How to Manage Your Contract Guideline

One important consideration often overlooked as part of the procurement process is contract management – namely how the contract will be managed and who will be responsible for managing it.

When starting any procurement process it is essential to consider all of the contract requirements, including the contract management requirements. Incorporating contract management requirements in a well-defined scope will provide clarity to respondents about the agency’s requirements and expectations around how it intends to manage and monitor its contract. It will also help with supplier performance management.

Unfortunately, there is not a ‘one size fits all’ approach to determining the contract management requirements as these will vary depending on the risk, value, term, scope, complexity and/or strategic nature of the contract.

Some important information to consider during the procurement planning phase to help identify contract management requirements include:

Contract manager

Identifying who has the appropriate knowledge, skills, experience and time to undertake the contract management responsibilities is an important step in determining who will manage the contract. Consideration needs to be given to whether the contract will require an individual or a team to manage it. Where a team is required, the roles and responsibilities for each team member will need to be defined and communicated to relevant stakeholders.

While the formal contract management role may not start until after a contract is in place, contract managers can play a key role in the procurement planning phase (particularly if they manage the existing contract). It is beneficial to identify and involve the contract manager as early as possible in the procurement process as this allows input and familiarisation with the requirements.

Contract management lessons to be learnt

Is documentation available from reviews of the previous/current contract that can help identify improvements for the new procurement? Consider what worked well, what didn’t work, if clarifications or variations were required, if anything was missing, what risks were identified, what data/reports/meetings were required, and how performance was monitored and measured. Consider what would improve the management of the new contract. If there isn’t a previous contract, are there lessons that could be learnt from similar contracts within the agency or from another agency or jurisdiction?

Contract management risks 

Give consideration to identifying the problems that may occur during the management phase of the contract as well as the strategies that may be used to manage those problems. This should be done as part of the initial risk assessment; however, risk identification and management should continue throughout the entire life of the contract. It is also important to involve the right people in the risk assessment process (e.g. legal, risk, technical, OSH, procurement, HR, contract manager) to ensure potential risks associated with the procurement are addressed. For more information on conducting a risk assessment please refer to the Risk Workbook template on the Department of Finance wa.gov.au website.

Contract and contractor performance measurement and monitoring

Identify what should be built into the contract to measure and monitor the performance of the contract and contractor (e.g. KPIs, meetings, reports, reviews, inspections, surveys, etc). The mechanisms should help identify and evidence whether or not the contract outcomes are being achieved as required (i.e. to the required standard, on time and within budget).

Relationship management requirements

Good communication is the key to developing an effective relationship with any contractor. Consideration should be given to how the relationship will be managed, whether a formal communications strategy is required, whether meetings will be necessary and how feedback will be given and received. Consideration should also be given to how potential issues or disputes will be managed.

Transition requirements

Consideration should be given to the transition in and transition out requirements for the contract, which may include the development of a formal plan. Consideration should also be given to scheduling a contract management meeting as soon as possible after the award of a contract to establish a common and clear understanding with the contractor.

Contract administration requirements

There are numerous administration requirements that may need to be considered, such as:

• how invoicing and payments will be handled (e.g. progress payments against milestones);
• the process for monitoring and exercising extension options;
• how contract variations will be processed;
• how insurance details will be monitored and recorded; and
• how and where contract management information will be documented and stored (e.g. hard copy file or records management system).

Please note that Treasurer’s Instruction 323 requires State agencies to pay invoices within 20 days.

It is best practice to consider the contract management requirements during the planning phase and incorporate them in the request document rather than trying to establish how the contract will be managed after it is awarded. Once a contract is awarded, the agency is limited to negotiate only with the appointed contractor, who may or may not agree to any proposed contract management requirements. The contractor may be unwilling to accept some or all of the desired requirements, they may want to charge additional fees or they may be unable to meet the requirements (even at an additional cost). If the contract management requirements cannot be met it may impact the suitability of the contract and limit the agency’s capacity to manage the contract.

Taking the time to thoroughly consider and develop the contract management requirements in the planning phase is a vital first step towards achieving contract management success.

Remember to allow plenty of time to give appropriate consideration to the contract management requirements. You may spend months developing a contract but you will likely spend years managing it.

The below checklists are not exhaustive but may help in determining the contract management requirements in the procurement planning phase.

Contract Manager

Research

Performance Management

Relationship Management

Contract Administration

Governance