What Is Procurement Contract Management?
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- Procurement contracts legally bind the buyer and seller in a purchasing agreement.
- Contract managers oversee the lifecycle of contracts for companies and organizations.
- Some procurement contract managers work with lawyers to draft their contracts.
- Most contract managers earn bachelor's degrees in business, finance, or supply management.
Procurement contracts play a huge role in the business world, especially in the sale of goods and services. Sometimes called "purchasing contracts," procurement contracts legally bind the buyer and seller in a transaction and protect them both. As a result, procurement contract management also plays a large role in companies and organizations. Usually, companies will assign this job to a contract management agency, project manager, or lawyer skilled in procurement contract management.
If not completed correctly, procurement contracts can cause deals to fall through, leading your company to miss out on the materials they need for a project. Or, if your company is the seller, they can lose out on a sale.
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What Does a Procurement Contract Manager Do?
Procurement contract managers finalize deals between the company they work for and other companies. Typically, these managers are skilled in business, project management, and law. They often work with vendors, suppliers, and the upper management of their companies or organizations.
Contract managers must know the differences between procurement and purchasing. Purchasing refers to the actual act of buying goods and services, while procurement refers to the process of finding a vendor and negotiating the price.
Purchasing managers, buyers, and purchasing agents earned a median of $75,410 per year as of May 2021, according to the Bureau of Labor Statistics (BLS).
Procurement Contract Responsibilities
- Finds and vets potential project vendors and negotiates the cost of goods.
- Formalizes the procurement contract either alone or with the help of lawyers.
- Monitors the transaction to ensure all parties uphold their ends of the contract.
- Works with engineers and managers to determine what goods are needed for specific projects.
- Maintains documentation of all acquisitions.
- Oversees the flow of goods and services throughout the company so they arrive at their destination.
Where Do Procurement Contract Managers Work?
Procurement contract managers work at various kinds of companies. Any business that needs to acquire goods or services might hire a procurement contract manager. These businesses include farms and food companies, retail and wholesale stores, and construction companies. They may also work in the public sector, such as for the government or military.
Depending on the company's size, the procurement contract department could be large or quite small, or the company might outsource the contract management altogether. Many business consultants and contract managers work as contractors rather than full-time employees.
Purchasing, Procurement, and Contracts Careers
When obtaining an entry-level job in purchasing, procurement, and contracts, you may seek a job as a contract associate. Contract associates work in various sectors to aid in purchasing and contracts, but they do not lead purchasing.
Mid-level jobs include procurement contract manager and purchasing manager. High-level jobs include purchasing director or strategic sourcing director.
The median salary for purchasing, procurement, and contract professionals was $75,410 per year as of May 2021, according to the BLS. The top 10% of earners in the field made $111,200 in the same year. Top earners may have more work experience than those who earn less or have negotiated their salary appropriately.
Purchasing Managers, Buyers, and Purchasing Agents
Workers in this field oversee the purchasing of goods and services by companies and public organizations. They may buy products to use in projects or to resell. Contract managers vet vendors and negotiate prices to get the best deal and increase profit. Additionally, many workers write procurement contracts and ensure both parties adhere to them.
-4% projected job growth from 2020-2030
Lawyers in the procurement industry typically work for companies or public organizations to ensure all procurement contracts are legal and fair. They may draft procurement contracts or work alongside a procurement manager to write them. Typically, companies and organizations contract lawyers to advise on the legality of procurements or draft contracts.
9% projected job growth from 2020-2030
Juris Doctor (Law school)
Cost estimators work in several industries such as construction, manufacturing, and engineering. They analyze data to determine how much projects will cost in terms of labor and materials. They often work with project managers and purchasing professionals. Like procurement contract managers, cost estimators maintain documentation of acquisitions.
1% projected job growth from 2020-2030
Most professionals in the contract management industry hold a bachelor's degree in a topic such as business administration, finance, or supply management. Some purchasing agents may be able to enter the industry without a college education, but managers almost always need a degree.
Earning a master's degree, such as a master's of business administration (MBA), can give you an edge for purchasing procurement manager jobs. Lawyers in this industry will also need to attend law school and pass the bar exam in their state. Many employers want their managers and high-ranking employees to have more experience and education in the industry.
