Contract Management
Your supplier's performance should be managed throughout the lifetime of the contract to make sure that they perform to the quality, service, cost and delivery identified in your original quotation.
-
1
There are three main stages of contract management
There are three main stages of contract management, Mobilisation & Implementation, Lifetime of the Contract and Exit Strategy.
-
2
Done correctly contract management can add real value
Benefits of good contract management include no contract surprises or escalating costs, more efficient processes, easier change management, consistent processes and the ability to build stronger relationships with suppliers.
-
3
Every contract needs a contract manager
The contract manager should be clear about what their responsibilities on the contract are. They should determine how much time should be spent on managing the contract.
-
4
A contract variation may need a new procurement exercise
If you need to vary your contract requirements and/or extend the length of the original contract, you may need to undertake a new procurement exercise.
-
5
You should try to keep contract variations and extensions to a minimum
Variations and extensions are exceptional and should be kept to a minimum. They should only take place where the changes that you make would not significantly alter the original contract.
5 things to know
Getting started
What to think about first
There are three main stages of Contract Management:
Mobilisation & Implementation
This is a readiness period before the new supplier begins performing the contract . This may involve coordinating communication between the current and new supplier, providing information and planning.
Lifetime of the Contract
This is the normal working period of the contract. This may involve solving any issues that may arise e.g. supply problems and monitoring key performance indicators (KPIs).
Exit Strategy
You should consider what will happen when a contract ends. This could be because the contract finishes on the pre-agreed date or it terminates earlier than expected. Your exit strategy should be considered/agreed during the tender and mobilisation and implementation stage. This can be updated during the lifetime of the contract, if agreed with the supplier(s).
Benefits of contract management may include:
- no contract surprises or escalating costs
- more efficient processes
- easier change management
- consistent processes
- the ability to builder stronger relationships with suppliers
Organisations should build sufficient checks into their contract management activities to make sure suppliers are meeting their obligations under the General Data Protection Regulations (GDPR).
If obligations are not being met, organisations should take urgent remedial action with the supplier to address issues and risks.
Identify a contract manager
Ideally a single person or team should manage the contract to ensure continuity of contract knowledge and to build a more in-depth relationship with the supplier(s) over time. The contract manager may not be the same person who awarded the contract.
The contract manager should be clear about what their responsibilities on the contract are. They should determine how much time should be spent on managing the contract.
For example:
- Contract is low value, low risk to your organisation and there are many other substitute suppliers available
The contract manager may not need to stay in regular contact with the supplier. The contract may effectively “run itself” with no issues and therefore the contract manager may decide to have a monthly (or quarterly) supplier call to go over any updates.
- Contract is low value but high risk to the organisation
The contract manager will be more involved to avoid issues and problem solve. For example, they may have weekly meetings, weekly reporting and regular supplier visits
Contract variations and extensions
If you need to vary your contract requirements and/or extend the length of the original contract, you may need to undertake a new procurement exercise.
Variations and extensions are exceptional and should be kept to a minimum. They should only take place where the changes that you make would not significantly alter the original contract.
A significant change could be to the:
- contract scope
- contract value
- contract duration
If a significant change to the contract is proposed, you must contact your central procurement function on how to proceed.
Net Zero
Use the mobilisation and implementation period at the start of the contract to re-state the Net Zero goals and wellbeing impact you’re aiming to achieve through the life of the contract.
The likelihood of successfully achieving these goals and impact – no matter how small they may be due to the low value of your contract – will be increased by working constructively, collaboratively and proactively with your supplier, throughout the life of the contract.
As you work through the life of the contract, capture “stories of change” (incremental steps towards achieving your goals and impact, and lessons learned) rather than only waiting until the end of the contract to write a case study (you should do that too).
Depending on the nature of the contract and the purchased goods or services, stories of change could include how you’re working with your supplier to:
- reduce CO2e emissions in their supply chains
- keep resources and materials in use for as long as possible, and avoiding all waste
- support good employment, local job retention and training, and contributing to community wealth-building.
