UGANDA CHRISTIAN UNIVERSITY

THE EFFECT OF CONTRACT MANAGEMENT ON THE PERFORMANCE OF THE

PUBLIC SECTOR

CASE STUDY: BUNDIBUGYO DISTRICT LOCAL GOVERNMENT

BY

MUHINDO FILTON

(S16B12/422)

SUPERVISOR: AGWETA COSMAS

A RESEARCH REPORT SUBMITTED TO THE FACULTY OF BUSINESS AND

ADMINISTRATION IN PARTIAL FULFILLMENT FOR THE REQUIREMENT
OF THE AWARD OF BACHELORS DEGREE IN PROCUREMENT AND
LOGISTICS MANAGEMENT OF UGANADA
CHRISTIAN UNIVERSITY
 DECLARATION

I Muhindo Filton, declare that this submission is my own work towards the award of a degree in
Procurement and Logistics Management and it has never been previously published by another
person for the award of any academic award.

Signature……………………………… Date …………………………

MUHINDO FILTON
 APPROVAL

This is to certify that this research report has been produced by Muhindo Filton under my
supervision and is hereby approved for submission to the academic board of Uganda Christian
University.

Signature……………………………… Date……………………………….

SUPERVISOR
DEDICATION

This report is dedicated to my parents who have tirelessly and generously supported me
financially and morally from childhood all through life. You have been a great source of
inspiration to me. God bless you all!
 ACKNOWLEDGEMENTS

Firstly, I acknowledge God Almighty for the gift of life he has given me since childhood up to

this level. May His name be glorified forever.

I acknowledge the efforts played by Uganda Christian University, firstly by granting my

application and admitted me to pursue this course and secondly for the loving lecturers who have

taught me throughout my entire stay at the University. Thank you indeed for your efforts, May

the Almighty God continues to bless you more.

Also special thanks go to the Management of Bundibugyo Local Government for having

accepted my request to use them as my case study and for having allowed me to contact the

entire employees and respondents of who heartedly responded expectedly. It would rather be

regarded nuisance to do without expressing my earnest gratitude to my contemporaries for their

encouragement and involvement in typing this report.

I wish to extend my thanks to my research supervisor for the professional and academic guidance

that enabled me to complete this research work. His useful advice, patience, guidance, direction,

counsel helped in seeing me through and the supervision he rendered to me.

Special thanks to my beloved parents for all the financial and moral support that they have given

me, May the Almighty God reward them tremendously.

Special gratitude also go to all my dear friends who have supported me in one way or another all

through the compilation of this report and encouragement all through my student life at campus.

May your lives always be as rich, warm and loving and may your income, peace, joy and

satisfaction increase every day. I thank my sisters and brothers for the financial support, the love

and the positive influence towards my life Am forever grateful to everyone who contributed

towards the successful completion of this research report. May the good Lord bless you

abundantly.
 ABREVIATIONS
BDLG Bundibugyo District Local Government

CM Contract Management

HSE Health, Safety and Environment

KPLS key Performance Indicators

SOW Scope of Work

SMART Specific, Measurable, Attainable, Realistic and Timeframe

PPDA Public Procurement and Disposal of public Assets

 CHAPTER ONE

INTRODUCTION

1.0 Introduction:

This chapter contains the background to the study, statement of the problem, research questions,

general objective, specific objectives, significance, justification, conceptual framework and

scope of the study.

1.1 Background of the study

Contracts are an essential part of today’s high speed, multi-lateral business culture in the public

and private sector. Contract management is becoming an integral part of project management

and business in general. Thus, many commercial and project managers are facing more contract

management issues.

The Uganda government has lost hundreds of millions of tax payer's money through canceled

contracts, unfinished projects, poor service or product delivery, corruption and extended contract

periods in the last eight years without major improvement (Transparency international, 2009).

Confirmed data shows that the government of Uganda spends between 10percent – 30 percent of

GDP on procurement alone ((Maria, 2013). Out of that,5% goes to west due to lack of proper

management of the contracts (Gordon, 2009 ).As a result of these economic situations, the World

bank and the International monetary Fund (IMF) had to intervene by putting in stringent

conditionality for lending funds to the government which slowed down economic development

by 2.1percent (T.I, 2009).

Contract performance system on the other hand originated in France in the late 1960s. It was

later developed with great deal of elaboration in Pakistan and Korea and thereafter introduced in

India. It has been adopted in developing countries in Africa, including Nigeria, Gambia, Ghana
and now Kenya and Uganda (Kobia& Mohammed, 2006). The use of Performance contracts has

been acclaimed as an effective and promising means of improving the performance of public

enterprises as well as government departments all over the world. Its success in such diverse

countries as France, Pakistan, South Korea, Malaysia and India has sparked a great deal of

interest in this policy around the world. A Performance contract is a freely negotiated

performance agreement between government, organization and individuals on the one hand, and

the agency itself on the other (GoU, 2005). The Government of Uganda adopted performance

contracting as a tool for managing public resources and as a management accountability

framework. Hitherto, management of public resources focused on processes and inputs rather

than outputs and results. Performance contracts are deliberately designed to ensure that

institutions take into consideration all the perspectives of an institution’s performance

(Letangule& Letting, 2012).