Additionally, employers favor experience, with purchasing managers usually requiring about five years of experience, according to the BLS.
The Future of Procurement Contract Management
The BLS projects employment of purchasing managers, buyers, and purchasing agents to decrease by 4% between 2020 and 2030. While this may seem discouraging, some industries may see an increase in contract management positions while others see a decrease.
Contract procurement is going increasingly digital, with most contracts signed over the internet. Additionally, businesses are constantly shifting their plans due to the COVID-19 pandemic and subsequent supply chain issues. Purchasing professionals need to be able to adapt to a quickly changing business landscape.
Is Procurement Contract Management Right for Me?
Procurement contract managers require skills in negotiation, math, and decision-making. Purchasing agents and managers regularly make informed and timely decisions impacting their companies. Additionally, procurement contract managers require analytical skills to compare their buying options.
Those interested in business and finance are best suited for roles in contract management. People in this field also like to pay attention to detail and work with several other departments. Those who wish to work alone or focus on big-picture concepts might not enjoy the role.
Procurement contract management could be right for you if...
- You enjoy working with numbers and finances and math was your favorite subject in school.
- You have strong analytical skills, especially regarding business transactions and purchasing decisions.
- You prefer to work with people across several departments and teams, including upper management.
- You can analyze large amounts of information and make a decision promptly.
- You like to negotiate and have strong interpersonal skills, including self-confidence and an ability to communicate effectively.
Frequently Asked Questions About Procurement Contract Management
Why is procurement contract management important?
Procurement contract management is important because it provides companies and organizations with the goods and services they need to complete projects. For example, a defense contract management agency may help the military find the necessary materials to build new equipment.
It's essential to ensure the contract between the two parties is secure and fair. Faulty contracts can lead to costly legal problems.
Additionally, the procurement contract manager is responsible for finding the best possible resources for the company. Ensuring the materials arrive on time and fit within the project's budget keeps the company running and turning a profit.
How much can I make as a procurement contract manager?
Salaries of procurement contract managers vary depending on the level of experience and location. However, the BLS reports that purchasing managers, buyers, and purchasing agents earned a median salary of $75,410 per year as of May 2021.
The top 10% of earners in this occupation earned $111,200 in the same year. You may earn more in a management role. Payscale reports that procurement managers earned a median base salary of $84,730 as of July 2022. The BLS reports purchasing managers earned a median salary of $127,150 as of May 2021.
Managers have more responsibilities than procurement associates or assistants. They interview clients, negotiate for the best price and finalize contracts.
What companies spend the most on procurement contract management?
Companies and organizations that spend large amounts of money on obtaining goods and services often spend the most on procurement contract management. For example, defense contract management agencies spend large sums of money on their procurement contracts.
According to management consulting company McKinsey & Company, companies in defense, aerospace, food manufacturing, and utilities can spend over 90% of their annual revenue on contracts with vendors and suppliers.
Most purchasing agents and buyers worked in manufacturing and government work environments as of May 2021, according to the BLS. Twenty-six percent of purchasing managers worked in manufacturing as well, while 16% worked in the management of companies and enterprises and 12% worked in government.
What should I study if I want to work in procurement contract management?
Most commonly, procurement contract managers earn bachelor's degrees in business, finance, or supply management. However, if you wish to work in a specific industry such as agriculture or defense, you may wish to study a topic such as agriculture production or military technology.
If you want to become a procurement contract manager, you could benefit from earning an MBA. A master's degree can give you an upper hand and more experience in the field.
You may also pursue a certification such as the Certified Purchasing Professional (CPP), Certified Supply Chain Professional (CSCP), or Senior Professional in Supply Chain Management (SPSM) to showcase your knowledge to employers.
How can I find a job in procurement contract management?
Finding a job as a recent college graduate can be very challenging. However, many companies and organizations offer entry-level positions in procurement contract management, such as contract assistant or purchasing associate.
To find a job in contract management, you may search job listings on websites such as LinkedIn, Indeed, and Glassdoor. Searching for keywords such as "procurement contract management" can help narrow down the results.
If you wish to work in a certain industry like agriculture or defense, you can also search for those keywords. Professional organizations such as the American Purchasing Society also post job openings.