SECTION 1 - WHAT IS CONTRACT MANAGEMENT?
Introduction
Contract Management is the process that ensures that all parties to a contract fully
understand their obligations enabling these to be fulfilled as efficiently and effectively as
possible to provide better services that are effective and efficient in delivery, are value for
money, provide good quality, perform well and are policy compliant.
The process of contract management process has two key themes or objectives:
 The management of the relationship between provider and purchaser (in this case the
provider can be defined as the organisation who has been awarded a contract to
deliver a support service; the purchaser can be defined as the Local Authority who
award the contracts)
 Identification, allocation and management of the risks associated with the quality,
efficiency and performance of the contract.
Benefits
The benefits to effective contract management are immense for both purchaser and
contractor. Good contract management can ensure cost effective, reliable and timely
services will be provided at an agreed price and a level of quality consistent with a
purchaser’s requirements. Contract management also ensures that legal standards, financial
probity and management accountability are adhered to whilst maintaining good customer
relationships
Value for Money
Value for money has been integral to how Salford Supporting People has commissioned
services to deliver housing related support since April 2003 and will continue to be an integral
aspect of contract management. Successful contract management relies on a combination
of many factors but the over-riding principle is to achieve “value for money” which is most
likely to be achieved by:
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Accurate assessment of the service requirement
Good supplier selection procedures with clear output based specification
Well specified contracts
Planned, active relationship management
Clear roles and responsibilities
Appropriate user behaviour
Reduction and control of risk
Monitoring the contract’s performance and effectiveness
Retention of departmental control
Management of change
Encouragement of continuous improvement in price, quality and service
 Management of performance shortfalls, proper cost and payment control
SECTION 1 - WHAT IS CONTRACT MANAGEMENT?
Scope
The principles of contract management will apply to service contracts and is particularly
relevant when a contract has:
 A high value;
 Is for two or more years;
 Is critical to the business;
 Has a significant number of customers
Terminology
A contract is an agreement between two parties under which one party promises to do
something for the other in return for a consideration usually a payment. This places
obligations on both parties to fulfill their part of the agreement. It is also the foundation for the
relationship between the parties.
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The contract manager is the person who leads the contract management team.
The user is the customer, the person or people who receive the service.
The supplier is the contractor.
The authority is the purchaser and can include all departments of the Council.
Contract Management Concept
The contract management cycle (Fig.1) is a way of keeping the contract alive. The activities
at each stage are summarised below. Pro-active management takes place throughout the
contract cycle, which will be adopted by the Salford Supporting People contracts team.
Fig.1 Typical Contract Management Cycle:
Identifying need
Setting direction
Preparation and
procurement
Transition and
handover
Contact service
review
Pro-active
management
SP Management
Cycle
SECTION 1 - WHAT IS CONTRACT MANAGEMENT?
Setting the Direction
Successful contract management of the supplier / provider relationship requires a thorough
understanding of
 The contract management environment
 The risks and selection of the appropriate style of contract management.
The contract management environment and risks should be assessed early in the cycle and
kept under review. They will have a fundamental effect on the contract and the management
style adopted. Depending on the circumstances, these analyses may be sophisticated or
informal but should be documented to enable the assumptions used and conclusions
reached to be checked and provide an audit trail. All aspects of contract management should
be undertaken against this background and resources devoted to the areas of greatest
benefit.
Contract Management Environment
Issues for consideration
Tendency towards
partnership
Tendency towards distant
relationship
Service type
Business critical
Non-core support
Benefits / success factors
Business improvement
Cost saving only
Agreement type
Shared benefits
Fixed price
Agreement duration
Long term
Short term
Nature of relationship
Developing trust, continuing
Formal, arms length
Stability of requirement
Liable to change
Performance measurement
Difficult to identify and assess
Fixed throughout
Easy to measure, unambiguous
to quantify
Assessing Risk
A realistic assessment of risk (ongoing) is key to the contract management process. The
level of risk associated with an individual contract will depend on the type and length of
contract, the stability of the service, conditions in the supply market and risk to the user in
terms of cost, quality and the impact of contract failure. There are five elements to risk
assessment, which we will adopt, implement and evaluate on an ongoing basis throughout a
contracts full life:
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Identify potential problems and their causes
Assess the probability of occurrence
Assess the impact on the department’s operation and standing
Identify which party is best able to manage the risk
Devise strategies to manage down the risk.
It is important to check the limitations of the information on which the risk assessment is
based. The extent of the information sought and used should be proportional to the risk. The
effort required to manage each risk needs to be considered against the benefits.
SECTION 1 - WHAT IS CONTRACT MANAGEMENT?
During the procurement process for example assessment of the risks will enable appropriate
procedures to be set up, contract management resources to be appropriately focused and
the degree of risk for the user and the provider to be established. If the provider is expected
to bear all the risks the contract price may increase. Each risk should be allocated to
whichever party is best able to manage it or to bear the consequences if such risk were to
materialize. During the contract execution phase the aim is to manage down the risks,
reducing both the likelihood and the consequences.
