Contract Development & Contract Award Phase

Contract Development & Contract Award Phase

4th December 2019

Contract Development & Contract Award Phase

By Manpreet Dhillon, Head of Legal Transformation at ContractPodAi 

In a previous post about the pre-contract phase, we broadly described the contract management process divided into three main phases:

  • Pre-contract phase
  • Contract development & execution phase
  • Post-award phase (often referred to as contract compliance/governance)

In this discussion, we will dive into the second phase.

For a thorough review of the contracting process including discussions about terms and conditions, pre-award to contract completion, and what effective contracts are - read our Contract Management 101 eBook. It is a first-step guide to help the legal team, contracting officer, and contract administrators.
 

Contract Development & Contract Award    The importance of this stage is what each party "gets" out of the relationship.

This second phase is that of creating the agreement and signing off on it. By this stage, both parties would have met, brainstormed and worked out many of the critical issues,. These include needs, obligations, and conditions of the agreement. Contract development is then about taking the details outlined in the pre-contract meetings and drafting an agreement.
 

Constructing the Agreement

This phase focuses on two concerns. First, is to draft and articulate the terms of the contract. Second, is to negotiate the terms of the agreement. Then adjust it accordingly, and to get the accord signed off by the authorized parties. Significant steps at this phase include:

  • Drafting the agreement
  • Detail full commercial terms (eg: pricing for project)
  • Outline preparations required, implementation, integrations
  • Include terms for monitoring, inspections, and performance metrics
  • Clearly state legal region under which the contract resides
  • Point out procedure for contract changes, change control or adjustments
  • Add auto-renewal periods or termination clauses
  • Consider penalties, expiration period, exit plan and indemnities
  • Provide payment terms and considerations (period, methods, currency …)
  • Compliance and regulatory considerations
  • Negotiating the agreement terms
  • Authorized parties signing the contract

 

Why Is It Important?

Getting to the sign-off stage of a contract can be challenging.As shown above, the creation and contract award are the 'main events.' When we think about contracts, agreements and the process - we invariably think about the actual accord document. In addition, we also think to the back and forth negotiation phase.

At this phase, the intent and concept of the work and relationship are documented. After some give and take, the two parties either agree on the details and form a pact, or conclude by walking away. Therefore, the key importance of this stage is the clear articulation of what each party 'gets' out of the relationship, and concluding with an agreement from all parties. Next, we will discuss the tools needed for the contract award stage.
 

Tools for the Contract Award Stage

Now, getting to the sign-off stage of a contract can be challenging. Think of the complexities of large, multi-national enterprise contracts that span countries and jurisdictions. There are many steps involved, and often these contracts can be lengthy, and complicated. In the authoring phase, there are many standard clauses to consider, and special conditions from the pre-award meetings. However, there are compliance conditions to remember, your company's need for consistency across accord documents, and figuring out the clauses that are most likely to be accepted by both parties.

Given the complexity and challenge of this stage, it is always advisable to look for the right tools to help the team. The right tool for this job is a contract management system. They are also known as contract lifecycle management (CLM)  systems. Today's good CLM systems include artificial intelligence (AI) built in. This helps tremendously by taking the knowledge from all your contracts, to help author the next agreement with standard clauses and conditions. Also, the AI runs quick analytics for consistency, does a first pass review to identify errors and risks, and provides highlights (financials, liabilities, key dates) as good snapshot summaries.
 

Next Steps

In short, the creating phase and contract award phase is the part that most people think about when asked about contracting. However, it isn't the end of the contract management cycle. Next in this series is the final part, the post-award phase.
 

AUTHOR:

Manpreet DhillonManpreet Dhillon
Head of Legal Transformation
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