Contract Management: What's Compliance Got to Do with it?

Checkmark Stock ImageContracts are typically the purview of the finance and legal departments. But in regulated environments, the regulatory, quality, and other departments might also be involved in the contract management process.
"For regulated companies, contracts don't exist in a vacuum. They require a contract management process that can handle both their business and compliance needs."

Depending on the size of a company, the nature of its business, and the regulations and standards it complies with, an organization may be managing different types of contracts, such as quality agreements, supplier agreements, specifications agreement, services contract, IP licensing contracts, nondisclosure contracts, confidentiality agreements, and co-development and co-marketing agreements.

Contract management in regulated environments is different because its objective is twofold: business and regulatory. For example, an American pharmaceutical company that has a supplier contract with a foreign company to buy an API may have the business goal of buying the API at a reasonable cost (the purview of the procurement department), but the contract also must address the supplier's compliance with U.S. cGMPs (the purview of the quality/compliance team). So, even if the supplier's price is the most competitive, if a supplier audit shows serious cGMP deviations, the pharmaceutical company may choose not to renew the contract, or even terminate it.

Contract Management Challenges

For regulated companies, contracts don't exist in a vacuum. They require a contract management process that can handle both their business and compliance needs. The contract managers in these companies face many challenges, including:

  • Inefficiency: Even in this day and age of digital information, the word "contract" still basically refers to a paper document. Most companies draft their contracts electronically, send the draft back and forth via e-mail during the revision process, and route them for approval manually or via e-mail. After a contract is signed, the document is filed in a cabinet, or scanned into a computer.
  • Inconsistency: In many companies, every department handles its own contracts. It is not uncommon for these companies to be plagued by inconsistencies in their contracts. Even when the legal department is responsible for drafting the basic document, the other departments may have variations, which could increase the company's vulnerability to risk.

How can regulated companies improve the contract management process? The good news is that there are many tools that can help them navigate the process. Regulated companies invest a lot of time and money automating their processes for compliance purposes, but they do not necessarily think of contract management as part of the picture. Yet their operations rest on a foundation of contracts and agreements with suppliers, providers, consultants, and other parties, making contract management essential.

So, if your company is thinking of automating a paper-based or hybrid system, consider an end-to-end solution that can handle both contract management and quality management. The system can bring your entire organization together under a single platform that will improve coordination among various teams and align your contract management's business goals with your overall compliance efforts.

Cindy Fazzi, a copywriter at MasterControl, Inc., writes about the life sciences industry and other regulated environments. Her two decades of experience as a news reporter, writer, and editor includes working for the Associated Press in Ohio and New York. She has a master's degree in journalism from Ohio State University.

Note: The views expressed in this article are those of the author and do not necessarily represent those of his/her employer, GxP Lifeline, its editor or MasterControl, Inc.