The Contract Management Triangle
The range of responsibilities of those involved in contract management is considerable,
depending on the particular contract and management structure. Some are concerned with
the whole process, others with particular aspects. The use of cross-functional teams
comprising of contract management teams, users and suppliers / providers is common and
recommended for strategic service contracts.
It is important to define the exact roles and responsibilities of each party. The roles of each
party depend on the particular service concerned, the user organisation and the nature of the
contract. The policies and procedures adopted should reflect these roles.
The contract management style may need to change during the life of the contract. The style
should be reviewed regularly particularly after the initial phase and prior to the end of the
contract. There are no hard and fast rules to determine which style is correct and different
styles will be used in different combinations to match circumstances.
Contract Management Styles
Partnership
Most likely to bring long-term success. Appropriate
when flexibility is required.
 Collaborative working to meet shared aims,
shared risk assessment, possible shared
responsibility for risk management
 Significant information sharing
 Open book arrangements
 Reduced purchasing costs, increased supplier
profits
Adversarial
Appropriate during negotiation or when serious or
persistent poor performance.
 Confrontational user /supplier relationship
 Parties assess own risks
 Your risk – your problem
 Information protected
 One party gains at expense of other
Hands Off
Hands On
Particularly appropriate for multi-user services where
management act in a coordination role and there is no
predominant user.
 Empowerment of the supplier to take action
 Monitoring by overall objectives framework or
by exception
 Measuring by clear performance indicators.
Appropriate when contract manager is being used as
a filter to control user demands or in instances of poor
performance.
 Labour intensive management
 Key decisions taken by contract manager
 Supplier being directed.
SECTION 1 - WHAT IS CONTRACT MANAGEMENT?
Contract Management Styles CONT…
Passive
Appropriate for stable situations meeting existing
needs.
 Basic monitoring of the supplier in terms of
quality reliability and costs
 Reporting to senior management
Open
Appropriate for contracts in a changing environment or
where business critical
 Full disclosure of information and ideas about
both service provision and management
 Potential full cost disclosure by supplier
 Potential full budget disclosure by contract
 Open book accounting
Proactive
Appropriate for large, high profile, business critical
services.
 Anticipating and responding to change
 Implementing improvements, increasing
quality, reducing costs
 Developing close relationships with the
supplier
Formal
Appropriate for stable service, not fundamental to the
business
or where business critical
 Reluctance by parties to disclose cost or
budget information
 Not a close relationship (not necessarily
management
adversarial).
Multi-Level
Single Level
Large, complex contracts
 Relationship which operates at more than one
level and maybe across more than one
contract
Smaller simple contracts
 Relationship largely or exclusively at one level
and with only one major interface
Equity & Probity
All concerned have a duty in respect of maintaining confidential information and handling
sensitive situations with integrity. All parties under the contract must handle information with
equity whether in-house or externally contracted. It is an offence for local authority officers in
their official capacity to accept any money gifts or other considerations when managing or
negotiating contracts.
Roles & Responsibilities
While the actual roles for a particular service need to be agreed between the parties and
have the support of senior management, the following information gives a generic guide as to
the division of responsibilities, when managing a contract. (See section six for more specific
clarity divisions of responsibilities of the Salford Supporting People Contracts Team).
Contract Management Team
Team members need to be appointed early in order to maximize the value of their roles (The
Salford Supporting People Department has a dedicated contracts team in place, whose role it
is to manage, evaluate and appraise the contracts we have with contractors. Roles most
relevant during the preparation and procurement phase include:
SECTION 1 - WHAT IS CONTRACT MANAGEMENT?
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Development and enforcement of policy
Planning and implementation of contract management approach
Establishment of the roles and responsibilities of those involved
Authority to incur the expenditure
Identification of key risk elements
Setting standards across the department
Development and monitoring of procedures
Post-tender negotiations (if acceptable under the EC rules).
Roles most relevant during contract implementation include:
 Acting as a filter between the user and the provider
 Analyzing information
 Monitoring prices and volumes, especially where the user has direct access to the
services
 Auditing of the provider as specified in the contract
 Authorizing invoices for payment and ensuring that payments are made
 Anticipating problems
 Reviewing and Appraising the contract
 Analyzing and managing risk
 Managing budgets
 Participating in post contract negotiations
 Implementing procedures and monitoring implementation of supplier procedures.
Senior Management Role:
Three distinct roles need to be fulfilled, preferably by different individuals. There should be no
ambiguity of their roles and when dealing with the supplier a joint view needs to be
presented. Their titles and roles are:
Decision Maker – EG: SUPPORTING PEOPLE Commissioning Body
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Approval of the need for the service
Approval of the contract budget
Approval of variations to the contract
Appointment of the Contract Owner
Reporting to this level will be occasional and by exception.
