With an increasing focus on the use of data and automation to create value across most organisations, there may be an assumption that contract managers have all the data they need at their fingertips.
But what does data and automation in contract management actually mean? Do organisations actually understand what is required in order to harness its power for true efficiencies in the way they operate?
The answer to the first question is intuitive – the use of data driven tools to replicate contract management activities that can be broken down into rule-based tasks. Think validation of reported Key Performance Indicators (KPIs) against supporting records, and verification of invoiced charges.
The answer to the second question on an organisation’s maturity to fully harness data and apply contract management automation is however more challenging.
In our experience contract functions are misled by a number of fundamental myths that prevent them from leveraging data and automation to create tangible value for the business.
Myth 1 : We know our own data
Contract management functions all use data to some extent with varying levels of maturity. This could be basic collation of timesheet data to validate labour charges or the use of delivery dockets in matching invoiced materials. The reliability, quality and availability of this basic data however can often limit the effectiveness of contract management activities. There is a volume of ‘other’ data that is captured for different purposes that also can inform Contract Managers. There is an opportunity to leverage these additional sources by considering the following facts.
Fact: There will be relevant data you aren’t using
Think weather events, vehicle GPS data, contractor maintained gate swipe records, independent flight and accommodation records. Whilst these data points may be maintained by external sources or for a different purposes, they provide valuable corroboration sources for contractual transactions you are managing.
Fact: You have data rights
Most contracts will have reasonable ‘right to audit’ clauses developed during the procurement and contracting phase. More often than not, these audit clauses are not looked at in reference to other contract clauses that present an opportunity to access data currently not considered.
Fact: It’s as easy as joining the dots
Using data from multiple sources to corroborate contractual transactions is now a reality with contract data analytic tools. Limitations that used to exist with extracting useable data from hardcopy documents and internal system reporting shortcomings can now be overcome with bespoke algorithms and data scraping techniques.
As a result of a small number of fictitious time-sheeting practices identified, our client was seeking to understand how common this was across their work location. The concern raised was particularly around individuals who had claimed for hours worked when they had not, in fact, attended site. Due to timesheets being a potentially unreliable source, we expanded our thinking into alternative sources to understand the facts and potential impact of this inappropriate activity. This included documentation held by the Contractor such as flight records, accommodation records, maintenance logs, drug testing sheets, email correspondence and daily meeting registers which were used to corroborate time sheet hours claimed.
Myth 2 : Automation is the domain of ‘operational people’
Whilst organisations have in recent times invested heavily in automation of operational processes through robotics, there is a significant opportunity for contract managers to apply the same principles on reducing manual contract management tasks.
Fact: Contract management can benefit from automation
From importing of data sources in contractor’s maintenance systems to generating performance dashboards and reporting of breaches, automation can reduce the level of effort significantly in collating relevant information on contracts managed by an organisation.
Fact: Low investment, High return through significant efficiencies
Our experience suggests that automation solutions for contract management functions can typically take the form of low complexity tools developed to extract, validate and report on relevant performance areas. The business case is clear: undertake a small investment to generate significant efficiencies through reducing manual work effort and reap benefits from improved decision making and identified value. Importantly, Contract Managers can be freed up from data collation activities to focus on strategic interrogation of efficiency opportunities with their contract portfolio and target root causes of non-compliances.
Our client had consolidated a number of smaller contractual arrangements into one large contract with multiple sites and activities. This increased the complexities associated with contract management, both in tracking of performance and validation of invoiced charges. An automated tool was developed to provide insights to the contract management team through dashboard displays with items of interest and anomalies identified in underlying schedules. Instances where required activities were not undertaken were highlighted for follow up. This information was also extended to streamline the validation of payment amounts by matching rates to the contract and quantities to underlying timesheets and maintenance records.
Myth 3 : More data = More specialist resources
There is a misconception that taking a more data centric approach to contract management means that contract managers need to be data specialists or recruit additional resources with these skill sets.
Fact: Contract Managers don’t have to be data specialists
Once routine analytic and automated processes are established upfront, minimal maintenance is required on an ongoing basis. Contract Managers can then focus on what they do best – making decisions with regards to extracting the greatest value from their contract portfolio.
A client had established a complicated process for the calculation of potential recovery scenarios under a contractual arrangement in place. Contract management personnel found this process to be time consuming and were unsure as to how to make ongoing updates when required. We were able to simplify this process by developing an Excel based entry template with a large number of pre-built scenarios being selectable on a single click. Further, the calculation itself was simplified to a number of key drivers with these values and assumptions being set out in a clear, single sheet listing to allow for easy updating by the client’s finance team going forward.
Like all commonly held myths, challenging them often takes a little courage, a small dose of discomfort, and the ability to see the big picture on the possibilities that you can achieve by facilitating change.
The resulting rewards are clear.
Data and automation emerge as tools that enable businesses to work smarter, not harder.
Organisations willing to challenge the status quo in transactional day to day activities will be the ones that are able to reset the strategic focus of contract management to deliver greater value to the business.
If you’d like to discuss how we can help you leverage data and automation to create tangible value for the business, please contact us.