Best Practices for Effective Contract Management Strategy
This paper examines best practices for developing an effective contract-management strategy in both public and private sectors. Drawing on a review of relevant literature, the paper explores key factors that influence contract-management effectiveness, including contract length, mutual acceptance of deliverables, dispute-resolution mechanisms, and communication between contracting parties. The paper traces the origins of performance-based contracting in the U.S. federal government and reviews empirical studies from multiple countries. It concludes that regular, positive communication between contracting parties and prompt dispute resolution are the most critical determinants of contract-management success, and recommends due diligence and continuous compliance reviews as foundational best practices.
- Introduction: Defines contract management and its financial stakes
- Background to the Study: U.S. legislative shift to performance-based contracting
- Literature Review: Empirical studies on contract management effectiveness
- Findings: Key factors influencing contract management success
- Conclusion: Recommendations for best contracting practices
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What makes this paper effective
- The paper moves logically from historical context to literature review to synthesized findings, giving the argument a clear, progressive structure.
- Multiple empirical studies from different countries (Uganda, Indonesia) are cited to support claims, lending the argument cross-contextual credibility.
- The conclusion translates research findings into actionable recommendations, bridging academic evidence and practical guidance.
Key academic technique demonstrated
The paper demonstrates effective use of a brief literature synthesis: rather than summarizing each source in isolation, it groups studies thematically to identify a recurring pattern—communication and interaction as the dominant determinant of contract-management success. This convergence technique strengthens the paper's central claim without requiring original data.
Structure breakdown
The paper is organized into five sections: an introduction that defines contract management and quantifies the cost of poor contracting; a background section tracing U.S. legislative milestones; a literature review presenting three empirical studies; a findings section distilling common themes; and a conclusion offering practical recommendations. Each section builds on the previous one, making the overall argument easy to follow for readers at any level.
Introduction
Contract management is the process of actively monitoring and controlling the contract between a procuring entity and a contractor to ensure the delivery of a reliable and cost-effective service (Muhwezi & Ahimbisibwe, 2015). Effective contract management helps to lower the factors of risk and uncertainty, and to enhance both financial optimization and operational efficiency (Muhammad et al., 2019).
Poor contract management can result in substantial losses for the procuring entity. According to a survey by the International Association for Contract and Commercial Management (IACCM), the average cost of poor contracting — as evidenced by missed milestones and slow negotiations — is 9 percent of an organization's annual income and up to 15 percent of the contract value for large capital projects (IACCM, 2019). Most of these revenue losses can be avoided through improved contract management (IACCM, 2019).
Background to the Study
In April 2000, Congress began to address service-contracting challenges by lobbying for the increased use of performance-based service contracts for all government contracts (Cooper, 2001). A performance-based contract describes the government's requirements in terms of measurable outcomes and desired results for contracted work (Cooper, 2001). Consequently, the Procurement Executive Council — a senior coordinating body comprised of officials drawn from over 20 federal agencies — established a goal that by 2005, more than 50 percent of service contracts would be performance-based (Cooper, 2001).
In May 2001, Congress passed the Federal Acquisition Regulation, which established a preference for using performance-based contracting when acquiring services. These changes marked the beginning of a growing interest in contract-management practices in both the public and private sectors.
Literature Review
Researchers have conducted multiple studies to determine the best practices for effective contract management. Muhammad et al. (2019) sought to examine the relationship between contract management and performance characteristics using a sample of 100 professionals drawn from the fields of project management, architecture, engineering, and quantity surveying, among others. The study findings showed that contract length had a significant but negative effect on project quality (Muhammad et al., 2019). The study also found that effective dispute resolution between the contracting parties and mutual acceptance of the product or service were significant influencers of project quality in contracted works (Muhammad et al., 2019).
These findings were replicated in a study by Muhwezi & Ahimbisibwe (2015), which found that the quality of a project depends on the nature of interactions between contract-management teams and contractors of the disposing and procuring agencies. The study concluded that one way to improve contractual engagement in public procurement is by adjusting laws to allow reasonable interaction between the disposing and procuring entities (Muhwezi & Ahimbisibwe, 2015).
A similar finding was reported in a study by Komakech (2021), which examined the relationship between contract management and service delivery at a local jurisdiction in Uganda, East Africa. The study found that contract management was more effective when there was good communication between the contracting entities, prompt resolution of disputes, and regular reviews to ensure continuous improvement (Komakech, 2021).
Conclusion
It emerges that as a best practice for effective contract management, the contracting parties need to maintain a reasonable degree of communication and positive interaction, and to have mutual acceptance of the product or service. In this regard, it is prudent that the procuring agency conducts due diligence to ensure that the interests of the contractor they select align with their own interests. This alignment will help to enhance communication and interaction between the contracting parties. Furthermore, there is a need to put in place a system of continuous compliance reviews and dispute-resolution techniques that allow the parties to resolve disputes promptly before they escalate.
References
Cooper, D. E. (2001). Contract management: Trends and challenges in acquiring services. United States General Accountability Office (GAO). Retrieved from https://www.gao.gov/assets/gao-01-753t.pdf
IACCM (2019). IACCM benchmark report 2019. International Association for Contract and Commercial Management (IACCM). Retrieved from
Komakech, R. A. (2021). Contract management and service delivery in local governments in Uganda. International Journal of Advances in Social Sciences and Humanities, 9(1), 1–23.
Muhammad, K., Saoula, O., Issa, M., & Ahmed, U. (2019). Contract management and performance characteristics: An empirical and managerial implication for Indonesia. Management Science Letters, 9(2019), 1289–1298.
Muhwezi, M., & Ahimbisibwe, A. (2015). Contract management, inter-functional coordination, trust, and contract performance of works contracts in Ugandan public procuring and disposing entities. European Journal of Business and Management, 7(20), 76–84.
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