CONTRACTS

MANAGEMENT
Lec#02:
Contract Management

 When does it start?

 When does it end?
 Who’s responsible?
Contract Management

 Contract management is the process which ensures all parties to a

contract fully meet their obligations, in order to satisfy the
operational objectives of the contract and the strategic business
goals of the customer.
Why Contract Management ?

 Risk is the chance of an event occurring that would cause actual

project circumstances to differ from those assumed when
forecasting project benefits and costs.
 Effective contract management incorporates identifying,
monitoring and managing all risks and opportunities over the life
of the project contract to achieve project objectives and value for
money outcomes.
 Risks not identified cannot be proactively managed. They can be
very damaging. Risks cannot be correctly identified unless there
are clear project objectives that provide an unambiguous
description of success for the project.
Conditions for successful Contract Management

 Arrangements for service delivery continue to be satisfactory to both parties

 Expected business benefits and value for money are being achieved
 Provider is co-operative and responsive
 Customer understands its obligations under the contract
 No disputes
 No surprises
 Professional and objective debate over changes and issues can be had
 Efficiencies are being realised.
Foundations for successful contract management

 Need for flexibility

 Willingness to adapt T&Cs to reflect change
 Clarity of contract contribution to strategic objectives
 Understanding provider’s business objectives and drivers
 Recognition of the provider’s need to make a profit
 The right team with the right skills
 The ability of the buyer and provider managers to manage
upwards in their own organisation.
Stakeholder Analysis Matrix

Stakeholder Stakeholder Assessment of Potential Strategies

Interests Impact
Contractor Benefit + ve Risk management
Experience - ve Clarity of contract
Credibility
Consultant See attached sheet

Client See attached sheet

a) Individual or Community
b) Restaurant
c) Gas Station
Performance Measures

 Cost and value obtained

 Performance and customer satisfaction
 Delivery improvement and added value
 Delivery capability
 Benefits realised
 Relationship strength
 Responsiveness
Pick a contract you are familiar with and identify
appropriate KPIs
What steps are required when a change takes place?
Managing contract change

 Acceptance that change happens

 Risk management predicts what might happen and potential responses
 Changes require negotiation
 Change management control is essential
 Accepted changes require scheduling to minimise adverse impact
 Changes need to be communicated
 Novation and assignment
Contract Management Stages
Procurement Stage
• Resourcing
• Planning & Development
• Developing Tools
• Integrate Management aspects
in the contract
• Key Performance Indicators
• Defining Governance
Responsibilities
Execution & Delivery Stage Contract Closure
• Managing Performance • Managing Compliance
• Managing Relationships • Maintaining Relationships
• Managing Changes • Documenting Changes
• Managing Contingencies • Saving Documents for Asset
• Managing Documents and Mangement
records • Informing the Management of
• Executing Governance the closure
Responsibilities
Key Elements of effective Contract Management
 Planning, Information Collection and Analysis
 Contract Administration
 Performance Reporting and Monitoring
 Relationship management, dispute resolution and issue management
 Governance, probity and compliance
 Knowledge and Information management
 Change management
 Contingency Planning
 Ongoing Review
 Contract Management Training
Planning, Information Collection and Analysis

 Contract management personnel understand the legislative, regulatory and commercial

context of the project.

 All the key risks of the project are identified and are updated as necessary over time.

 The likelihood of each risk materialising, and its potential consequences and impact on
project objectives have been assessed.

 Possible controls and mitigations for each risk have been identified, assessed and
implemented.

 Interdependencies between risks are understood.

 Potential changes in the project’s risk profile over its lifecycle have been considered,
planned for and responded to.

 Good contract management is not reactive, but aims to anticipate

and respond to business needs of the future.
END