According to the Government of Uganda, before the advent of performance contracting, the basis

for determining a manager’s performance was purely on perception and processes, and managers

were not comfortable being evaluated on the basis of perceptions. The introduction of

performance contracts compelled all public institutions to prepare and submit quarterly

performance reports to designated agencies, and annual performance reports to the Performance

Contracts Secretariat. Performance based contracting has been identified by both the private and

public sectors as an effective way of providing and acquiring quality goods and services within

available budgetary resources. Whereas within the private sector, profit orientation and

competitiveness have necessitated the introduction of performance contracts, the public sector

has taken long to embracethe practice, especially in Local Authorities (Omboi, 2011). The public

sector has come under intense pressure to improve their operations and processes so as to reduce

its reliance on exchequer funding. Further, there is need to increase transparency in operations

and utilization of public resources, increase accountability for results and to deliver services

more efficiently and at affordable prices to the tax payer/ customer thereby, forcing governments
to institute reforms in the public sector (Akaranga, 2008). The endeavor to improve service

delive

These included emphasis on the adoption of private sector business management ethos in the

lines of New Public Management principles. The reform programme in Uganda as in many

countries, promised a lot both to the citizens and the public servants, promises which were not

being fulfilled fast enough. With very little results to show after about five years of

implementing reforms, the Government through a World Bank sponsored programme and policy

hired a team of private sector experts into the public sector through short term contracts to inject

the sense of urgency in improving service delivery which was thought to be lacking in career

public servants (Morris & Winnie, 2005).

In 2005, the Ministry of Local Government placed the management of all the 175 Local

Authorities on performance contracts with the hope that this would improve service delivery to

citizens (G.o.U, 2008). Service provision by the local authorities in the recent years has been

deteriorating. Moreover, public servants have been a target for criticism due to what is perceived

by recipients of government services as unsatisfactory service delivery. This state of affairs has

resulted largely from systems of management in government which put emphasis on compliance

with processes rather than results. Whereas the general public and even some public servants

welcomed the idea of performance contracting as a means of measuring performance, it was

notreadily accepted by everybody. Some saw it as a rigorous exercise that amounted to little if

any. In terms of service delivery, majority of recipients of Government services have faulted it

claiming that it had had very little positive effect. close scrutiny of the management and

performance of existing local authorities shows that most local authorities in Uganda are poorly

managed and that there is disillusionment with the performance, management and competence of

local authorities in providing the services that they are mandated to provide. As a result, there

has been a rising number of residents associations which are prepared to resort either to court
action or to campaigns aimed at withholding of the rates due to councils as a mechanism for

compelling local authorities in Uganda to provide services on a regular basis.

1.2 Statement of the problem

There is no much doubt that there has been growing interest in contract management in the

developed world and hence the many studies of contracting and management ((Rendon, 2008;

Rendon, 2009; Abi-Karam, 2002; Charles and Oludele, 2003; Davison and Wright (2004);

Minahan (2007) Ya Ni &Bretschneider, 2007). Despite the emphasis and regulatory framework

on contract management, Uganda Public Procurement Compliance Reports sanctioned by the

Public Procurement and Disposal of Public Assets Authority have continuously shown contract

management as one of the areas where performance of public entities is wanting.

According to the Baseline Survey Report on Public Procurement Systems in Uganda (PPDAA,

January 2010), there were significant variances between the actual and indicative time frames in

contract completion. Other variances in the time exhibited were with regard to the contractual

payment period. While some contracts, supervisors were not appointed. This cast doubts on

contract management compliance which may be hamper service delivery and value for money.

Studies addressing contracting in general are varied (Azom 1999; Ruchiu (2008); Martin and

Miller (2006); Davison and Sebastian (2009) though not specific to the determinants and

constraints in public procurement in Uganda. Ruchiu (2008) argues that despite the fact that

contracts are made in good spirit, many contracts are not supervised. This cast doubt whether

contract management stage is really taken seriously. If the likely determinants and constraints are

ignored, public entities are more likely to suffer shocks that may even bring the institutions to

their bended knees. Inevitably, organizations will eventually encounter poor service delivery

resulting in loss of clients and market share, declining profitability, erosion of capital, high
 borrowing costs from banks or public debt and deteriorating institutional reputation. Thus,

contracts are building blocks of a business and no matter the company size, industry or products

and services sold, contracts still remain an integral part of everyday operations. They are living

documents that need to be carefully constructed, stored, managed and maintained and as a

company grows and changes, the number of contracts, complexity within those contracts and

overall contract processes tend to morph as well. Therefore, the research was conducted to

establish the relationship between contract management and contract performance of public

sector in Uganda.

