Procurement Essentials is a new series of articles to help you overcome common hurdles, understand key concepts, and make your life as a buyer of everyday goods and services easier.
Once you've chosen a supplier, effective contract management is a vital step in the process to make sure what's promised gets delivered.
Contract management is simply too important to be ignored. Without ongoing diligence a contract can leak' value through issues like missed deadlines, compliance failures and inefficiency.
It can be easy to blame suppliers for problematic or failed contracts, but if your organisation doesn't manage performance then you're relying on good luck that things will go well.
Effective contract management involves the proactive monitoring of all activities necessary to ensure your goods or services are provided in accordance with your contractual arrangement.
Here's our introductory guide to getting it right. For more in-depth advice please refer to the government's contract management professional standards.
Contract lifecycle management
Once you've chosen a supplier for your requirement, it's time to think about contract management.
This can be grouped into 3 general areas: mobilisation, service provision, and supplier relationship management.
Mobilisation happens after you've selected your supplier, but before the contract goes live. You should set aside appropriate time to gather together all the information you need to run the contract and make sure that the right plans are in place.
A mobilisation plan can be a useful tool at this stage, particularly for high-value or more complex procurements, and should contain:
- a summary of expectations
- details of all tasks to be completed and timescales
- roles and responsibilities of both parties
- arrangements for any contractual due diligence, including monitoring performance and any ongoing assurance of supplier capability, such as their financial standing
People and skills
Check that all your stakeholders are familiar with and can access the latest live version of the contract. It should be understood by all those who will be involved in its day to day management, including the identification of a designated contract manager. If the contract manager was not part of the sourcing exercise, a handover is essential to ensure continuity.
The contract manager must understand the scope of the contract, the pricing mechanism, the service levels/deadlines, monitoring periods and governance processes. They should always apply best practice and legal principles.
If the contract is long-term or complex and you have the resources, you might need a contract management team. Choose individuals with a range of relevant legal, financial and technical skills.
You may be committed to working with a supplier for some time. The success of your contract relies on good communication between both parties based on mutual respect and trust. Regular review meetings are important to avoid drift.
It's important to keep the relationship open and constructive, identifying and resolving issues early. Make sure you take the right steps to escalate matters with the supplier if you need to.
For major or long-term contracts it may be worth putting in place a partnership agreement that represents good practice' principles for all contracts.
Performance management and dispute resolution
Both parties want your relationship to be successful. By managing performance proactively throughout the contract period, at regular intervals, you'll ensure that this focus is retained and things stay on track.
Contractual disputes may arise; for instance, from the supply of defective goods or failure to meet deadlines. Contracts are usually only terminated mid-way through in extreme circumstances such as the discovery of fraud. The goal of performance management should always be to try to avoid termination and resolve any dispute by following the correct resolution process.
Change control and risk management
Accept that changes, such as minor variations in scope or amendments to timescales, will happen during the term of your contract and plan for it. Review the contract regularly and allow changes as required, as long as both parties agree to these in writing.
A flexible approach to your contract, through which you can negotiate continuous improvements, can help you achieve greater ongoing efficiencies.
Risk management includes all the activities required to identify, control and manage risks that might have an impact on the contract being performed effectively. These could include:
- changes of key personnel
- factors affecting supplier costs
- changes to legislation
- extraordinary events beyond the supplier's control which disrupt service delivery, such as the Covid-19 pandemic
Make sure you check your organisation's policies and processes on risk management and incorporate them into your contract management.
Contract expiry and transition
Your contract should have been written to include clear expectations and strategies for exit and transition. Before your contract ends you should start planning for:
- a debrief meeting with the supplier, agreeing any final reports you need from them
- the final payment or the return of any unspent funds
- control of client records - how should any sensitive data / records be handled, ensuring that security is maintained and there is full compliance with GDPR
- a review of the supplier's performance and the service agreement
- the steps you might need to take to ensure a straightforward transition to a new provider or contract
Be aware that if your existing supplier has lost the contract to a competitor there may be a risk of performance decline if you haven't established a good relationship. Extra vigilance may be required at this point.
Finally, be sure to keep full and accurate records throughout the contract management process to ensure good governance, transparency and accountability - including recording what terms didn't work well and how this will be improved within the next contract. For further advice on retention of contract records see The National Archive.
Good record keeping means that you can demonstrate that you're delivering efficient and effective services to your stakeholders.
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