5 Vendor Contract Management Tips
With the growing popularity of outsourcing in facilities management and building maintenance, it’s expected that more and more facility managers will collaborate with vendors to maximize the physical assets under their care. However, such collaborations can only happen with different contracts in place, all managed by an efficient vendor contract management process.
Why Do Facility Managers Need Vendor Contract Management?
Vendor contract management refers to the process of negotiating, creating, storing, and tracking vendor contracts. It’s a standardized process that offers the best control of contract risks and streamlines contract renewals (when required).
For facility managers, a large portion of their operational budget will likely be tied to multiple service contracts; for activities like cleaning, lift maintenance, lawn care, and so on. Therefore, it is beneficial to get every single contract right and running properly from the start. To help FMs achieve this balance, here are a few hints and tips aimed at assisting them to oversee the entire vendor contract process successfully:
- Adequate Planning
How a contract is put together and implemented will usually impact its outcome. The most successful contracts start off on a solid foundation that clarifies vital issues like:
- Outlining the specific needs that the contract will fulfill for the organization/facility.
- Understanding the risks and liabilities.
- Linking contract relevance to achieving key performance indicators (KPIs).
- How and when to measure and evaluate performance, efficiency, and standards.
- Availability of resources to execute the contract.
- Overall, the contract prioritizes service quality over cost.
Understanding these issues will provide better insights on how or when to proceed with the contract. Additionally, careful planning makes it easier to spot potential problems early on.
- Clarify Priorities and Expectations
Keep the terminologies and language used simple and spell out all the details as much as possible and never assume that all parties understand what’s expected of them.
The body of the contract should describe the obligations of each party in detail. A common mistake is to discuss something verbally and “agree” but omit to capture it in the contract. Such omissions can cost you dearly later and may be nearly impossible to enforce. Instead, include a short, written amendment and get it signed off by all parties. This effectively makes it a legally enforceable part of the contract.
As the contract execution progresses, prioritize frequent communication with vendors and any other stakeholders about what’s expected, when it’s expected, and how performance measurement will happen. Additional essential details include contract scope, deliverables, and important project timelines.
Money issues can be contentious, so specify when payments can be expected, who pays whom, and the medium for payments (e.g., by check). Also, spell out clearly if payments will be in installments and if there are specific conditions to be met before funds are released. Doing this can potentially save everyone many headaches as the contract progresses.
- Consider Automation
To create, negotiate and execute contracts can be tricky and cumbersome. That aside, manually managing the vendor contract management process with paper records, spreadsheets, emails, or outdated filing systems often leaves too much room for mistakes and inefficiencies. Fortunately, there are automated tools that can help. More businesses are adopting dedicated solutions to manage their vendor contracts. From regular maintenance contracts to different types of agreements with vendors and other service providers, vendor management software and most modern maintenance software come with functions for creating and managing a robust vendor database.
- Fulfill Your Obligations
A contract can break down due to the non-performance of either party: the client or the service provider. In that case, while the vendor (service provider) is keeping their end of the bargain, the client (facility manager) has to play their part to ensure contract continuity by fulfilling all their obligations, especially regarding payments, resources, required support, etc.
Keeping your part of the contract agreement and being upfront with vendors if you foresee problems/limitations that could hinder your performance, creates a win-win situation for all parties involved. And your transparency with vendors will gain their trust and may make them more inclined to support your contract objectives fully.
- Expect and Manage Disruptions
At the commencement of a vendor contract, the expectations are that everything will go as planned. Yet, many times contracts will fail for various reasons. It’s therefore more realistic and advisable to be prepared for the unpleasantness of contract breaches. These breaches can be as commonplace as failure to supply items on time to a vendor delivering defective work, and so on.
Whatever the case, facility managers will be better off if they make provisions to identify and address any major issues early enough. Doing this helps to ensure that their organizations are better prepared to handle any worst-case scenarios and that their facilities, business reputation, and assets are protected as well.
Overlooking the vendor contract management process can mean significant problems for facility managers including financial losses, productivity issues, loss of customers, and poorly executed maintenance.
Bryan Christiansen is the founder and CEO of Limble CMMS. Limble is a modern, easy to use mobile CMMS software that takes the stress and chaos out of maintenance by helping managers organize, automate, and streamline their maintenance operations.