1.3 General objective of the study

The major objective of the study was to determine the relationship between contact management

and performance.

1.3.1 Specific objectives

i. To examine how Risk management influences contractor’s Health, Safety, and Environment

(HSE) performance at Bundibugyo district local government.

ii. To assess how contractor selection affects cost effectiveness and compliance during contract

execution at Bundibugyo District Local Government.

iii. To assess the determinants of effective contract management.

1.4 Research questions

i. How does risk management influence contractor’s HSE performance at Bundibugyo district

local government?

ii. How does contractor selection assist in achieving cost effectiveness and compliance during

contract execution at Bundibugyo district local government?

iii. What are the determinants of effective contract management?
1.5 Conceptual frame work

The Conceptual framework provides connections and relationships between concepts, should be

sufficiently specific to help answering the research questions (Fisher, 2010); According to

Mbogo et al., (2012) conceptual framework is a basic structure of a research consisting of a

certain abstract ideas and concepts that a researcher wants to operationalize, observe, experiment

or analyze. The analysis of contract management has been built on the basis of some factors

which contribute to successful contract management in monitoring contractor’s performance

from the above theoretical and empirical studies. The variables which build the conceptual

model of this study include risk management, KPI, Contract manager or contract management

team, SOW and specifications, relationship management, contractor selection, cost effectiveness,

HSE performance and compliance to contracts requirements and regulations. Contract

management plan referred as mediating variable.

According to the figure below, the model shows the relationship between contract management

[CM] activities and contractors’ performance outcomes. According to the model the researcher

has developed, if the various variables of contract management activities combined with a

support of contract management plan as an independent variable, then the result on contractor’s

performance was revealed.

Competent CM team do help to prepare a good contract scope of work[SOW] which stipulates

all the details of the specifications, which lead to no or less contract variations hence cost

effective since no budget overrun caused by missed details on the first contracted specification

requirements. Proper Risk management results on identification of the risks involved, allocation

of risks between contractor and company, level of impact and its mitigation measures. This

enables contractors to include provisional cost for risk coverage in their bid and provide

assurance on good HSE performance for the right contractor selected for the work. Appropriate

and well defined KPI, with penalties and incentives stipulated, agreed by both company and
contractor due to good working relationship, assist to score the performance and evaluate if

contractor is achieving the agreed targets in terms of compliance to the contract requirements.

This includes the delivery schedule, quality specification, regulations and standards.

A competent CM team with clear roles, duties and responsibilities do conduct a detailed risk

assessment to prepare clear and robust SOW and specifications and contract requirements, select

the right contractor, put together smart KPIs, and have a good relationship to manage the

contractors’ performance to deliver a project safely, timely and within budget.

Conceptual framework

Contract Management Contract Performance

 Risk management  Health, Safety, and

 Contractor selection Environment (HSE)
 Contract management team Performance
 Key Performance Indicators  Compliance
(KPI)  Cost Effectiveness
 Scope of work and
Specification

Figure 1: Conceptual model

Source: Adopted from RAJAB.SHIWAS research report and modified by the researcher

1.6: Scope of the study

1.6.1 Geographical scope

The research was conducted at Bundibugyo district local government headquarters and they are

located in Bundibugyo town council off Bundibugyo-Fort portal road, Bwamba County, P.O

BOX 1166, Bundibugyo District.

1.6.2 Content scope

The study concentrated on contract management and contract performance of the public sector in

Uganda. Here the researcher looked at how risk management influences contractors Health,
 Safety, Environment performance, compliance and cost effectiveness during contract execution

at Bundibugyo District local government.

1.6.3 Time scope

The literature reviewed covered a period between 2000 to 2014 and thus, the research covered

literature from the past fourteen years for purposes of being current with updated valid

information. Because of limited time, the study was conducted for a period of four months.

1.7 Significances of the study

i. The ultimate significance of the study is that the knowledge obtained from the study will to

contribute to the development of intervention strategies to be used as a model for adoption by

all organizations or agencies in improving contract performance.

ii. The study will be used by other researchers and academicians for widening research

knowledge on the impact of contract management on contract performance.

iii. The findings of the study will assist top management or leaders at the district to improve and

maintain the performance of the contractors.

iv. The study will also enable the researcher to acquire his degree as it is a fulfillment for the

award of the degree.

v. The study findings will add on the already existing body of knowledge that will thus help

other researchers by using it for reference purposes on contract management.

1.8 Operational definition of terms and concepts

1.8.1 Contract

A contract is a written or oral legally-binding agreement between the parties identified in the

agreement to fulfill the terms and conditions outlined in the agreement. A prerequisite

requirement for the enforcement of a contract amongst other things is; the condition that the

Parties to the contract accept the terms of the claimed contract. Historically, this was most

commonly achieved through signature or performance, but in many jurisdictions especially with

the advance of electronic commerce the forms of acceptance have expanded to include various

forms of electronic signature. Contracts can be of many types for example sales contracts

(Including leases), purchasing contracts, partnership agreements, trade agreements, and

intellectual property agreements (Arrow smith, 2004).

