In my previous blog, I explained how to build a structured repository of your assets. Knowing your asset related contracts and the terms and conditions is a second important step to getting the fundamentals in place for effective maintenance management.
Setting up your contract management repository
Without a proper contract management repository, you and your organisation are at high risk and not in control of supplier obligations, associated costs, and contract terminations or regulatory compliance. A structured contract registration allows you to proactively manage suppliers, validate contract related cost and performance, ensures timely contract cancellation or change, and delivers valuable information to improve contracting policies.
Setting up your contract management repository starts with an inventory of contract categories such as activity based contracts, performance contracts or framework agreements and the contract applications such as maintenance, services, procurement, lease or any other. For any contract, you have to collect, register and maintain a set of basic data, such as:
- Internal information such as contract owner, department and cost centre.
- Supplier information such as company details, address and contact person.
- Contract status information such as active, in negotiation, for approval, or terminated.
- Date information such as start date, notice, end date or cancellation options.
- Asset reference, linking the contract to one or multiple assets in your asset repository.
On top of the basic data, the contract category determines the next level of contract data and information. For an activity-based maintenance contract, you have to register information about:
- The individual activities that are contracted.
- The timing and eventual frequency of the activities.
- The associated budget for the contract or fixed cost per activity.
As performance contracting is a completely different concept for outsourcing maintenance, the performance contract includes different types of data and information, such as:
- Performance definition in terms of availability and quality of assets.
- Detailed service levels, times to start and times to complete.
- Performance measurement methods, supplier bonus or penalty agreements, and billing parameters.
3 starting points for registering your contracts
It is obvious that the more complex contracts are, the more they result in a more complex registration and contract management process. In all cases, you will need to start with the registration of your basic contracts. Once you have your basics in place, the contract management process will help you to evolve to the next level of maintenance contracting and outsourcing. However, for registering any type of contract, bear in mind the following three starting points:
- Link contracts to your asset repository, as that will immediately support your reactive and planned maintenance processes and allows you to make more and improved analysis.
- Implement alerts and notifications in your process or contract systems that will immediately help you to process contract cancellations or renewals in a timely fashion.
- Link all digital or scanned contract documents and files to the contract to ensure a single source of truth for all contract information.