Contract Management
Sub-Regional Caribbean
Public Procurement
Conference
The Importance of
Contract Management
Port of Spain, Trinidad
June 22, 2014
Sabine Engelhard
Importance of Contract Management
Topics Overview
Segment I:
Contract Definition and Purpose
Segment II:
What is Contract Management?
Segment III:
Contract Management and Achieving Results
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Segment I Contract Definition
Segment I: Contract Definition
A voluntary, deliberate, and
legally binding agreement
between two or more parties,
usually in writing
A contractual relationship is evidenced
by
(1) an offer,
(2) acceptance,
(3) competent parties, and (4) a valid
consideration. Each party has rights and
duties.
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Segment I: Contract Definition
Purpose Contract = Management Tool
Ultimate Goal: Maximized Performance-Minimize Risk
Benefits
Confirms the parties agreement (predictability, stability, transparency)
Confirms the object of agreement
Confirms the terms & conditions of the agreement (rights &
obligations)
Confirms the considerations
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Segment I: Contract Definition
Where does the Contract fit in the Procurement Process?
Need Identification/Recognition
(Procurement planning)
Procurement Preparation
Starting Bidding Process
Bids/Proposals submission
Bids/Proposals Evaluation
Internal Clearances, Negotiation and Award of
Contract
Signature of Contract by the parties
CONTRACT MANAGEMENT starts
formally
(Check availability of funds, Sourcing,
preparation of bidding documents/solicitation
documents)
(Publication of Notices, Issuance of
Solicitation Documents)
(Bids/Proposals received)
(evaluation by a team)
(notice of award to the Contractor)
(Client & Contractor)
PERFORMANCE STARTS.
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Segment II What is Contract Management?
Segment II What is Contract Management?
management of
contracts made with
contractors, vendors
What does Contract
Management Imply ?
ensuring compliance
w/ the terms and
conditions,
documenting and
agreeing on any
changes
Systematically and
efficiently managing
contract execution and
analysis for the purpose
of maximizing financial
and operational
performance and
minimizing risk
Achieving Results
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Segment II What is Contract Management?
Terms of
Reference/Statem
ent of Works
Contract
-Background information.
-Description of the physical or functional characteristics.
-Nature of a supply, service, or construction item.
-Requirements to be satisfied by a product, material, or
process.
-Procedure to determine whether requirements are
satisfied/Reporting.
Source: National Institute of Government Purchasing (NIGP)
Dictionary of Purchasing Terms).
Segment II What is Contract Management?
Characteristics
Terms of
Reference/Stat
ement of
Works
•Written by someone who understands the topic
(Procurement function: help articulate the needs)
•Invest time specifying what you want & how you want
it
•Be sure that what you write is what you want
•Because what you write is what you will get
Segment II What is Contract Management?
When does Contract Management Start formally?
Negotiation between Client & successful
Contractor/Vendor
Award is finalized
Signature of contract
Post-Award - Kick-Off Conference
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Segment II What is Contract Management?
 Know your contract (what does it contain?);
 Understand your contract (what are these provisions?);
 Use your contract (When is it appropriate to use what/timely action);
 Know your risks & understand how to mitigate them;
 Supervise your contract technically (performance & quality);
 Escalate to obtain help/guidance .
Segment II What is Contract Management?
Contract Management
Planning & Timing
Monitoring Execution
Performance
Time
Budget
Contractor Communication & Meetings
Documentation
Resolutions of Issues
Acceptance
Escalate, if
necessary
Documentation
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Segment II What is Contract Management?
Contract Management
Order for Payments
Executed work
Modifications
Closeout
Scope/Amendm
ent
Contract
Evaluation
Contractor’s
Performance
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Segment II What is Contract Management?
Key Supplier Management Program
(IDB example)
Contract
Criteria
Total Value:
$500,00
Candidate for
Pilot Program
Key Performance
Indicators
Performance of
Services, and
Multi-year
contract (at least
three (3) years)
Service Level
Agreement
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Segment II What is Contract Management?
IDB Corporate Contracts Management Tool Kit
(Summary of Topics)
 Scope of Contract Management;
 Key Contractor Management Program;
 Importance of Financial Reporting and Contractor’s Internal
Controls;
 Focus of Contract Management
 Terms of Reference, Statement of Work
 Nature & Extent of Contract Management
 Contractor’s Performance
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Segment II What is Contract Management?
IDB Corporate Contracts Management Tool Kit
(Performance Support Tools)
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Template for TOR & SOW
Contract Management Diagram
Contract Kick-off Mtg. Checklist
Contract Management Checklist
Contractor’s Performance and Contract Progress Report Form
Contract Closeout Checklist
Contractor’s Final Performance Evaluation Form
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Segment II What is Contract Management?
Contract Specialist
•
•
•
•
Letter to to PM confirming role &
responsibilities.
Conduct Contract Kick-off Mtg.
Validate contractor’s processes &
systems for compliance.
Maintain contract files and monitor
documentation.
•
•
•
Coordinate performance reviews.
Resolve issues & disputes.
Document actions.
•
•
•
•
•
•
Issue amendments.
Evaluate.
Negotiate.
Modify scope & price.
Maintain documentation.
Complete Contract Closeout Checklist.
•
•
Complete contract files.
Archive file.
Project Manager
•
•
•
Acknowledge PM communication.
Read contract
Participate in Contract Kick-Off Mtg.
•
•
Prepare Surveillance Plan.
Complete project Mgr. Contract Mgt. Checklist.
•
•
•
•
Implement Surveillance Plan.
Monitor & documents contractor’s performance
(Contract Progress Report if SLA).
Document acceptance of deliverables.
Notify Contract Specialist of issues & disputes.
•
•
•
•
Identify & evaluate changes.
Notify Contract Specialist.
Document changes.
Assist in negotiations.
•
•
Finalize acceptance.
Authorize payment.
•
•
Complete Contract Closeout Checklist
Provide all relevant documentation
•
Complete
Contractor Final
Performance Report.
Segment III Good Contract Management-Achieving Results
Segment II Good Contract Management-Achieving Results
Importance of Contract Management Achieving Results
5 Risks Avoided by Good Contract Management
1. Throwing away money -Not enforcing negotiated terms on
suppliers/Contractors.
2. Leaving money on the table-Not delivering value to your customers.
3. Time wasted-Looking for contracts, schedules, file notes and data.
4. Money wasted-Errors, double handling, disparate and ad-hoc
processes.
5. Being re-active instead of pro-active. Prevention is better than cure.
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Segment III: Good Contract Management-Achieving Results
Good Contract Management -Achieving Results
Technical Capacity Critical:
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Good specifications (TORs or SOWs);
Planning of selection process & execution of assignment;
Sufficient technical knowledge;
Sufficient & timely performance;
supervision/measurement;
Good understanding of when changes to scope needed.
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Segment III: Good Contract Management-Achieving Results
Good Contract Management -Achieving Results
Administrative Capacity is Critical:


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Properly Defined Responsibilities and Rules;
Capacity to prepare standardized documentation;
Capacity to evaluate and negotiate;
Clear Procedures (i.e. acceptance of deliverables, payments,
amendments, extensions, termination…);
 Dispute resolution mechanism (appropriate use).
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Segment III: Good Contract Management-Achieving Results
How do we contribute to Achieving Results for the Organization?
 Good Contract Management-Strategic function and
important pillar.
 Empowering organization.
 Good contracts outcomes.
 Contribution to organization’s Goals.
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