A contract also means an agreement between a procuring and a disposing entity and a provider

resulting from the application of the appropriate and approved procurement or disposal

procedures and proceedings as the case may be concluded in pursuance of a bid award decision

of a contracts committee or any other authority (PPDAA, 2003).

1.8.2 Performance

In law, act of doing that which is required by a contract. The effect of successful performance is

to discharge the person bound to do the act from any future contractual liability. Each party to

the contract is bound to perform promises according to the stipulated terms. In case of any

controversy as to the meaning of a promise, the courts have usually decided that a person must

perform it as the other party reasonably understood it to be. Thus, a preference for the rights of

the one who is to receive the benefit of the promise is established. It also means actually

completing the deal according to the terms given in the contract. For example, you want to buy

that snazzy looking 1998 Ferrari at your local dealer's clearance sale. Your dealer, Mr. X, offers
to sell you that slick-looking Italian car if you pay him $97,000. After a bit of bargaining, you

agree to the terms and get the car at a reduced price of $96,995, signing on the dotted line. A

contract has been accepted. Mr. X, your car dealer, will deliver the 1997 Ferrari and then you

pay him the balance due. The dealers delivery of the car and your payment of $96,995 are the

performance of the contract.

Both parties must live up to their end of the bargain in the contract to have closure. In other

words, until both parties have properly performed under the contract, the contract remains open.

1.8.3 Contract management

The terms “contract management” and “contract administration” are often used synonymously.

However, “contract management” is commonly understood as a broader and more strategic

concept that covers the whole procurement cycle including planning, formation, execution,

administration and close out of a contract and goes beyond the day to day “administrative”

activities in the procurement cycle. Because it is difficult to draw the line between the two terms

and because the majority of the UN organizations commonly use “contract management” when

describing the contract administration phase, “contract management” will be used in this Unit.

Contract management is the activities of a buyer (KLB) during a contract period to ensure that

all parties to the contract fulfill their contractual obligation (Bailey, 2008). Contract life cycle

management is the process of systematically and efficiently managing the contract creation,

execution and analysis of maximizing operational and financial performance and minimizing

risks (Elsey, 2007). A sales contract is a contract between a company (the seller) and a customer

that where the company agrees to sell products and/or services. The customer in return is

obligated to pay for the product/services bought. A purchasing contract is a contract between a

company (the buyer) and a supplier who is promising to sell products and/or services within

agreed terms and conditions. The company (buyer) in return is obligated to acknowledge the

goods or service and pay for liability created (Willmotts, 2009).

The purpose of contract management is to ensure that all parties to the contract fully meet their

respective obligations as efficiently and effectively as possible, delivering the business and

operational outputs required from the contract and providing value for money. It also protects the

rights of the parties and ensures required performance when circumstances change.

Contract management is similar to project management. Each contract is a mini-project. It has a

unique goal, consumes resources, has a beginning and end date, and requires coordination and

planning of relevant activities, as well as documentation in a contract file throughout the process.

Contract management includes monitoring and documenting performance. Depending on the

organization and goods or services procured, daily/regular monitoring of the contract may be

primarily the responsibility of the requisitioned.

The stages of contract management are intended to ensure that the parties work together to

achieve the objectives of the contract. Contract management is based on the idea that the contract

is an agreement, a partnership with rights and obligations that must be met by both sides to

achieve the goal. Contract management is aimed not at finding fault, but rather at identifying

problems and finding solutions together with all contracting parties involved.

1.8.4 Contracting

Contracting is when a company (buyer) purchases goods or services from another company

(supplier or vendor). In this situation, the buyer "owns" and controls the process. In other words,

the buyer tells the supplier exactly what it wants and how it wants the supplier to perform those

services. The supplier cannot vary from the buyer's instructions in any way. The buyer can

replace the supplier quite easily by breaking the contract. .It is one-off or medium term (two

years or less) assignment. Scope and technical specifications of service is defined by client.

Assessment of performance based on completeness of technical specifications.

(OutsourcingFAQ.com, n.d.)
1.8.5 Contract performance

This implies the execution of a contract by which the contracting parties are automatically

discharged of their obligations under it. Although contracts usually call for full and precise

performance, a substantial performance may be acceptable under certain circumstances on a pro

rata basis or payment of damages for unfinished or defective performance.

1.9 Limitations of the study

Limited funding that is to say; the funds to sponsor and facilitate the research exercise were

ideally inadequate and as such, this affected the commencement and smooth execution (flow) of

the whole research exercise.

However, the researcher mobilized enough funds from close relatives and friends to facilitate

him during the study period.