Contract Owner – EG: SUPPORTING PEOPLE Core Strategy Group
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Accountable for delivering the service requirements within the given approvals
Requires the status and authority to provide the necessary leadership.
Contract Sponsor – EG: SUPPORTING PEOPLE Lead Officer / Contract Manager
 The single focal point for the day-to-day management of the departments interest
SECTION 1 - WHAT IS CONTRACT MANAGEMENT?
Contractor (EG - Provider of services)
The extent to which the contractor is empowered will depend upon the procurement
approach adopted. However, the contractor / provider will always be responsible for:
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Deciding how to provide the service
Delivering the service to specification
Deciding priorities to achieve the service
Meeting user requirements within the contract terms and budget
Monitoring the service delivery performance
Development and implementation of agreed procedures
Providing information as required by the contract.
User (EG - Service User)
The user will be fully involved in:
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Defining exactly what services are to be provided
Setting service levels
Providing relevant and timely information to the contract manager and contractor
Informing the contract management of under performance.
When there are many users of a service, consideration should be given to setting up user
groups. These groups should add value, promote inclusion and steer how services should be
shaped for future demand.
Relationships
No matter how good the contract and the definition of the roles, the service provision will
depend upon the relationships between those involved. The relationships need to be
established early (during the procurement process), constantly reviewed and actively
managed. Relationships can be flexible and open while maintaining proper businesslike and
professional conduct. A balance needs to be maintained between these, consistent with the
overall style of contract management adopted. Good procedures help to establish this
balance and encourage mutual trust between the parties. In general adversarial relationships
are less likely to be productive.
Formal links need to be set between those in the contract management triangle and should
be designed to ensure accurate and timely information is in the hands of those responsible
for any resulting actions, corrections or improvements. The relationships will be based on the
respective roles agreed between the parties and should be appropriate to the service. Care
should be taken to avoid the generation of a contract management industry where costs
exceed its benefits.
Generally minor items should be dealt with directly between the users and the contractors
while more fundamental issues need to involve the contract management structures. It is
more beneficial to solve problems jointly rather than having one party imposing a solution on
another. Continuous dialogue will help to identify problems early often giving greater scope
for solutions before they seriously affect the service provided and at worst allowing time for
contingency plans to be implemented by the users. Whilst difficult to define, the Authority’s
ethos and culture will have an impact on the relationship with the supplier.
SECTION 1 - WHAT IS CONTRACT MANAGEMENT?
Strategic service contracts will place a greater emphasis on these relationships, which may
exist, at different levels within the groups. At senior level the contract strategy and potential
major changes will be the focus while monitoring the performance and service delivery will be
the focus at operational level.
Recognising that there may vast numbers of users of a service communication routes must
be considered e.g.:
 The extent to which local user/provider communication is encouraged or permitted
 Whether the provider will be the first point of contact for individual user requirements
or queries (or will contract management act as a filter).
SECTION 2 – CONTRACT MANAGEMENT PRIOR TO A CONTRACT BEING
AWARDED?
Getting the Arrangements Right
A framework within which contract management will subsequently be conducted should be
developed during procurement planning. The main areas to be addressed are shown below:
The Contract
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Getting Arrangements Right: Building Blocks
CM Team
Define the Service Specification &
outputs
Performance indicators
Pricing
Pricing factors
Variations
Break conditions
Assignments
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Early appointment
Procurement
Resourcing the team
Post tender negotiate
Training
Contract
Management
Procedures
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Devising procedures
Managing problems
Escalation
Arbitration
Recording resolution
Performance information
Management information
Transition plans
Relationships
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Internal structures
Roles, responsibilities
Balance of relationships
Department culture
The Contract
Contracts should provide the contract management team and the contractor with clarity and
flexibility and should:
 Set out exactly what services are to be provided
 Require the potential supplier to specify how the transition from existing contracts and
to future contracts is to be effected, including documentation and software
 Define performance standards and performance indicators (i.e. how the service will be
judged)
 Define who is responsible for providing performance information and the
 Information required
 State any unacceptable methods of providing the service (the method of providing the
service should be for the supplier to decide)
 Define the relationship between output and charges
 Define how the relationship between the Authority and the provider will work (to
enable the supplier to estimate the resources required and the costs of managing the
interface)
SECTION 2 – CONTRACT MANAGEMENT PRIOR TO A CONTRACT BEING
AWARDED?
 Provide for regular short and long term reviews throughout the contract life
 Define the pricing mechanism (fixed or variable), the method of payment and any links
to performance; for variable price contracts, specify the criteria for price variation and
the period of review
 Include a procedure for managing future changes
 Detail any arrangements for the use and care of the departments assets (land,
buildings, utilities, IT, stores, etc)
 Define the rights of the Authority to audit the supplier’s systems
 Make provision for contract assignment to a private sector supplier
 Define break conditions, including periods of notice required, and sometimes specified
break points
Performance Indicators (PI’s)
An effective system of performance measurement should be tackled in stages:
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Identify the services to be provided
Identify the Critical Success Factors for that particular contract
Identify the key PIs, targets and measures. These must be objective
Identify the components to be measured or assessed including outputs - what will be
produced and outcomes - what is the effect of the service.
