Introduction
Many Contracts Professionals get confused about the difference between Contract Plans and Contract Management Plans. It doesn’t help that these two concepts are often referenced differently in different industries and fields. For example, those in Procurement often call “Contract Plans” anything to do with the Contract Lifecycle up until Contract Execution. This blog post will provide a comprehensive comparison of these two types of Plans, their respective roles in the Contracting process, and how they contribute to successful Contract Drafting and Contract Management.
Contract Plans
A Contract Plan is a detailed outline of the process you will take to draft the Contract, as well as the terms and conditions to be included in the final Contract. It may also include tasks such as risk allocations that will need to be drafted into the Contract. Where Contracts Professionals are working with their Lawyer, the Contract Plan will set out the key steps each person will take and the timing of those steps, to ensure everyone is on the same page and the Draft Contract is completed within the overall Project timeline.
Another way of saying this is that a Contract Plan is a document or methodology that a Contracts Lawyer or a Contracts Professional puts together containing all the information they need in order to draft a Contract. It outlines the terms and conditions of the agreement, the parties involved, and the desired outcomes of the Contract. Contract Planning is the first Pillar of The 7 Pillars of Contracting, and is an important step in the Contract Lifecycle and the Contracting process.
Key elements of a Contract Plan include:
- Scope and objectives: Clearly defining the contract’s purpose, the goods or services to be provided, and the expected outcomes.
- Roles and responsibilities: Outlining the roles and responsibilities of each party involved in the contract, including any subcontractors or third parties.
- Negotiation strategies: Identifying negotiation tactics, areas of compromise, and any potential obstacles that could arise during the negotiation process.
- Legal requirements and compliance: Ensuring that the contract meets all legal and regulatory requirements, and addressing any potential compliance issues.
A well-prepared Contract Plan offers numerous benefits, such as streamlining the negotiation process, minimising misunderstandings, and helping to avoid costly legal disputes down the line. Find more information in our Contract Planning Guide.
Contract Management Plans
A Contract Management Plan is a document that sets out the procedures for managing an executed Contract and carrying out Contract Management during the term of a Contract. Usually, the Contract Management Plan is considered an internal document and is not shared with the other party. For a large project, it is quite likely that each party will have their own Contract Management Plan. Despite this, Contract Management Plans are designed to ensure that both parties meet their contractual obligations and that the Contract remains aligned with its original objectives (unless these have been changed by agreement).
Key elements of a Contract Management Plan include:
- Performance monitoring and measurement: Establishing clear performance indicators and regularly assessing each party’s adherence to the contract terms.
- Communication and reporting: Defining communication protocols and reporting requirements, ensuring that both parties remain informed and engaged throughout the contract’s duration.
- Change management: Developing a process for managing changes to the contract, including modifications, extensions, and terminations.
- Risk management: Identifying potential risks and developing strategies to mitigate or address them.
- Dispute resolution: Establishing procedures for resolving any disputes that may arise during the contract’s lifecycle, including mediation, arbitration, or litigation.
An effective Contract Management Plan provides several benefits, such as improved contract performance, reduced risks, better communication between parties, and a smoother dispute resolution process.
Comparing Contract Plans and Contract Management Plans
While Contract Plans and Contract Management Plans share the common goal of ensuring successful contractual relationships, they differ in several key aspects.
Key similarities:
- Both plans focus on achieving the desired outcomes and objectives of the contract.
- Both plans aim to minimise potential disputes and misunderstandings between parties.
- Both plans require clear communication and collaboration among stakeholders.
Key differences:
- A Contract Plan is developed before contract negotiation and execution, while a Contract Management Plan is implemented after the contract is signed.
- Contract Plans primarily focus on defining the terms, conditions, and objectives of the Draft Contract, whereas Contract Management Plans focus on managing the contract’s performance and ensuring compliance with the agreed-upon terms.
- Contract Plans are typically the responsibility of Contracts Lawyers and Contracts Professionals (usually in Procurement, Commercial or Projects), while Contract Management Plans may involve a wider range of stakeholders, led by the relevant Contract Manager.
Best Practices for Creating and Implementing Both Plans
To maximize the effectiveness of Contract Plans and Contract Management Plans, organisations should:
- Engage stakeholders: Involve all relevant stakeholders in the creation and implementation of both plans to ensure a thorough understanding of the contract’s objectives and responsibilities.
- Utilise technology where appropriate (particularly in Contract Management): Leverage Contract Management Software and tools to streamline processes, track performance, and maintain up-to-date records of contractual obligations in alignment with the Contract Management Plan.
- Regularly review and update Plans: Periodically reassess both plans to identify areas for improvement, adapt to changing circumstances, and ensure continued alignment with the Contract’s objectives.
Conclusion
Both Contract Plans and Contract Management Plans play crucial roles in the Contracting process, contributing to successful Contract Drafting and Contract Management. By understanding their respective purposes, organisations can develop and implement effective Plans that enable the best Contract possible to be drafted, promote positive commercial relationships, and minimise potential disputes.
By engaging stakeholders, utilising technology where appropriate, and regularly reviewing and updating each Plan, organisations can further optimise their Contract Drafting and Contract Management processes and achieve the desired outcomes of their contractual arrangements.
FAQ
While not legally required, both plans are considered best practices for Drafting Contracts, Managing Contracts and mitigating potential risks and disputes.
Contract Plans are typically developed by Contracts Lawyers and Contracts Professionals (working together), while Contract Management Plans are often drafted by the Procurement Team, the Legal Team or the relevant Contract Manager (depending on the organisation) and may involve a wider range of stakeholders, including Project Managers, Procurement Officers and Procurement Specialists, and Compliance and Quality Assurance teams.
Contract Plans and Contract Management Plans should not be combined into a single document. Each Plan has a completely different purpose, and are relevant at different stages of the Contracting process. Combining these Plans would only end up confusing the relevant stakeholders.
Both Plans should be reviewed and updated regularly, with the frequency depending on the complexity of the Contract and the nature of the Project. This may range from quarterly reviews for simpler Contracts and low risk Projects to monthly or even weekly reviews for more complex arrangements. Having said this, it is more usual for Contract Plans not to need review, as they serve a limited purpose during the Contract Planning and Contract Drafting phases.
Technology can play a significant role in streamlining the creation and implementation of both Contract Plans and Contract Management Plans, although it is more useful for Contract Management. Contract Management Software and tools can help automate various tasks, such as drafting Contracts, tracking performance indicators, managing change requests, and storing essential documents. These technologies can also facilitate better communication and collaboration among stakeholders, ensuring that everyone remains informed and engaged throughout the Contract’s lifecycle.
Contract Plans help identify potential risks before contract execution by outlining the terms, conditions, and objectives of the contract, as well as addressing legal requirements and compliance issues that need to be taken into account in Contract Drafting. Contract Management Plans, on the other hand, contribute to ongoing risk management by establishing procedures for monitoring performance, managing changes, and resolving disputes. Both Plans work to mitigate potential risks and ensure that Contractual relationships remain beneficial and productive for all parties involved.
Small businesses can benefit from implementing both Plans, as they can help streamline the Contracting process, reduce misunderstandings, minimise potential disputes, and ensure that contracts remain aligned with their intended objectives. While smaller businesses may not have the resources to employ dedicated Contracts Lawyers or Contracts Professionals, they can still develop effective Plans. Small business owners can work with their Lawyers to plan their Contracts (even if they don’t implement a written Contract Plan), and they still need to manage their Contracts (although they may not put a written Contract Management Plan in place). While their Plans may not be written, taking the time to implement Contract Plans and Contract Management Plans can help small businesses ensure stronger Contracting processes.