Weather changes that is; rainy or sunny weather patterns caused a limitation on certain occasions

for example on days when it is raining, it was difficult for the researcher to access all other

avenues for collection of data or information.

However to overcome this, the researcher will equip herself with an umbrella, rain coat/jacket

and sun glasses respectively to overcome this challenge.

Shortage of time (inadequate time frame) whereby the researcher will encounter limited time for

the research exercise as inconveniences shall arise from the submission of the research proposal,

extensive research exercise as well as preparation of the researcher’s final Academic semester.

However, the researcher will draw a time table that will contain a list of activities on a daily

basis ranging from most important activities to least important activities that will guide the

researcher in executing his research activities timely, consistently and consecutively.

Financial hardships in that the researcher will have to incur different costs from time to time and

in most cases these will be personal costs such as the cost of printing and photocopying,

transport expense and among others. In addition to that; some respondents will at first think that

the researcher is paid a lot of money to conduct a government related programme and thus this

will make them to develop the mentality that the researcher is financially sound. However, the

research will always equip herself with an introductory letter to prove to the respondents that the

researcher’s project is purely for academic purposes only and this will enable them to co-operate

by availing data to the researcher.

The researcher anticipates the issue of resource constraints in form of information due to limited

time frame and inadequate resource centers in form of public libraries in Bundibugyo District for

easy access to the vital and required information on contract management and contract

performance.

However, the researcher will consult relevant authorities at Bundibugyo District Local

Government headquarters and effectively utilize the only public library at the district

headquarters supplemented by internet to get relevant information regarding contract

management.
 CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This chapter reviews literature written and studies made by various scholars on contract

management on contract performance of public sector organizations and the theoretical review.

This chapter also focuses on both published and unpublished literature related to contract

management and contract performance. Here, the researcher made a critical review of related and

pertinent literature, both empirical and theoretical, on the study geared towards enabling the

researcher to identify the existing gaps that the study intends to fill.

2.1 Theoretical review

Mac Neil’s contract theory

Relational Contracts theory is a theory mainly developed by Iain McNeil in U.S.A. some decades

ago and has been the object of theoretical research in common law jurisprudence ever since. This

theory contrasts legal formalism to a certain extent and is based on the assumption that all the

contracts can fall along a relational range from discrete mere transaction to highly relational,

although no relation can be totally separated from relational elements; the isolation of the

contract from a relational context and the complete and exact planning of the relationship

presentational though having a great importance for contracts law, cannot explain totally modern

contractual relationships. Highly relational contracts are these, the effect of which is strongly

based on a specific social and economic context, on an ongoing relation usually of trust between

the parties, which influences the scope and content of the contract (Diathesopoulos, 2010). This

entire context that “hides “behind the contract may help us understand and explain the

contractual content. McNeil’s work was supported by other researchers, who contributed to the
relational contracts theory and it had a significant impact on economic literature. Some other

major points of that theory is the effect of constant re-negotiation, the resolution of conflicts

between the parties, the interaction between agents in modern business contracts as the

contracted parties are mostly companies governed by agents, the importance of the concept of

the “exchange” as the terminus for modern contracts and of course the contractual norms.

According to relational contracts theory, relations are governed by a set of common

characteristics (norms) that play an important role, regarding the content of the relation, the

formation of parties’ obligations and the actual operation of the contracts. These norms are based

on a set of internal values and the broad context social and economic factors, related to the

relation. According to McNeil, there are ten norms common for all kinds of contracts: role

integrity, reciprocity, implementation of planning, effectuation of consent, flexibility, and

contractual solidarity, the ‘linking norms’ (restitution, reliance and expectation interests),

creation and restraint of power, propriety of means and harmonization with the social matrix.

There are also five norms (additional or the same as these of common contracts), responding in

an intensive way to contracts with a highly relational character than conventional contracts: role

integrity, preservation of the relation (expansion of contractual solidarity), harmonization of the

relational conflict, supra contract norms and propriety of means.

Other authors, such as Austen-Baker, although supported the concept of norms, proposed simpler

and more comprehensive norms models.

Relational contracts theory, according to the literature, can constitute among its other scopes a

valuable tool, in order to describe and explain the operation and the content especially of the

contracts, which could be defined as highly relational. Furthermore, it seems quite interesting to

try to apply this theory to a specific kind of relation. The general goal of this work is to test

whether the theory of the norms can be actually used, in order to approach a type of contractual

relation and whether the norms can be actually related to the content of a type of contract.
Management contracts include some characteristics that make us choose them as a paradigm for

the application of relational contracts theory and specifically of the theory of the norms. They are

long-term and highly customized, they concern broad category of business relations and they are

characterized by close cooperation and interdependence.

