In my survey of Contract Life Cycle Management (CLM) vendors, not one CLM vendor encompasses all of the current functionalities in a single solution. and some offer them at different levels. Here is my “Dream Team” of features for a single CLM solution. This is what each phase of CLM would look like if all of the features were in one solution. Again all of these features are available in some form by at least one vendor.
Drafting Contracts– from Templates to Clauses Libraries
Even prior to the contract being drafted, templates and clauses have been reviewed and approved through a workflow. This ensures that all new contracts will be created using approved content. The workflow would include an audit trail that would allow administrators to be able to know who authored and who approved each template and clause. Clauses should be related to the templates which use them. This should ultimately be managed through a graphical tree interface.
Drafting would start in either one of two ways, from inside the authoring tool or in the end user application. In Microsoft Word, this would be done from a ribbon that would allow the user to select the template and fill in a simple wizard to complete the rest of the document. The system would support a button inside the CRM, ERP, or HRM solution, that when clicked would read the current record from the screen completing the information that would normally be captured in a wizard. Clauses should also relate to alternate standardly accepted clauses.
The system should also support generation of a contract from a wizard on the organization’s website or portal. Finally, the system should allow for importing contracts generated outside the organization that will also need to follow the negotiation, approval, and tracking phases.
Negotiations – from Emails to Real-time Negotiation
Negotiation and approval should be separate processes because some contracts may never leave the negotiation phase and oftentimes approvers are not the negotiators. Workflows should be created with a graphical mapper and an individual task should require configuration only. While it will be rare that an individual task would require custom code, it should support the ability to do so. For example, a customer contract may include a step to perform a credit check against a web service.
Users should be notified about negotiation tasks from an email or mobile alert. The email should allow the user to interact with every task from inside the email. For example, it should have a link to automatically open the document, utilizing single sign on if possible, or an approval button should be available on the email.
Negotiation should be able to be performed in an on-line portal that has a real-time option. At a minimum, a shared space should be used that tracks changes and annotations to the contract while maintaining an audit history of why the change was made and who requested it. For the drafter, the contract should allow for easy substitution of alternate standardly accepted clauses. When not being performed in real-time, the system should notify negotiators by email or mobile alert of new changes.
Once negotiations are finalized, there should be an electronic signature associated to each negotiator. These signatures need only support a secondary sign-on associated to an audited event. Finally, the completion of a negotiation workflow should automatically launch the approval workflow.
As a final step, the system should report on workflows. The system should be able to report on which clauses are being used in which contracts. To make contract negotiations more efficient, workflow tasks should be monitored for duration. Alternate standardly accepted clauses should be tracked for where and how often they have been used. This information can be used to improve contract templates.
Approvals – with Emails and Mobile Alerts
The approval workflows should be created with a graphical mapper and an individual task should require configuration only. This process should be a minimal workflow that only addresses both parties’ signatures. The system should verify that the outside party is an authorized signer for the organization by comparing it to previous approved signers.
Interaction from the signer should be from email or mobile device alert. The system should allow signers to read the contract, print or save a local copy, and electronically sign the document using an enforceable eSignature solution such as Adobe eSign or DocuSign.
Tracking – from Expiration to Obligations
It is not enough to just track contract expiration and renewals. The system should track other key dates and also monitor obligations.
For expiration, the system should track the renewal date or expiration. It should notify users in advance of pending renewals or expirations. The notification window should be defined at the system level but allow for different notifications for individual contracts. For example, a contract that was very difficult to negotiate may need a longer notification window. The system should also allow for the recording of notes for changes to future negotiations. For examples, a note could recommend changing discount thresholds or to canceling an evergreen contract.
For obligations, the system should track date or price based metrics. For performance contracts, the system should track when a specific action should occur. The system should tie to the CRM or ERP to monitor purchases as they reach negotiated contract thresholds. The system should be able to track supporting documents, such as site inspections or surety bonds.
What about – Records Management and Legal Holds
The system must manage the contracts library for records retention. Contracts should be stored with retention policies to allow for the deletion of contracts after the organization has deemed them no longer a record. The system should address the retention value of contracts in the draft phase once approvals have been completed. For example, are drafts to be kept and if so what is their retention schedule? The contracts system must support legal holds. If a contract is related to a legal action or audit, the system must not allow for the deletion of the contract and related documents.