In heavy industry contracting, we use a lot more software systems today than we did 20 years ago. We've all experienced the promise of cost savings from streamlined processes, and we've all experienced the reality of complex implementations and no measured cash benefits.
Contract Administration Software however, is a different story. Instead of generating value by saving people time, it generates value by preventing missed claims and lost disputes. These are hard cash benefits worth millions, that flow directly to the bottom line.
This helps contractors in three ways:
- Improving steady-state profitability - Today, claims are regularly missed, time-barred or forgotten. These may individually represent relatively small amounts, but can add up over time to ~1-5% of contract value. This is easy money being left on the table.
- Providing insurance against potentially catastrophic events - When contracts go bad, contractors can lose millions all at once, putting them at risk of bankruptcy. The only protection is to be well prepared in case of disputes that arise in these situations.
- Providing leverage for contract re-negotiations - On good contracts where nothing is claimed, contractors often end up doing extra work here and there. Over time this gets normalised and may not be taken into account at retender. Better records allow these extra activities to be brought into scope for the next phase to ensure contractors get paid for the work they do.
In summary, we shouldn't be thinking about Contract Administration Software in the same way as other systems. It is much closer to increasing profit and can be critical for preventing serious cashflow shocks.