Performance indicators need to be appropriate and achievable. This requires knowledge of
the market and the provider concerned. The principle of PI’s need to be included in the
contract specification, but the actual setting will often be done as part of the negotiation with
individual contractors, but before the contract price is agreed and the contract signed.
Incentivisation
Payment to contractors linked to additional performance is “incentivisation”. The approach
sets out to provide benefits to both the user (quality of service or reduced costs) and the
contractor (increased profits and marketable experience) as the contractor rises through the
learning curve. Such systems have costs. The contractor and the contract management team
will have to produce and analyze information to determine the correct payments. Procedures
will have to be implemented to manage the system. It is most likely to be cost effective on
long duration, higher value contracts.
Termination
While normally only used as a last resort and resulting in a lose-lose situation, the contract
may need to be terminated as a result of:
 Unacceptable performance by the supplier
 Change in government policy
 Change in user needs
In the event of a contract break, contingency plans will be required to ensure continuity of
service. This is especially important when the service is business critical and the contractor
has break rights in the contract. An existing contractor is required to co-operate with new
contractors to effect a transition
SECTION 2 – CONTRACT MANAGEMENT PRIOR TO A CONTRACT BEING
AWARDED?
Dispute Resolution
A contract may specify the system of arbitration or arbiter to be used in case of unresolved
conflict. Beyond such arbitration, contract conditions can be enforced in the courts. However,
these are unlikely to improve service delivery and must only be used as a last resort. If used,
the contract has already failed.
Contract Management Team
A contract management team will be required for the more risky or complex contracts. The
aim is to minimise the resources consistent with securing VFM and reliability of service. It is
important that the team obtain the support of senior management who may have a role to
play in managing and sustaining the relationship with contractors.
It is particularly critical that the team are involved in:
 Drawing up the specification and evaluation criteria
 Evaluating proposals.
The size of the team will depend on:
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The scope of the contract/s
The risks involved
The complexity of the pricing mechanism
The level of control required.
The team will need a full understanding of:
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The legal implications of contract for which they are responsible
The contract terms and conditions, including any incentivisation conditions
The proper certification and authorisation of invoices
The Authority’s rights if things go wrong
The Authority’s duties and responsibilities under the contract
The procurement process and post tender negotiation
Any assumptions made by the department and the supplier
The department’s expectations of the service relationship
The main cost determinants, how they relate to the outputs and quality standards, and
how they will be measured.
Skills & Competencies:
The following competencies might usefully be found in the contract management team. It will
be necessary to judge which of these, and to what level, are appropriate for each contract.
The team may require:
 Full or part time staff
 Advice from other departments
 External assistance.
Knowledge of:
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The types of contract and contract law
The procurement process including specifications and contract management needs
The supply conditions and developments in relevant markets
Pricing mechanisms
SECTION 2 – CONTRACT MANAGEMENT PRIOR TO A CONTRACT BEING
AWARDED?
 Risk management techniques and contingency planning
 The terms and conditions of individual contracts
 The roles and responsibilities of the contract manager, contract officer users and
suppliers
 The need to seek and achieve continuous improvement
 Benchmarking techniques and their application
 Performance management techniques
 Quality assurance techniques
 The need to forecast future demand
 The principles underpinning government accounting and financial management
 Relationship management.
Abilities:
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To define the business needs and develop a contracting strategy
To identify the principal demand and cost drivers for each service
To produce and implement plans for managing relationships with suppliers
To complete an analysis of risks associated with each contact
To analyze the contract management environment and adopt the appropriate
management style
To apply contract management procedures and techniques
To negotiate successfully
To control expenditure
To manage users and users’ demands
To manage relationships successfully
Individual Qualities:
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The ability to work effectively as a member of a team
Effective negotiating and influencing skills
Effective interpersonal skills
Well developed analytical skills
A forward looking and pro-active approach
The ability to exercise sound judgment
A positive and practical attitude to change and innovation
 The ability to work reliably under pressure and prioritise competing demands.
Training
The skills and competencies of the contract management team members should be
assessed. Any shortfalls need to be remedied by either recruitment of additional members to
the team or the training of existing members.
Post - Tender Negotiations
Although undesirable, both users and contractors may request modifications to the tender
specification. Performance standards and price variations will often be tailored to individual
contractors, usually because of the types and variety of services they offer. The result may
require post tender negotiation before the contract can be agreed and signed. Contract
management staff should be involved to ensure continuity. A clear understanding of the
original specifications and the reasons for them will be required to ensure the user needs are
met. All of these negotiations must be complete prior to contract agreement. Fundamental
changes to the original specification could compromise the basis of the procurement and
lead to challenge from other bidders, so re-advertising and re-tendering must be carried out
and the entire process done again.