2.2 Contractor’s performance in terms of Health, Safety and Environment (HSE)

Management systems are tools that help organizations continually improve its health, safety and

environmental performance. They contain organizational elements that follow a continuous cycle

of planning, implementing, checking and improving. Therefore, health, safety and environment

(HSE) is a discipline and specialty that studies and implements practical aspects of

environmental protection and safety at work. In simple terms it’s what organizations must do to

make sure that their activities do not cause harm to anyone.

According to business dictionary, Performance is the accomplishment of a given task measured

against present known standards of accuracy, completeness, cost, and speed. In contract,

performance is deemed to be the fulfillment of an obligation in a manner that releases the

performer from all liabilities under the contract. It refers the conformance of contractor or

supplier with contract terms, specifications, service level agreements or Key Performance

Indicators (KPI) and other elements of the commercial agreement (CIPS, 2012a). Performance

key outcome priority is cost, quality, speed and flexibility (Ketchen and Hult, 2006). According

to BG Group (2014b) Contractor performance management include the following areas: Health

Security Safety and Environment (HSSE); Operations; Quality; Delivery; Payment; Receipt;

Expediting and inspection. Nassar (n.d) refers contract performance can be measured in main

three categories; schedule, cost and safety.

In this study, the term ‘contractor’s performance’ means the accomplishment of contractors’

contractual obligations in terms of compliance to contract’s requirements, cost effectiveness and

HSE performance. The contract’s requirements include; delivery schedule, quality specifications,
regulations and standards. HSE performance refers to assurance of people’s health and safety, as

well as environmental protection. Cost effectiveness means no cost overruns, project delivered

within the budget. This definition provides what a contractor has to achieve so that to deliver

project contract safely, timely and within budget.

Contractor or supplier performance measurement generally implies the comparison of

contractor’s current performance against the following elements (CIPS, 2012d); Defined

performance criteria such as KPIs, to establish whether the aimed-for or agreed level of

performance has been achieved; Previous performance, to identify deterioration or improvement

trends; The performance of other contractors or supplier (standard benchmarks), to identify

areas where performance falls short of best practice or the practice of competitors, and where

there is therefore room for improvement.

Key performance indicators are used to track and evaluate the Contractor’s performance in

complying with the contract requirements. Performance indicators measure and evaluate success

against a specific goal. The process begins by selecting performance indicators that are relevant

for the procurement environment. This is followed by identifying and collecting appropriate data

for each performance indicator to establish a baseline on the level of performance (Path n.d).

For performance indicators to be effective, they need to be SMART (CIPS, 2012c), that means

need to be; Specific: clear and well-defined statement of precisely what the desired deliverables

are; Measurable: susceptible to monitoring, review and measurement (ideally in quantitative);

Attainable: achievable and realistic, given the time and resources available; Relevant:

performance measures should be relevant to, and aligned to contract needs; Time-bounded:

given defined timescales and deadlines for completion (or review).

A range of performance indicators can be developed to monitor a supplier’s performance, and

the exact indicators used will vary according to the contract specifications, the level of risk

associated with contract failure by the supplier, and the value of the procurement (Path n.d). This
has been supported by Miller (2005) who observes that, just because everything can be measured

doesn’t mean that everything has to be measured. Performance measurement is all about

measuring the right things at the right time for the right people. It’s about measuring what’s

important to the business. It’s about the quality of the measures and not the quantity (Miller,

2005).

2.3 Compliance and cost effectiveness in contract management

Compliancy is a tendency of cooperating of being obedient to the law. Cost effective is

something that is a good value, where the benefits and usage are worth at least what is paid for

them. In order to deliver the business and operational objectives required from the contract,

compliancy and cost effectiveness is one of the key things that one has to keep in mind.

This will share industry best practices for contract management, including how the right

automation approaches can enable companies to achieve contract compliance while helping drive

further savings opportunity identification. The following are the best practices towards contract

compliance.

2.4.1. Create Dynamic Contract Repositories that Reflect Operational Requirements

during contract negotiations driven by dynamic markets

Contract negotiations are one of the many ways that companies can leverage savings

opportunities. Given today's highly volatile currency and commodity market environments,

organizations need to identify savings opportunities that can take advantage of market conditions

versus sacrificing savings to them. Many companies involved in global -- and even regional

contracting observe that it is difficult to increase their visibility into contract exposure around

multiple currencies and commodities. Because procurement organizations often denote contracts

in both local currency and the dollar it is often difficult to track specific exposures. Moreover,

currency fluctuations may result in companies overpaying and losing out on considerable
savings. Companies should track contracts dealing with volatile commodities as massive price

fluctuations may provide opportunities for savings(e.g., the price of steel sheet or copper coil can

vary by 8% or more on a single day in different regional markets). However, the good news is

that companies can effectively manage this volatility provided they have visibility into

underlying market indices combined with escalator and de-escalator clauses in the contract."

(Aberdeen Group Research 2009)

Best Practices

1 Include escalation and de-escalation clauses during contract negotiation and link these to

market parameters like foreign exchange & commodity indices.

