Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
Contracting Phase — 4 Phases for Effective Negotiations
Key takeaways
- The contracting phase is the final stage in the procurement process where all the agreements and details are officially documented in a legal contract.
- In developing a contract, buyers define their needs, research the market, conduct a risk analysis, and establish a contract strategy.
- Monitoring performance is the final step, where the procurement process circles back to RFQs and RFIs.
The contracting phase is the last part of the procurement process. But just because it’s the last part, it doesn’t mean that it’s also the least important.
For this article, we are going to learn why the contracting phase is also important for the procurement process. Like most articles, we are going to learn what it means and study some of its definitions so you can go through this phase without issues.
Once you’re done reading this article, you should already know what to do when dealing with the contracting phase.
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.
The Contracting Phase– What is It?
The contracting phase, to put it simply, is the last part of the procurement process where everything agreed on during the negotiation phase is placed on paper. This involves processes that allow the procurement team to list down all agreements, put those agreements into paper or data, and store them for future use.
Once that part is done, the procurement process cycle starts anew and it’s back to stage one again, should there be a need for another procurement.
To be completely honest though, the contracting phase is the least favorite part for most procurement managers. That’s because the most exciting part of the procurement process, which is the negotiation phase, is already over and it is now time to put all those agreements and deals into paper.
That particular process is boring, cumbersome, and downright annoying at times. However, because it is an integral part of the procurement process, the contracting phase should be done in an efficient manner, which we at Procurement Tactics will discuss in full detail, should you enroll in our one-of-a-kind Negotiation Course For Procurement Professionals.
For now, it’s vital that you learn all about the contracting phase and how it is done in 4 stages or phases.
The 4 Phases of Contract
Like most variables in the procurement process, the contracting phase also has its own stages or phases. Each phase, as always, coincides with each other. So one cannot work without the other. It is important to consider each phase very carefully.
Once the contracting phase is done, the whole procurement process usually shifts again to the checking of RFIs and RFQs. The procurement process starts again and it’s another cycle, should there be a need to procure more materials.
In any case, here are the 4 stages or phases of the contracting phase:
1: Planning and Scoping of Contracts
The first stage of the contracting phase has something to do with the planning and scoping of contracts. Of course, each phase of contracting is dependent on which side of the group you are in. If you’re with the buyer, the first things you need to do would be to 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.
2: Developing of 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 contracting 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 they can deliver without fail.
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.
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 to RFI and RFQ again.
All information available and important are 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 on 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 an incoming end of a contract opportunity.
Conclusion
In conclusion, while the contracting phase may seem less thrilling compared to negotiations, its significance in securing agreements cannot be overstated. The four stages—Planning and Scoping, Developing Contracts, Negotiation and Signing, and Performance Monitoring—guide this critical phase.
Despite the perceived monotony, efficient handling of the contracting 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.
Frequentlyasked questions
What is a contracting phase?
The contracting phase is the part of the procurement process where all agreements made by the two parties during the negotiation phase are put into paper or data.
Why is a contracting phase important?
It is important because it establishes that a deal has been made.
What are the 4 phases of contracting?
The 4 phases of contracting are
Planning and Scoping,
Developing,
Negotiation and Signing, and
Performance Monitoring and Contract End
About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.