SECTION 2 – CONTRACT MANAGEMENT PRIOR TO A CONTRACT BEING
AWARDED?
Procedures
Clear procedures established at the outset maximise the efficiency of contract management
while minimising the disruption that problems may otherwise cause. Some will apply to the
regular contract management functions; others will be used as and when required.
Contractors and users should understand procedures. Procedures will ensure that:
 Problem details are recorded and proper documentation is maintained
 Information is shared at the appropriate levels of management on a timely basis by
all parties
 Problems are addressed in a proper manner consistent with the contract conditions
 Open mindedness and addressing the facts is encouraged
 It is clear how disputes between the parties are to be resolved.
Every effort should be made to resolve problems at the lowest practical level. However,
provisions should be made for escalation up through levels of management and ultimately to
the formal dispute resolution procedure
Procedures will be required for:
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Approval of transition plans
Submission, processing and certification of invoices for payment
Reviews of contract and adjustments of prices
Assessment of risk
Planning of contingency events
Review and control of budget
Problem management arrangements
Disputes resolution; management of change - variations requested by either the
supplier or the department
 Service and performance management providing information, monitoring activity and
reporting requirements
 The control of user/3rd party relationships
 Security
 Monitoring of compliance - adherence to above procedures
 Implementation of termination provisions.
SECTION 3 – CONTRACT MANAGEMENT AFTER THE CONTRACT HAS BEEN
AWARDED?
Managing Problems
However good the relationship between users and contractors and however stable the
service being delivered, problems may arise. The aim is to minimise the consequences by
encouraging co-operation and a mutual desire to resolve the issue. Clear procedures that are
followed from the outset should be established .A key function of contract management is to
anticipate problems.
The most common causes of problems are:
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Failure to anticipate major risks or changes
Lack of preparation or contingency planning
Changes of requirements
Failure to consult
Conflict of objectives
Inaccurate original assumptions
Changes in user needs
Wholly unforeseen events
Failure of the supplier to deliver
 Mistakes people make
The consequences of problems can be reduced by:
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Early identification and remedial action
Prepared contingency plans
Regular reviews with users and suppliers
Agreed procedures
Contract changes implemented when appropriate
Users who are aware of changes particularly when they affect the way the service is
used
 Boundaries of delegated authority which are adhered to
 Problem escalation to senior levels when appropriate.
When things do go wrong:
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Exactly what has gone wrong?
Has it or something similar happened before?
Why has it gone wrong?
Is it a one-off problem? If not, how likely is it to recur and how often?
Can it be put right and if so what is the cost to the supplier or user?
Managing Users
Managing a large user group can be complex and time consuming. Users, sometimes in user
groups, have many useful roles, including:
 Communicating effectively
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Monitoring performance
Managing change
Predicting future needs
Publicising service standards
Setting priorities, especially when under budgetary pressure
Managing other users, queries and complaints.
SECTION 3 – CONTRACT MANAGEMENT AFTER THE CONTRACT HAS BEEN
AWARDED?
However, unless managed the users can create excessive demands that have a negative
effect on the contract as well as value for money, therefore it is vital that consultation and
inclusion is set with realistic roles and expectations.
Managing Performance
The supplier’s performance must be monitored against pre-determined, clear and agreed
criteria set out in the contract. Monitoring should be carried out to a plan which assesses the:
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Quality of the service against the Critical Success Factors
Cost of the service
Timeliness of the service
Extent to which the user’s needs are being met
Recognising these may change with time
Use and care of the department’s assets.
The frequency of monitoring and reporting will need to be decided for each contract. In the
event of identified poor performance, remedial action should be taken as soon as possible
and the effectiveness monitored. There is often a need for a robust stance towards nonperformance with a view to improving the service delivery. A record of the performance and
the action taken must be maintained and will prove invaluable should a trend of poor
performance emerge. Where performance has exceeded requirements, action may also be
required to build on the success and take advantage of any new opportunities presented.
Default
Failure to perform may constitute a breach of contract, as can failure to take remedial action.
The severity of the failure and the cost to the Authority will need to be assessed. Legal
advice should be sought before any action is considered. Default under the contract may
arise from a failure to:
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Perform any part of the services
Provide financial or management information
Pay any sub-contractors or suppliers within 30 days
Employ appropriately qualified, experienced, skilled or trained staff
 Comply with legislation
Managing Change and Contract Variation
The quantity quality and even the nature of the user’s needs may change during the life of a
contract. Contracts should include procedures to manage change but normally only when
such changes are anticipated or planned in advance.
The business needs should be reviewed at regular intervals to anticipate potential changes
that may be required with regard to the contract. Consideration should be given to:
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New products
New technology
Changes in market prices
Revised business objectives.
