore, e.g., it was created during a bidding phase but the customer decided to not go ahead with the contract, it can be canceled.
Lost
If you have not reached an agreement with the customer, and a competitor wins the contract instead, you can register the reason for the loss. This can then be used for further analysis in order to rectify or to improve existing routines and increase the likeliness of winning contracts in the future.
On Hold
Sometimes it is necessary to put a contract on hold. There can be a number of reasons for doing so, maybe the customer needs more time before making a decision, maybe they run out of money, maybe the customer is bidding for a main contract and the contractor has decided not to go for the contract at the moment. Regardless of the reason, putting a contract on hold is merely information in addition to the contract status. If applications for payment is used, the system will issue reminder messages when trying to create new applications or process existing ones.