Management

• Contract management consists of tools, methodologies and procedures on which an organization relies to monitor agreements that it signs with business partners, such as vendors and customers. Drawing on legal concepts, the practice enables companies to ensure that its existing agreements adhere to corporate policies, laws and regulations, industry practices and top management's recommendations. Equally important, contract management keeps a close eye on how various agreements affect a firm's competitiveness, especially when it comes to confidentiality covenants. Confidentiality agreements are contracts that prohibit business partners from sharing business data with external, unauthorized parties.
  
  

Compliance

• Compliance management is a practice that enables companies to ensure that business partners, also known as counterparties, conform to contractual agreements. Key to conformity management are the steps that an organization follows to ensure contract adherence over the short and long terms, according to the U.S. Government Accountability Office. In fact, compliance administration activities focus on two areas: business conformity and regulatory conformity. Business conformity procedures verify that counterparties abide by contract terms. Regulatory conformity ensures that business parties do not break the law when completing their part of the bargain.
  
  

Relationship

• Contract management and contract compliance are distinct activities in corporate operations. Yet both concepts draw on a similar conceptual framework, and organizations often combine both functions in the same department. For example, the corporate head of legal department--that is, the general counsel--may ask a company's purchasing manager to review existing contracts, evaluate the performance of counterparties and determine whether business partners are adhering to contract terms and regulatory guidelines.
  
  

Significance

• Contract management and compliance provides many benefits to all organizations, including nonprofits, government agencies and businesses. In fact, contract management provides the tools and acumen that are necessary to rein in waste in contractual agreements, thus helping counterparties save on costs. For example, adequate contract administration procedures can help the federal government monitor contractors' activities and prevent losses that may result from fraud and waste. For a corporation, sound contract compliance practices can help avert adverse regulatory developments, such as fines and temporary suspensions.
  
  

Tools and Personnel Involved

• Employees who oversee contract management and compliance activities hail from different corporate departments, including legal, purchasing, customer relations and finance. To complete the necessary tasks adeptly, these personnel use tools and equipment such as customer relationship management software, purchasing administration programs and legal analysis software.