Preparing an RFP for a Contract Management Software System

One of Contracts 365’s most popular webinars this year was “Best Practices for a Contract Management Software RFP." In 45 minutes, we shared our experience with RFPs (as well as RFQs and RFIs, what we collectively refer to as RFx) in the contract lifecycle management space. We offered suggestions for determining scope, gathering quantitative data (numbers of contracts, addenda, attachments, reviews, approvals, system users, etc.), requesting (and providing) pertinent information to get an organization closer to a decision, and evaluating contract management vendors’ products and services. We provided examples of useful surveys and evaluation tools.

Within the short time of a webinar, there were some points we could touch on only briefly. Here in detail, are some additional considerations for getting the most out of your Contract Management Software RFx process.

Don’t Miss a Chance for Improvement

Understanding and mapping your contracting processes is fundamental to preparing your requirements for a contract management initiative. You can use this opportunity to examine what your organization is currently doing and how you can eliminate poor contract management practices. It is not every day that you have the attention of the General Counsel and business users. Some of these professionals are aware of inefficiencies or risky practices that are followed because “it has always been that way." As long as you are collecting the quantitative information on your organization’s contracts (ideally broken out by buy/sell side, high/low value, high/low risk, time from initiation to execution, etc.), take time to ask users to identify one or two practices they consider sub-optimal. After review, you can selectively weed out some of these poor practices. Why proceed “selectively"? Because changing professional practice is best done incrementally, whether you are adding an automation step or eliminating a duplicative review of boilerplate contract language.

By and large, you should base your requirements on your contracting process as it is so you can review contract management software systems that address your particular needs. But, at a minimum, avoid automating existing bad practices in a new contract management software system.

Look to the Future of Your Business

Present need is usually what prompts an organization to seek a contract lifecycle management software system. Current dissatisfaction creates a desire to replace a current system. Sometimes a sudden crisis (think internal audit) gives urgency to the search. But in preparing the RFP, it is worth considering your company’s – or department’s – future. You are selecting a contract management software system that will take time to install, configure, and get used to, one that you hope will have a long useful life. The software should have flexibility and potential for growth, ideally on your timetable and with the future configuration under your control. Here are some common areas where looking to the future should shape your requirements:

Contract Volume. You may only want a searchable repository now, but your contract creation needs may change as your business and customer base grow. If your business grows substantially, will this result in dozens, hundreds, or thousands more contracts, with supporting/related documents like NDAs, statements of work, etc.? Will the growth be in high-volume, low-negotiation contracts where contract automation makes sense? Or can you expect growth in highly negotiated contracts where collaboration tools or even a clause library would save on review time and legal costs?

Geography. If US dollars currently make sense for your company’s contract and accounting systems, you may not be thinking about support for other currencies; but if you later develop business in a different part of the world it could become a requirement. Multi-lingual support, especially for contract metadata, could make the system usable for a whole new population of contracting colleagues if your company acquires – or is acquired by – an overseas business entity. Can you look ahead to where in the world your business will operate in five years? What languages and character sets will your overseas staff or clients expect to see as they interact with the contract management software you are purchasing now?

Internal Function and Ownership. Contract management is sometimes a distributed function and sometimes centralized. Regardless of which division or department head is signing off on the requirements in your RFP, will your system have flexibility to survive a reorganization or merging of departments? IT procurement professionals may need different metadata and different review processes for contracts than what you have in mind for the finance department – can the new system accommodate both if you find yourselves sharing it one day?

Integration with Line of Business Systems. Nearly every company has line of business systems in place – the databases and systems for managing accounting, inventory, customer relationships, product service, and sometimes several of these in an enterprise resource planning (or ERP) system. First question: Is your company anticipating a change in line of business? You should at least be aware of any likely change in line of business systems as you frame the integration requirements for a contract management software system. Next question: Are you likely to integrate the new contract management  software system with your company’s line of business system in the future? Your processes may not provide for that kind of contract analysis right now, but your contract managers can tell you whether, in future, integration with line of business systems would help them introduce more value to their contract analysis, purchasing recommendations, and contract metrics.

Senior Management Discussion. As a matter of course, senior executives have an eye to the future. While they may be far removed from the process of selecting a contract management software system, it is worth seeking information from them before an RFP is written. Their knowledge of possible directions for the organization – from anticipated internal changes, to overseas expansion and outsourcing, to technical and software purchases – can cue you to look for capabilities and flexibility in your CLM, and avoid conflicts with other systems within the company.

Know Your Partner: Implementation, Training, & Configuration

The software, hosting options, and product features for contract management systems can be compared quite nicely in a functionality matrix, a typical feature of an RFP. It is just as important to develop requirements around implementation of the new system, including its configuration, whether by the vendor or your own people, and necessary training – all of which have costs in time and money. To understand these costs and you should give thought to how you will make a meaningful comparison among vendors. The information you will need (the more specific, the better) includes:

  • How the software system will be implemented and how big a role your IT will need to play
  • How the software system will be configured to your business terms and processes, with your business logic driving the automation, tasks and reporting
  • How much of the configuration can be done by you and your business users
  • How training is offered
  • How service is rendered

One way to get at this information is to include use cases in your RFP. These simple scenarios should draw on your own business requirements for contract management. Ideally questions based on these short scenarios should require specific answers that address technical problems as well as options for architecture and workflow. Answers may show that some vendors are more comfortable talking features and technical requirements than business processes and change management. Others may skirt the hard technical aspects of your questions where every solution has a tradeoff that must be acknowledged and addressed. How vendors respond can also help you develop qualitative evaluations of the vendors themselves.

For readers who are just starting an RFP process, these higher-level RFP considerations may seem a bit pie-in-the-sky. If you just want some direction in getting started, we recommend that you check out Contracts 365’s recorded webinar “Best Practices for a Contract Management RFP." The webinar, slide deck, and end notes with poll results and Q&A are available free of charge, on our website.

Contracts 365 –the Leading Contract Management Software for Microsoft 365 Customers

Contracts 365 is the leading contract management software for businesses that run Microsoft 365. With usability, functionality, and security at the forefront of development, Contracts 365 addresses all aspects of the contract lifecycle through a modern, intuitive interface specific to your users. Customer First Cloud Architecture provides IT with the security of Microsoft 365 while powerful prebuilt integrations with Dynamics and Salesforce extend the platform to every part of your business. Please don’t hesitate to reach out to contact us or to request a demo.