Centralizeddecentralized contracting

Centralized/decentralized contracting

The two general strategies used to organize a contracting department are either to centralize the expertise into one department, or to decentralize the contract staff by distributing the experts to assigned projects. In a centralized system the contract manager would report to their functional manager and they would expect to work on a series of projects. A decentralized structure has the contract manager reporting direct to the project manager and being responsible for just one project. Each approach has its own merits, but the organization's senior management will decide whether to follow a policy of centralization or decentralization for their contracting staff. The decision is unlikely to be made by the project manager unless there is a compelling argument to change the structure of the contracting department. The main advantage of having a centralized contracting organization is the ability to standardize the company's procedures and processes across the entire department. The main advantage of operating a decentralized contracting department is the allocation of a contract manager to a designated project. The main disadvantage of applying a decentralized system is the difficulty of maintaining expertise and standardization across the organization, because each contract manager is operating in isolation. This approach could also prove to be a less efficient use of contracting resource due to duplication of effort. From a human perspective there is no home department for the contract manager to return to once the project is complete, nor is there a clear career path for the individual to follow. To make a decentralized structure work well, good communication, regular meetings and central training sessions should be set up for all contracting staff within the organization.

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