If significant changes are anticipated during the contract life, there should be greater
empowerment of the contractor to initiate change, especially to take advantage of new
techniques and technology.
SECTION 3 – CONTRACT MANAGEMENT AFTER THE CONTRACT HAS BEEN
AWARDED?
Contracts should incorporate a mechanism for pricing variations. However, these are seldom
as competitive as those in the original contract. It follows that changes must be managed in
detail and will consume considerable effort from all parties. This effort itself adds to the
contract costs. The essential stages of a managed change procedure are to:
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Record any potential need for change
Consider the full implications of the change
Ensure those concerned have the authority to agree the change
Record each step of the action taken
Ensure a formal contract change is produced
Inform the users of the agreed changes.
Care must be taken with the cumulative effect of a number of changes to a contract.
Negotiation
A fundamental aspect to any contract management activity is that of negotiating, successful
negotiation depends on a myriad of key points and factors, which may include:
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Training if you are new to negotiating or assistance from experienced negotiators
Becoming familiar with the appropriate guidance’s
Planning and preparing negotiation strategies in advance
Being clear about your aims, what you have to offer, what the supplier has to offer
and aims to achieve
 Assess realistically what is of value to you and the other party which party is under
most time pressure and which party has most to lose if negotiations break down
 Reviewing the process in order to learn for the future.
Managing Risk
As part of all contract management activity the evaluation of risk is essential, effective risk
management will:
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Reduce the impact of risk on the performance of the contract
Reduce contract management costs and lead to effective utilization of resources
Give greater job satisfaction
Yield maximum benefits for the Authority and more productive relationships with
users and suppliers
 Lead to more satisfied users and suppliers
 Increase the reliability of the service.
In general terms the contract management team should:
 Check regularly to see if the most recent risk assessment has been evaluated and
valid
 Manage down the risks by:
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Identifying that action is required
Planning the appropriate action
Recording and implementing the plan
Monitoring the effectiveness of the action and:
When the level of risk is acceptable, consider reducing the contract
management resources passing responsibility to the supplier.
SECTION 3 – CONTRACT MANAGEMENT AFTER THE CONTRACT HAS BEEN
AWARDED?
When managing risk consider the following if the level of risk to is unacceptable and needs to
be managed down.
Relationships
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Consider roles of different members in the contract management team
Should more senior personnel be involved?
Are specific aspects of the relationships failing?
User Education
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Do the users know what to expect from the service?
How are they to be educated?
Do the users have effective input to the contract management process?
Performance Monitoring
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Is reliance on user monitoring or supplier self-assessment?
Is the level of resource dedicated to monitoring appropriate for the service and the
risks?
Contingency Planning
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Are the existing contingency plans adequate?
What would the Authority do if the supplier were unable to deliver the required
service?
Is accepting some delay whilst a replacement supplier is established an acceptable
one?
Detailed plans for establishing required emergency cover.
Researching the Market
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Does the Authority understand the way the market works sufficiently well?
Are mechanisms available to keep knowledge current?
Effective Budget Control
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Is the focus on pro-active budget control?
Are end-of-year costs being forecast or are only current costs being recorded?
Are budget predictions early enough to take remedial action?
Are major factors influencing the service demands known, understood and
monitored?
SECTION 3 – CONTRACT MANAGEMENT AFTER THE CONTRACT HAS BEEN
AWARDED?
Contract Appraisal / Reviews
In addition to regular performance monitoring, the contract performance should be appraised
or reviewed more comprehensively at intervals appropriate to the service provided. These
appraisals are key to anticipating problems. Short-term appraisals should include:
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Current issues and potential problems
Information - timely adequate and relevant
Developing trends
Impending events
Changed demands from users.
Longer-term appraisals should include assessment of:
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Achievement of objectives - reasons for variance
Quality of service - fitness for purpose
Financial position versus budget
Effectiveness of relationships - suppliers/ users/ contract management
Flexibility of service delivery
Initiative and responsiveness of supplier/ Authority to change
Planning and control exercised by supplier - particularly in response to changed
needs
 User satisfaction level
 Extent to which improved VFM is being achieved
 Opportunities to reduce costs, improve services or procedures.
Budgetary Issues
Sound budgetary procedures will be required to ensure:
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Services are delivered within budget
Budget difficulties are identified early enough to take remedial action
Remedial actions are decided, implemented and monitored
User demands are managed
All staff, especially those in contract management are aware of their responsibilities
and limits of authority
 All staff act in accordance with Departmental and government accounting policies for
each contract
Fraud & Impropriety:
The processes associated with the awarding, managing, monitoring and paying for contracts
inevitably give opportunity for fraud and impropriety. All staff have a responsibility to minimise
the risk of fraud. Managers in particular should regularly consider probity issues and ensure
their systems minimise the opportunities for fraud.
