Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

The 5 Tips to Make the Contract Phase Effective

1. Define a clear scope and measurable outcomes

Start with a precise scope of work so there is no confusion about what is included, what is excluded, and what “done” means. Convert expectations into measurable outputs such as service levels, quality criteria, and delivery targets. Attach supporting documents like specifications, drawings, or a statement of work to avoid different interpretations. When requirements are vague, suppliers price risk higher and disputes become more likely. A clear scope also speeds up approvals because stakeholders can review something concrete.

2. Align stakeholders early and lock decision boundaries

Involve legal, finance, operations, and the budget owner early, not at the last minute, so you avoid late changes that restart negotiations. Define who can approve which topics (price, terms, risk) and what the non-negotiables are. Build a simple approval path and timeline so everyone knows when input is needed. This prevents “hidden” requirements from appearing after the supplier has already adjusted the offer. It also keeps communication consistent and reduces internal contradictions.

3. Use a risk-based approach to contract clauses

Focus your attention on the clauses that matter most for the category, rather than treating every contract the same. Identify key risks such as delivery disruption, data security, compliance, or quality failure, and address them with specific controls. Examples include warranties, service credits, audit rights, insurance requirements, or step-in rights for critical services. Keep the balance fair so the supplier can realistically accept and execute the agreement. A practical contract manages risk without creating unnecessary complexity.

4. Standardize templates and control versions

Use approved contract templates, clause libraries, and playbooks so you do not reinvent the wheel every time. Standard language improves speed, consistency, and compliance across categories and teams. Maintain strict version control so everyone negotiates on the same document and changes are tracked transparently. Store final signed contracts and key metadata in one accessible system to support audits and renewals. This also helps new team members ramp up quickly without missing critical terms.

5. Plan for execution, not just signature

A contract is only effective if it can be managed after signing, so define how performance will be monitored and how issues will be handled. Set review cadence, reporting formats, escalation steps, and corrective action procedures in advance. Include clear change control so new requirements can be added without chaos or informal side agreements. Capture renewal dates, notice periods, and exit plans early to avoid last-minute renewals under pressure. When governance is clear, both sides spend less time arguing and more time delivering results.

The 4 Phases of Contract

The contract phase is typically divided into several connected stages that work together and should be managed carefully. After contracts are completed, procurement usually returns to reviewing RFIs and RFQs, restarting the cycle when new purchasing needs arise.

1. Planning and Scoping of Contracts

The first stage of the contract phase has something to do with the planning and scoping of contracts. Of course, each phase of the contract is dependent on which side of the group you are in. If you’re with the buyer, the first thing you need to do is produce the acquisition plan together with the solicitation. If you’re on the seller’s side, things are also different, since you’re the one who’s going to produce the business development plan and the offer.

How to do it

Start by defining the business need, scope, deliverables, timelines, and success criteria (what “good” looks like). Then map key stakeholders and approvals, and translate requirements into clear contract documents (e.g., SOW, specs, SLAs, KPIs). Example: for warehouse packaging supply, you specify monthly volumes, quality standards, delivery windows, and penalties for late deliveries before sending anything to suppliers.

2. Developing Contracts

Once you are finished with planning and scoping the contracts, it’s time to develop those contracts. We should probably say “Welcome to the most boring part of the contract phase”, but we also couldn’t because this is an important phase for contracting.

This is where details of the contracts are written and discussed further. But contract development is also based on one’s role during the negotiations. The buyer’s side will define the requirements, conduct relevant market research, perform a risk analysis, and formulate a contract strategy. All of these must be done before asking for solicitations.

As for the seller, once the request from the buyer is received, they need to develop their response in a way that demonstrates the seller understands what the buyer needs and that they can deliver without fail.

How to do it

Draft the contract structure and fill in the operational and legal details: pricing model, payment terms, responsibilities, change control, confidentiality, and liabilities. Run internal checks (legal, finance, operations) and make sure the wording matches what the business can actually execute. Example: for a transport provider, you define rate cards, fuel surcharge logic, proof-of-delivery rules, and escalation steps for service failures.

3. Negotiation and Signing of Contract

Once both parties have finished developing and planning out their contracts, it’s time for more negotiations and the signing of the contract. Once again, both parties must come together for one last negotiation for the details of the contract. If there are details that need to be ironed out, these should be discussed thoroughly.

Once both parties agree to the contract, the signing stage or phase is next. It’s basically just both parties signing the contract. For traditional companies, the contracts are still based on paper. However, modern procurement teams are using automated procurement platforms to take care of the contracting phase. Therefore, all contracts are saved on the database and are kept there for safekeeping.

How to do it

Prepare a negotiation plan with must-haves, nice-to-haves, and fallback positions, then negotiate based on facts like risk, total cost, and service impact. Keep a clean record of agreed changes, update the contract version, and confirm final alignment before signature. Example: the buyer agrees to a longer contract term in exchange for lower unit prices and stronger service credits, then both parties sign the final version in an e-signature tool.

4. Performance Monitoring and Contract End

Once the contract has been awarded, it’s time for the procurement team to monitor the performance of the whole procurement process. This is the stage where the procurement process cycle restarts with RFI and RFQ again. 

All information available and important is taken note of as sources of information for the next procurement process. Once information is collected and stored, it is up to the procurement director to call a meeting and discuss the details of the performance.

There is also the end of the contracts to observe. Normally, most automated procurement systems come with a feature where the program itself will check for every contract used during the procurement process. Once all contacts are collated, the program will give an alert regarding the end of a contract opportunity.

How to do it

Track performance against KPIs and SLAs using regular reviews, scorecards, and documented corrective actions when issues appear. Manage changes through formal change requests, and plan renewal or exit early by reviewing end dates, notice periods, and transition needs. Example: if on-time delivery drops below the target for two months, you trigger a corrective action plan, and three months before expiry, you decide whether to renew, renegotiate, or switch suppliers.

Conclusion

Contract phase turns negotiated commercial agreements into a clear, enforceable contract that defines scope, responsibilities, pricing, service levels, and key legal protections. When done well, it reduces misunderstandings, protects both parties from avoidable risks, and creates a solid foundation for reliable delivery. The goal is not only to sign a document, but to set practical rules for how the relationship will work in real operations.

An effective contract phase depends on clear requirements, early stakeholder alignment, and standardized documents supported by a risk-based approach. After signing, attention shifts to performance monitoring through KPIs and SLAs, with structured change control and governance to keep execution on track. This cycle strengthens future procurement rounds by capturing lessons learned and improving decisions in the next RFI/RFQ process.

Despite the perceived monotony, efficient handling of the contract phase ensures the smooth transition of the procurement cycle. Procurement Tactics offers comprehensive insights through their Negotiation Course for Procurement Professionals, shedding light on the intricacies of this essential but often overlooked aspect.

I have created a free-to-download, editable procurement contract template. It’s a set that includes a PowerPoint file and a Word file. You can use and tailor them to your needs when contracting with a supplier. I even created a video explaining how to use the templates.