2 Set a system of alerts and reminders for the specific escalator/de-escalator clauses linked

to commodity or Forex indices. Track and measure compliance and quantify the savings

accrued from these contracts when possible.

2.4.2 Define, Communicate and Effectively Manage to Specify Contract Metrics together

with transparent measures for contract Compliance are essential

Many industry experts argue that it is necessary for companies to put in place quantifiable

contract compliance performance metrics across their organization to achieve the types of

savings opportunities that best-in-class organizations realize on a daily basis. Having

quantifiable measurements for contract compliance also helps to identify underperforming

segments." (Aberdeen Group Research 2009)

Best Practices

 Link contracts to spend to establish performance metrics

 Establish benchmark parameters with regards to peers

 Communicate and elicit input from decision makers while determining parameters.
  Track contract compliance and utilization based on these parameters

2.4.3. Institute Regular Contract Audits and Apply Learning to Create Opportunities to

identify the Source of Non-compliance:

It is one thing to proactively identify opportunities during the contracting process. But it is

another to capture lost savings opportunities after the fact. Our experience suggests that vendor

overpayment is one of the most common forms of non-compliance. These mistakes, often

innocuous (e.g., clerical errors) can sometimes point to vendor or internal fraud (recent case of

Best Buy). In case of non-fraud situations, one of the most common errors is purchases made

without keeping track of volume or other discounts negotiated in the contract." (Aberdeen Group

Research 2009)

Best Practices

 Increase visibility by developing the necessary infrastructure and organizational

commitment to ensure contract compliance. Visibility should be improved in the
following areas:

 Currency Change and Conversion

 Cost Amortization

 Volume Discounts

 Buyer Turnover

 Clerical Errors

2.4.4 Standardize and Accelerate Contract Authoring by Maintaining a Contract Template

and Clause Library Long drawn out contract authoring leads to undue delays in

negotiation cycles.

Standard, well- defined templates for contract authoring can help lower compliance violation and

other associated risks." Best-in-class enterprises reduce contract creation time by nearly 15-20%

compared to others by standardizing contract language." (Aberdeen Group Research 2009)

Best Practices

I. Define mandatory/non mandatory clauses

II. Define templates and clauses based on geographies and categories

III. Ensure continuous updates to all clauses and access to relevant stakeholders to modify

and maintain templates

2.4.5 Create a Standard Workflow for Collaborative Authoring and Negotiation of

Contracts

Faster contract authoring and approval can be achieved easily by establishing a standard

workflow for creating, amending and approving contracts. Workflow standardization is essential

to reduce contract creation cycles and ensure stakeholder improvement. This also helps eliminate

ambiguity in the contract authoring process. Bringing Together Contract Stakeholders is

Essential, Gathering feedback and support from all stakeholders in the contracting process is

never easy. But achieving such a collaborative model can help streamline contract amending and

approval." (Aberdeen Group Research 2009)

Best Practices

i. Create a standard workflow with set protocols and procedures

ii. Define hierarchies for approval process

iii. Ensure access to all necessary stakeholders during the contract authoring and amendment

process

iv. Costs effectiveness Procurement outcomes are considered in light of the costs incurred

(human resources and time), the level of competitiveness achieved (number of bids,
 participation from cross-border bidders) and the perception of transparency. Overall on

procurement Total cost of public procurement in Europe is estimated at about 1,4 percent

of purchasing volume. This equates to about 5.3 billion euro in 2009 terms. Businesses

account for 75 percent of these costs. Although the unit costs for developing a request

and managing the process are higher for authorities, the fact that several bids are prepared

and submitted for each tender explains the higher total costs for suppliers. The average

competition uses the equivalent of 123 person days of resources; in monetary terms this

equates to 28.ooo euro. There is practically no relationship between contract value and

procurement costs except in the very high value range. Thus, costs are a big share of

contract value for the smaller contracts. For example, in contracts with a value close to

the threshold above which EU procurement directives.

v. There is much difference in cost efficiency between countries. For example, in Germany

and Norway the process cost of procurement reaches above 4 percent of total

procurement volume, while in the UK and Italy the share is less than 1 percent. It is

important to note that these costs are not fully attributable to the procurement directives.

Purchasers would regardless have to procure their goods and services and costs would be

incurred with or without directives. For public procurement, authorities would have to

follow national procurement regulations if they were not subject to the EU directives. For

private sector procurement, both purchasing and sales departments also expend

significant resources organizing business-to business transactions.

