What is Service Contract Management And Why Is It Important?

Anyone interested in service contract management must first master the fundamentals. At its most basic level, service contract management refers to tracking performance and resolving any difficulties that arise during the course of the contract.

According to a study published in the Journal of Contract Management, 71% of organizations misplace 10% of their service contracts

Contract management services, according to the International Association for Contract and Commercial Management (IACCM), might launch a contract management revolution, but only if firms are willing to embrace the new technology’s potential fully.

We’ll look over how service contract management solutions may drastically increase your ability to oversee your contract portfolio and highlight some of the managing risk and expense-saving benefits of successful contract management in this post.

Defining Service Contract Management

Contract management includes evaluations, analysis, and other methods that keep leases on course throughout their duration. 

Many people consider agreement drafting, bargaining, and signing the most important aspects of contract management. However, service agreement management systems begin after the contract is signed.

Service Level Agreements (SLAs) are commonly used to manage service contracts. A service level agreement is typically included in a contract, making it a fully negotiated contract. In service contract management, the SLA defines the following:

Service Level Agreements
  • Services: This describes the extent and nature of the services to be provided.
  • Responsibilities: This section outlines each party’s responsibilities. It could include job descriptions and who is accountable for producing what and managing whom.
  • Priorities: When there are two criteria or obligations, this is what should be delivered first and take priority.
  • Deliverables: This is what the services will generate. It usually defines the goods to be manufactured and their quality standards.
  • Warranties: Many buyers demand warranties and assurances that their services will deliver the expected and paid-for business or technological gains.
  • Availability: This specifies when the services will be offered and when project workers will be available.
  • Performance: This is a metric for evaluating service quality. In truth, this has everything to do with the vendor’s desired quality of service.

Target levels and minimum levels are supplied when measuring service contract management. 

There is frequently a penalty aspect when the baseline levels are not met, or the SLA is not met.

How is Contract Management Critical to Your Company’s Success?

Contract management software is vital to businesses since it manages contracts through a comprehensively recorded system. 


It allows you to monitor agreements, including their terms, transactional elements, and reestablishments.

The significance of contract management in any business is to ensure that the important people in the organization understand their responsibilities and promises to clients and suppliers and that they are followed through.

Some Service Contracts Management Tips And Techniques

An effective service contract can be achieved using the below strategies:

  • Keeping an eye on the Statements of Work, or SOWs
  • Monitoring the insurance coverage terms
  • Checking the auto-renewal terms

It’s critical to understand the differences between service contracts. Extended warranties are service contracts given to the customers as part of product purchases. 

Federal and state agencies control these dimensions of service contracts. This blog post focuses on service contract management for every field service business.

B2B maintenance contracts are essential to the business’s success. Whether you offer service as an aspect of business or acquire services to supply your products, service contracts can help you be more efficient and lucrative.

1. Work descriptions (Statement of Work- SoW)

Service contracts frequently attempt to strike a balance between predictability and flexibility. 

The customer is unsure about the job details at the start of any project-based Service agreement. Even if the customer is sufficiently explicit, the provider may be unsure regarding the amount of money and time required to accomplish the project.

Both sides want to know what more money and energy will be necessary for advancement. Around the same time, both sides understand that tasks change over a project and that things happen to the service provider. 

A tight service contract inhibits the essential flexibility, whereas a hazy agreement invites excessive cost overruns.

Contracts frequently incorporate one or even more statements of action to fix the tension between predictable work and changeable demand (SOW). The agreement is set up as a collection of legal terminology that governs the two parties’ relationship. 

The details of the work needed, on the other hand, are moved from the original contract to a display or schedule.

There are various advantages to separating the labor terms from the legal parameters of the relationship.

First, without attempting to negotiate the underlying agreement, the parties can split up the project into distinct pieces, each with their statement of work.

Second, this technique allows business people to figure out the task’s intricacies without legal representation, who can concentrate on the umbrella agreement’s parameters.

