Establishing the Contract File

My first contract management activity was dealing with construction contracts where there are normally a significant amount of change that will occur during the course of construction and that shaped my thoughts on both contract systems and contract files. I believe that irrespective of whether you have an on-line contract system you should also have a desk file. In a desk file you can annotate changes to the agreement, and incorporated into the agreement like drawings and specifications that occur over time.

If you do that correctly you can identify what if any changes occurred, when and what amendment or change order the changes were made under in case you have a specific question or dispute regarding that point. It eliminates the need to check through all the individual documents to find out what the status of the contract was at any point in time. The annotation can be to do a pen and ink change showing what’s changed or simply referring to the amendment or change order number that defines the change. As a side note when I refer to a change order what I mean is a unilateral order that is issued by the buyer or owner changing the scope of the work, where that concept has been pre-agreed in the agreement and has established an agreement method of compensation or adjustments for that change.

When I did procurement in the Air Force the organization of how contract files needed to be maintained was specified. The advantage of that was every contract file would be organized in exactly the same manner so if you needed to find something in a file you could quickly find it. This was needed because people were constantly coming and going so it made transitions easier. Be it a contracts system or a desk file I think the same system makes sense. I know I don’t want to spend a lot of time going through a contract file to find the information I need.

What should be in a contract file?
Depending upon whether you are managing the contract for a buyer or supplier the requirements will be different. If you do public procurement you will most likely have a list of contract documents that is far greater than commercial requirements. Commercially the scope of contract files will vary based upon the policies and procedures you must follow and whether it will be used for audit purposes.

If it will be for audit purposes the contract file should include copies of everything that lead up to the creation of the contract to show compliance with requirements and procedures. That type of contract file would include how sources were determined, bid or proposal requests, supplier responses, correspondence, negotiation plans, justification for why the specific supplier was selected, proof of funding and any necessary reviews and approvals.

For a simple desk file:
1. It should the agreement itself and copies of any documents incorporated by reference into the agreement. If some of those documents are too voluminous the contract file should have a placeholder in that section that identifies what those document are and where those documents are filed.
2. It should contain copies of all amendments, approved changes and change orders in order by the date signed.
3. It should contain copies of required reports and submissions
4. It should include copies of correspondence between the parties by letters or email where the subject or content applies to actions, performance or rights or the parties, filed by date.
5. It should include minutes of all meetings and reviews filed by date.
6. It should include any third party correspondence that is applicable to the contract.
7. If you require insurance, it should include certificates of that insurance. Companies may come and go but insurance applies injuries or damages that occurred when the insurance was in effect.
8. It should have a location for notices of the exercise of options, notices to stop work, notice to cure, notices of acceptance or rejection of the work or any milestones, and notices of any termination.
9. It should have a separate section for claims and correspondence on claims.
10. Upon contract close out it should indicate that all deliverables that were required have in fact been met.
11. Upon close, it should be retained or sent for records retention to be held for the applicable retention period.