Pre-Execution vs. Post-Execution Contract Management: Key Differences

A food manufacturer, utility company, or aerospace and defense firm can have 90% or more of its annual revenue tied up in supplier and vendor contracts. Procurement operating expenses typically amount to less than 1% of total spending, but can result in a 9% loss in sourcing value. That translates to $2.5 trillion when terms are suboptimal or poorly managed. 

When executing tens of thousands of contracts each year, the sheer volume alone makes it difficult for procurement teams to effectively manage competitive terms, contract structure, and supplier relationship rules. 

Understanding where to insert technology into the contract lifecycle management process—whether pre-execution or post-execution—can help companies derive more value from their contracts and hold vendors accountable for better performance.

What are the Stages of Pre-Execution Contract Management?

Pre-execution contract management is a critical phase where stakeholders must align around acceptable terms and conditions. From key deliverables and deadlines to legal remedies for a contract default, negotiating favorable pre-execution positions helps companies maintain smooth partnerships and avoid potentially lengthy and costly litigation. The right set of contract terms can empower stakeholders to reach their performance goals, seek win-win resolutions, and create more mutual value.

Pre-execution processes include:

• Initial requests: identifying all documents needed for contracting

• Authoring: using templates and playbooks to streamline contract writing

• Reviewing: comparing drafts to standard clauses and identifying errors

• Negotiating: collaborating with the other party to reach agreeable terms

• Approvals: gaining buy-in signatures from senior officials

Best practices for pre-execution contract management include the following:

• Clear and effective articulation of contract objectives
  
  
• Compliance with commercial best practices and legal requirements
  
  
• Insight into key cost and value drivers, as well as potential risks
  
  
• Outlining performance benchmarks and targets
  
  
• Outlining reward and penalty structures for vendors to optimize performance
  
  
• Deploying time-saving technology that streamlines contract review and escalations

What are the Stages of Post-Execution Contract Management?

Post-execution contract management kicks off obligation monitoring and enforcement. Deadline tracking for renegotiation and renewal initiates a continuous loop of performance management and optimization. Failure to review and enforce contracts can erode relationships and prevent a company from reaching its full potential.

Post-execution processes include:

• Obligation management: monitoring/ensuring deliverables and deadlines are met
  
  
• Revisions: correcting overlooked provisions with amendments
  
  
• Auditing: determining and proactively addressing compliance issues
  
  
• Renewing: identifying opportunities to sustain or create new contracts

Best practices for post-execution contract management include the following:

• The ability to capture relevant data and create useful reports
  
  
• Commitment to regular monitoring against clearly defined targets
  
  
• Measurement of total costs and supplier performance
  
  
• Enforcement of penalties for failure to meet contractual obligations
  
  
• Resources for a formal review process and relationship optimization

Where Can Technology Truly Add Value?

Whether you’re looking to optimize pre-execution or post-execution contract management processes, enhancing transparency in your collaborations, differentiating risks, and routinely reviewing and benchmarking contracts can improve your results.

LexCheck lends its AI-powered automation technology to help corporate legal departments thoroughly and efficiently review contracts during the pre-execution phase. With it, legal teams can:

• Compare a draft to an AI Digital Playbook
  
  
• Fully redline a contract draft in less than five minutes
  
  
• Enforce pre-approved contract language, either manually or automatically
  
  
• Reduce the amount of time from drafting to signing by more than 33%
  
  
• Utilize context-based suggestions to aid in negotiating terms
  
  
• Determine where bottlenecks occur in the review and revision process
  
  
• Reduce the number of escalations to senior counsel while also helping train junior associates on playbook standards

Contracts serve as the foundational pillars for many businesses today. Managing them properly at each stage, including pre-execution and post-execution, is necessary for keeping track of legal agreements and ensuring operations run smoothly at all times. With the right technology such as LexCheck, tapping into the true potential of your contracts is faster, easier, and automated.