Third, using a separate SOW helps the participants agree on future work that was not initially planned without negotiating a new contract. They can merely add a new statement of work to the original deal as a timetable.

2. Documents of insurance and insurance coverage

Unexpected events occur. Lawyers write contracts to account for the unforeseen. 

Requiring the service provider to acquire insurance that covers some liabilities is one of the most dependable ways to “expect the unexpected.”

One basic insurance provision is to demand the service provider retain coverage with specific features and then include a confirmation from the supplier that it has the necessary insurance.

If there is an incident and you want to make an insurance claim against the provider’s policy, you will only find out if that statement is true or not. 

If it turns out that there is no or insufficient insurance, you may have a breach of contract claim. 

The objective of obtaining insurance through work is to give you someone to pursue other than the provider.

A service contract could require the provider to present the evidence of the insurance contract in the shape of a Certificate of Insurance to mitigate this risk (COI).

There are numerous types of insurance, each with its COI. There are three common types:

  • Certificate of insurance for vehicle or equipment
  • Certificate of property insurance
  • Certificate of liability insurance

A certificate of insurance contains vital information regarding the policy’s coverage and limits. 

It also contains the insurance term for contract management purposes. This information is crucial for contract risk management in service contracts.

3. Provisions for auto-renewal

Contracts that automatically renew are every contract manager’s nightmare. Even if a company’s strategy is not to consent to auto-renewal conditions, they find their way into the sequential request. 

Auto-renewal arrangements put both the provider and the corporate customer at risk financially.

Auto-renewal clauses normally state that unless one side sends notice to discontinue by a specific date, the agreement will extend at the expiry of the lease.

Because the human resource is involved, parties to contractual arrangements are especially sensitive to auto-renewals. 

While recurring revenue helps to keep a business afloat, a provider may discover that the contract’s conditions impose unforeseen costs, preventing them from continuing to provide good services under the current circumstances.

On the other hand, businesses are acquiring services and may be dissatisfied with the performance or expense of the services.

Allowing a contract to renew, while not a violation of the contract, may bind the parties to the contract’s provisions for at minimum another duration.

Auto-renewals can be set up in several ways:

  • Unrestricted:

    These persist until one of the parties decides to terminate the contract, making it an everlasting contract.

  • Fixed-term contract:

    These extend for a stipulated period, such as two years.

  • Repeated renewals:

    These renew for an unlimited couple of iterations, each for Y years. A two-year service contract, for example, might be renewed for up to three subsequent two-year terms.

    The expiration and renewal of your contracts should be notified via your contract management software. When the contract’s expiration date approaches, the auto-renewal should continue.

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Contract management has a lot of trouble explaining the value of agreement management to authorities and directors because they focus on the incorrect concerns at the wrong times.
They keep claiming that they are underfunded and have multiple agreements to fulfill. This problem never persuades the administration to invest in contract management.

Field service scheduling software helps different service businesses to manage and streamline their business operations like scheduling, job management, client management, dispatching, invoicing, and payments. Using our software solution, you can automate all the business operations from scratch and make things easier than ever.

FieldCamp: Effective Contact Management Solutions

FieldCamp, as a field service scheduling software, assists your service business from job scheduling to client management, job dispatching to tracking technicians, and invoicing to accepting payments. 

But that isn’t all. FieldCamp is a lot more than a simple service scheduling software. It manages your overall business operations, helping you to save time & effort. 

All features and functionalities of FieldCamp software help in boosting work productivity and thereby increasing revenues. So stop procrastinating, start your and get your effective field management solutions now. 

Author Bio

Gaurang Bhatt

Gaurang Bhatt is a techie in himself with an ability to solve problems technically and present solutions in the form of a product. He is one of the pioneers to curate FieldCamp with his 15+ years of knowledge and expertise in providing solutions to home service industries. Gaurang aims to overcome challenges faced by service business owners through software solutions and blogs.