The Difference between Contract Management and Project Management

Project Management is the art and science of achieving defined project goals, on time and within budget. A project typically involves multiple parties, sometimes from one business entity, but frequently involving various related and unrelated entities. A project may involve no contract or several separate and / or related contracts. Even for complex projects, the mandate and objectives rarely comprise more than a few pages of text. While roles may be spelled out, responsibilities rarely are. For a project to be a success, all project participants must generally agree on their roles and on the project’s objectives.

Contract Management is the art of achieving the mutual satisfaction of two, or sometimes more, parties whose objectives are dissimilar, although closely linked. A contract generally binds two separate business entities. Where multiple business entities are involved there are generally separate sub-contracts. Even a low value contract will typically comprise many pages of text. A contract should describe the purchaser’s purpose for the contract and the remuneration of the supplying party for delivering upon it. It should also clearly define specific roles and responsibilities for each party, sometimes naming specific resources to the roles. While all parties and participants will generally agree on the general outcome or purpose of the contract(s), the specific business outcomes for each party are fundamentally different.

Sound Project Management is therefore an essential sub set of Contract Management. Without attention to the contract(s), project success becomes increasingly unlikely.

Satisfaction surveys, conducted over several decades, have shown little improvement in IT project success, as measured by users. This is despite significant improvement in Project Management methodologies and professional accreditation of Project Managers. Major IT service providers both initiate and defend against suits involving multi-million dollar contracts which fail to deliver the hoped for business outcomes.

What appears clear in the failure of Project Management is that the focus on methodology has been at the expense of the softer people skills. Every project involves change – and people resist change. A successful Project Manager must be able to motivate people to overcome their natural resistance to change. This is best achieved by reward and by self interest. Only by empathy and understanding of each participant’s self-interests can the greater enterprise goals be fully and effectively achieved.

Understanding the more diverse interests of all the stakeholders engaged with a contract presents another layer of inter-personal skills requirements. These are skills more easily learned from life than from manuals.

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