Procurement Manual:
Good Practice 1
1. Contract Management:
Responsibilities and Duties
A. Whose responsibility is it?
B. When is Contract Management
valuable?
C. Contract Manager Duties
A. Whose responsibility is it?
So, you’re at the end of a procurement process and
ready to award a contract to the successful bidder. It’s
been a long procedure and you’re already thinking
about the next project. But what happens to the contract now?
Of course for more complex University, there may be
a project or contract management team to support the
contract but in most cases the service manager will
look to ensure that the provision/delivery/ installation
meets expectations and targets.
To procure a contract and neglect to put sufficient resources into contract management, seeing it perhaps
as an unnecessary overhead, is not conducive to ongoing best value
Best practice insists that organisations recognise the
value that contract management can add - much more
than just administration, contract management involves ensuring contractual obligations are met, services are delivered efficiently and commercial risks
are identified and managed.
B. When is Contract Management valuable?
D. Relationship Management
Whether a contract requires dedicated contract management depends on a number of criteria, such as:
E. Change Control Process
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Contract value;
Contract length;
Complexity of services;
Level of risk.
A relatively low-risk supply-only contract would benefit
from the attentions of a contract manager at the start (or ideally a few weeks before the contract is
signed) to implement core contract management processes, produce a contract summary if required
and assess the risks and/or opportunities that may require action in the future. After that, monthly or
even quarterly contract management reviews may be sufficient, with a focus on risk management
and contractual compliance matters such as price increases and management information. Framework contracts for purchase of goods may fall in this category, requiring minimum contract management as long as the supplier is performing adequately.
For more involved contracting arrangements, such as contracts for service, detailed performance
management regimes, a reasonable level of expected change, ongoing obligations on either party
such as disaster recovery testing or benchmarking, or performance slippage or disputes, you should
really be thinking about dedicated and skilled contract management as part of overall planning.
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Procurement Team: University of Exeter August 2010
C. Contract Manager Duties
A good place to start is to read the contract all the way through a couple of times. Although you may
have been involved in the award of the contract; to understand the possible pitfalls, difficult negotiation points, and the commercial and contractual risk in the deal you may wish to discuss with colleagues in the procurement team.
A useful, if laborious, way of becoming more familiar with the contract is to develop a tool for tracking
contract obligations and deliverables. This can be an Excel spreadsheet with the following suggested headings:
Contract document (e.g., “main terms” or “schedule 1”);
Contract section (e.g., “business continuity”);
Contract reference (e.g., “para 1.1”);
Title (e.g., “prepare draft business continuity plan”);
Description (e.g., “Supplier shall provide a draft business continuity plan for review by the
parties”);
Due date (e.g., the date the first draft is due);
Responsible party (e.g., “supplier”);
Frequency (e.g., “one-off”); and
Status (e.g., “in progress”)
Ideally a Contract Manager should go through the whole contract carefully and note every instance
where there is a requirement, a deliverable or a specific obligation (look for “The Supplier
shall....” and “Both parties will ensure that...”). In most instance these will have been set when writing the specification and scope for the tender documents (planning like this in advance is always an
advantage). You could add sub-categories to filter all obligations relating to invoicing, for example,
regardless of where they are in the contract. You can sort the spreadsheet by “Due date” to plan
forthcoming requirements or use it as a checklist to ensure the supplier complies with their obligations.
One important point is about access to the contract itself. People will come up with all sorts of reasons as to why they should have a copy, and there may be no apparent harm in letting them see it.
However, a wise contract manager will limit access to those who need it. Keep a log of who has a
hard copy and only send electronic copies in PDF. Otherwise you may be swamped by “lay contract
managers” interpreting and quoting the contract without the necessary context and understanding.
Remember also that their copy of the contract will be out of date as soon as the first change control
note is agreed. This, and the administration required to keep on top of this, is enough reason to limit
access in the first place.
Another important function for the contract manager is providing contract guidance and education.
This can be a detailed summary of key terms, risks and opportunities produced for senior managers
(restricted distribution). Or it could be a users’ guide to the services being delivered under the contract so users understand what they should get and what to do if they don’t. Contract changes may
affect the services, so consider a standard communication template to inform users of relevant
changes.
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Procurement Team: University of Exeter August 2010
D. Relationship Management
Encouraging a co-operative and trusted relationship with the service provider can really help if the
going gets tough, as it will at some point in a long-term contract. A good contract manager will be
naturally inclined to dig into every nook and cranny, looking at things from different angles to identify
risks, solutions and opportunities that others may not see. Their work may require them to build relationships with every area of the business, from finance and IT to project managers and operational
users. Being able to capitalise on this central position in the business is what makes the contract
manager different.
Most importantly, the contract manager should have strong commercial awareness, an inquisitive
probing approach and an inclination to assume the worst in order to flush out risk. However, to really
add value, the contract manager should not only identify possible downfalls but also come up with
creative solutions to enable work to go ahead, albeit with less risk.
However, the University may have legal accountability for the quality of the product or service further
along the supply chain and will be held to account if there is a failure. Contract management must
ensure an appropriate level of governance and sufficient monitoring, supported by external audit
where necessary, to be confident the supplier’s assurance process is working and they have acted
responsibly
E. Change Control Process
Core contract management processes include the change control process, dispute resolution, performance management, managing contractual documentation, and contractual/commercial risk
management. You may not be aware that the contract manager is responsible for all these processes too!
A distinction may be made between contract change control and “operational” change control, which
is not necessarily best managed by the contract manager but can include an interface into the contract change control. The contract will usually contain high-level procedures, for example the change
control procedure, and the contract management process should sit underneath this procedure to
detail the internal steps, sign-off requirements and implementation plans.
If performance monitoring indicates an unacceptable level of non-compliance then immediate corrective action is required. How this is notified to the supplier and how quickly the supplier has to respond is usually defined in the contract. The performance issue may also trigger service penalties
and, depending on its seriousness, require escalation. Each event should be fully recorded and,
once resolved, investigated and action taken to prevent any reoccurrence.
Other useful references
Procurement Manual Good Practice 2: Risk Management and Handling Change
Procurement Manual: Good Practice 3: Supplier Appraisal
Procurement Manual: Good Practice 4: Assessing Supplier Performance
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Procurement Team: University of Exeter August 2010