Budget holders have the responsibility for ensuring the necessary controls are being
administered by maintaining audit trails (see below).
SECTION 3 – CONTRACT MANAGEMENT AFTER THE CONTRACT HAS BEEN
AWARDED?
Maintaining Audit Trail’s:
It is essential to keep records of dealings with contractors, whether written or verbal. All
information should be kept on the file relating to each contract. Records will be especially
valuable for:
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Problem solving especially if problems lead to litigation
Appraisal meetings and re-negotiations
Audit purposes
Planning any subsequent re-tendering process.
Managing Transition:
Transition from one contractor to another needs to be planned well in advance. The detailed
transition plans will include:
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Winding down existing arrangements
Developing effective procedures for a smooth handover
Evaluating the advantages of a period of parallel running
Educating the users to the new arrangements
Communicating the supplier’s setting up timetable
Introducing the new arrangements.
SECTION 4 – A TYPICAL CONTRACT MANAGEMENT CYCLE
The Contract Management Activities
The typical contract management activities have clear and defined links to procurement
activities i.e. the purchasing of goods, services or works. Generally speaking however
contract management activities include:
Identifying the Need and Setting Direction
Activities include:
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Define user needs
Agree sourcing policy
Set contract and service objectives
Agree contract management style
Establish budget management
Review existing contracts.
Preparation and Procurement
Activities include:
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Appoint the contract management team
Decide budget management approach
Decide policies and procedures
Specify output based requirements
Assess risks and allocate responsibilities
Issue invitations to tender
Participate in contractor selection process
Assess tenders
Negotiate the contract.
Transition and Handover
Activities include:
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Disengage from existing arrangements
Restructure management as required
Monitor set-up operations
Transfer responsibilities
Implement new arrangements.
Contract and Relationship Management
Activities include:
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Assess and manage risk
Manage Authority/contractor relationship
Monitor the contract performance and effectiveness
Retain adequate control
Manage changes
Encourage continuous improvement
Manage performance shortfalls
Manage budget effectively
SECTION 4 – A TYPICAL CONTRACT MANAGEMENT CYCLE
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Control payments.
Contract Appraisal
Activities include:
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Assess the performance of the supplier
Assess the effectiveness of management
Determine if the anticipated benefits have been realized
Check the business needs
Examine competitive options
Anticipate changes
Re-assess the risks
Consider renewal strategy.
Checklist for effective contract management
Issue
Criteria
Overall Framework
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Is there a nominated contract manager/team?
Do they have delegated authority?
Has it been adhered to?
Do they know the contract budget?
Understanding the Requirement
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Do they fully understand the outputs set out in
the contract and fully understand the link to
cost?
Do they fully understand the key conditions in
the Contract?
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Contract Management Activity
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Value for Money
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Have the main factors determining cost
Been identified and are they being
Monitored?
Have all changes adhered to procedures?
Are any substantial changes anticipated?
Is the correct information being generated and
are management-reporting procedures
satisfactory?
Are invoices being properly certified and
authorized?
Is the budget on profile?
Were the required outputs delivered
satisfactorily?
Are views of the users sought?
Are the key risks fully understood/
Do adequate contingency plans exist?
Do review meetings take place with the
supplier?
Can the team demonstrate that VFM is being
provided?
SECTION 5 – SALFORD SUPPORTING PEOPLE CONTRACT MANAGEMENT
FRAMEWORK?
Introduction
The Salford Supporting People Contract Management Framework (See Fig.1) has been
designed to assist contract managers, officers and contractors to manage and monitor
contracts over the whole life of the contract to ensure any issues associated to the contract
can be dealt with in a robust, fair, efficient and transparent manor.
Generally speaking the contract management cycle begins when a new contract has been
agreed, either through a procurement process (new service) or a re-negotiated process
(existing service). For newly procured services (for more information regarding procurement
please refer to the Salford Supporting People Procurement Strategy 2007-2010) the contract
will commence only after the contract and service specification has been discussed and the
workbook schedules have been negotiated. For re-negotiated processes the contract will
have been appraised using the Salford Supporting People Framework.
A workbook has been produced to assist all those involved in managing Salford Supporting
People contracts (App1). As an interim tool with an interim function the workbook is intended
to sit behind the contracts issued by the Salford Supporting People Department, giving
greater clarity to the contractual obligations contractors have when delivering housing related
support services across the City of Salford to vulnerable groups. The workbook when used in
conjunction with general contract management processes identify contractual obligations
outside of the service specification, the workbook also supports the Salford Supporting
People Department to assess and evaluate risks associated to the contract.
The workbook, which we have produced, covers six areas known as ‘Schedules’. Each
schedule covers:
Schedule 1
Schedule 2
Schedule 3
Schedule 4
Schedule 5
Schedule 6
General Service Data
Housing Related Support Obligations
Quality and Performance Management Action Plan
Quality Assurance Framework Review
Contract Appraisal and Risk Assessment Summary
Recontracting recommendations
As part of the contract appraisal process, usually commencing 14 weeks prior to the contract
end date (App2) (this does depend on total length of contract, and whether procurement
activity is required) we request that the contractor produce and provide statistical and
qualitative reports (App3) as part of their contractual obligation and our appraisal process
(cited in the Supporting People New Steady State Contracts (App4) and service
specifications (App5)). This includes submitting up to date performance data using the SPI
workbook (App6), completing a QAF self-assessment (App7) and if required producing a
business case (App8) if requesting expansion or extra revenue.
Finally, Value for Money (App9) and Strategic Relevance (App10) will continue to be
assessed and evaluated as an ongoing contract management activity.
SECTION 5 – SALFORD SUPPORTING PEOPLE CONTRACT MANAGEMENT
FRAMEWORK?
Supporting People Contracts Team - Division of Responsibility
Supporting People Contract Manager:
The Contract Manager oversees the entire contract management cycle, supervises Contract
Officers and presents recommendations for re-contracting to both core strategy and
commissioning body.
The Contract Manager is responsible for:
 Developmental activities that lead to significant contractual changes with regard to
strategic positioning and relevance as directed by the core strategy and
commissioning body groups, this would potentially include procurement and tendering.
 Issues relating to poor performance, quality etc that would lead to the issuing of
default, suspension or termination notices, the latter under the governance of both
core strategy and commissioning body groups.
 Dealing with contractual disputes, conflicts and concerns and will direct courses of
action to Contract Officers as and when needed.
 A team of officers responsible for managing and monitoring all Salford Supporting
People contracts
 Ensuring any changes to the contract in terms of cost are communicated to the
finance and payments section
The Contract Manager is responsible to the Supporting People Lead Officer, Accountable
Officer, Core Strategy Development Group and Commissioning Body and will report back to
these individuals / groups all matters concerning contractual issues.
Supporting People Contract Officers:
The Contract Officers are primarily responsible for the monitoring and management of the
general contracts held with providers. Officers are required to conduct mid term and annual
appraisals alongside and in consultation with providers and if appropriate service users
(please refer to Salford Supporting People Communication and Involvement Strategy 2006 /
2010) and produce documents and reports relating to contractual obligations concerning the
quality and performance of the service as well as make provisional recommendations for recontracting.
Contract Officers are responsible for setting up and monitoring action plans, risk
management plans etc with contractors if failure to deliver on the contract is recognised
during the contractual period. Officers are required to advise the Contracts Manager of such
issues and how these are being resolved.
SECTION 5 – SALFORD SUPPORTING PEOPLE CONTRACT MANAGEMENT
FRAMEWORK?
Larger changes or recommendations to default, suspend or terminate a contract should be
passed up to the Contracts Manager who will then take responsibility and lead on any action
required (issued by either the core strategy of commissioning body groups). The Contracts
Manager will delegate actions to Contract Officers as part of any remedial process
concerning a particular contract. The Contract Officer is required to devise and develop
remedial action plans and report on progress to the Contracts Manager. Contract Officer’s
are expected to deal with and negotiate any minor changes to contracts, following process
and procedure as well as keep contract files and systems up to date and accurate.
Contract Officers are expected to think strategically and make recommendations based on
their analysis of the contracts they manage and monitor, feeding back issues, which have
been identified during the contract period.
Fig.1
The framework below represents the cyclical approach, which Salford Supporting People
Department use when managing, monitoring and appraising all of its housing related support
contracts.
SECTION 7 –CONCLUSIONS AND SUMMARY
To conclude, this guidance has identified and illustrated how Salford Supporting People
Department will conduct its contract management operations in line with our legal
requirement under contractual law, supported by the wider corporate and national approach
to contract management of Supporting People Services.
By developing and introducing this guide our intention is to ensure that all contract
management activity is fair, transparent and fully endorses our obligations to promote
positive, non-discriminatory practice. We will ensure that approach to contract management
is inclusive and our processes stand up to scrutiny and challenge.
We will continue to undertake service reviews and contract appraisals and work alongside
our partners and contractors to ensure every service we commission:
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Offers Value For Money
Is adaptable and able to shape and modernise
Is risk managed
Has training and development at the forefront of its agenda
Offers continuous quality improvements
Performs well,
Links into both sustainability and regeneration agendas
 Strives to work in partnership with us to ensure that every vulnerable citizen in Salford
has an opportunity to access a service that is able to meet his or her needs.
Finally, as our commitment to positive contract management will continue to develop over the
next three years, we will endeavour to continue our strong ethos to involve and consult
colleagues, partners, wider stakeholders and service users (new and old) when engaging in
contract management activity now and in the future. By adapting our flexible approach to the
way we manage contracts we hope to respond positively and firmly to Council driven
objectives as well as National changes in legislation or policy.