2.4 Determinants of effective contract management.

The prescriptive literature on contract management tends to offer step-by-step procedures for

procurement managers 8and other stakeholders. In the process of ensuring that contract

management successfully takes the right course, all the parties involved must keenly pay

attention to all provisions in the given or existing contract (Sanders, Locke, Moore, & Autry,
2007; Laratta (2009) and Saunders, 2000). Successful and efficient contract management

practices are those that meet the needs of the company’s stakeholders, achieve optimum

conditions and value in regard to the allocation of scarce tax payers resources (best value for

money), ensure rational and efficient of funds available, stimulate valuable competition and

manage the risk and potential liabilities to the buyer thus improving service delivery. Thus

enforcement of existing regulatory measures must be enforced to avoid pitfalls of inefficient

contract management process and eventual poor service delivery. The people in charge of the

contracts need to play an important and meaningful role in ensuring that the company’s

contractual goals are fully achieved at the minimum cost possible. As a result, consideration

should be given to address the questions in the procurement contract literature as to how the

supplier can provide the buyer with sufficient flexibility while not assuming all the risk due to

demand uncertainty (Golovachkina and Bradley, 2002). Equally pertinent is need for trained

personnel in contract management and procurement procedures. But this is not usually the case

as supported by Nadiope (2005) who observes that the government lacks trained procurement

personnel. In Uganda the need for training personnel particularly to contract management can

only be established after what is known about the same has been established. Public Procurement

Authorities must continuously formulate and implement strategies to address the existing

capacity gaps within PDEs especially in the area of contract award and management. This

evidenced by the PPDA Capacity Building Report (2010) which noted that some PDEs had

serious constraints in execution and monitoring of contracts.

In an effort to attain these demands, organizations constantly look for employees who have skills

necessary to deal with the wide variety of tasks (Monczka et al., 1998; Sauber et al., 2008).

Notwithstanding the above, Lan, Riley and Cayer, (2005) posit that finding, hiring and retaining

dedicated, energetic, and ethical employees with special skills is always hard. The supervisors

(contract managers) should be knowledgeable in contract management. Organizations must

therefore, assign experienced staff to supervise the consultant and contractors. This should be

accompanied by proper record keeping.

The public procurement regulatory framework dictates that contracts must be drawn carefully

involving all stakeholders for completeness to avoid as unnecessary deviations. Therefore, key

responsibility centres, as they relate to different procurement processes must be established.

Minahan (2007) observes that it is possible to design contracts that are robust enough to

profitably continue operations in the face of expected deviations and unexpected disruptions and

quickly recover from disasters. The foundation is a strong, stable supply network forged from

good supply base management, strong supplier links, and continuous improvement and a

corporate culture that embraces change and flexibility. But one may ask whether multi-

stakeholder collaborations are important and how sustainable are they? While attending the

Common Market for Eastern and Southern African (COMESA) Trainers of Trainers Workshop

held in Addis Ababa, Ethiopia from 25th July-5th August 2010, participants identified key issues

that can influence contract management as follows:

Table 1: Determinants of effective contract management extracted from the primary
source.

DETERMINANT FACTOR INDICATORS

Putting in place structures and resources
Ensuring the right people are in place
Clear roles and responsibilities
Feedback and communications mechanisms
Payment and incentives
Managing risks
Ensuring the time aspect
Costs
Identifying and defining processes and a clear
contract management plan, with a focus on
outputs and milestones to performance
The contract manager has a detailed
knowledge of the contract
Clearly defining the responsibilities of both
parties contract manager
Regular and routine feedback is given to
contractors on their performance
Ensuring payments are made to contractor or
supplier as per contract
Identifying and anticipating risk such as
service failure, reputation damage and
additional costs
Make sure all the contract obligations are
fulfilled within the specified time agreed upon
between the parties
Be aware of the costs your are to incur before
even sign contracts, this means you have to
plan well and be ready for any challenges

2.5 Summary of literature review

In conclusion therefore, contract management is an issue of strategic importance both to

organizations and projects. Through successful contract management, organizations can increase

control, increase effectiveness and reduce costs and also provide strategic and competitive

advantages and this applies to all kinds of organizations regardless of the size or line of business

and thus an organization that fails to pay attention to the contract process is often not collecting

the revenue they could fetch hence they are paying too much for the service and assets it buys.

Thus poor management of contracts means huge risk taking and lots of excess cost.
 CHAPTER THREE

RESEARCH METHODOLOGY

3.0 Introduction

This chapter presents methods and procedures the researcher will use in conducting the study

and also presents information and specific fields of the survey to be carried out.

3.1 Research design

According to Kothari (2004) research design is arrangement of conditions of collection and

analysis of data in a manner that aims to combine the relevance to the research purpose with

economy in procedure. In fact, design is the conceptual structure within which research is

conducted. It constitutes the blueprint for collection, measurement and analysis of data. The

study methodology will be cross sectional research design.

3.1.1 Qualitative research design

Qualitative research is generally defined as the study which is conducted in a natural setting

where the researcher as an instrument of data collection gathers words or pictures, analyses them

inductively, focuses on the meaning of participants and describes a process that is both

expressive and persuasive in language.

3.1.2 Quantitative research design

Quantitative research is defined as the study that involves counting an measuring of events and

performing the statistical analysis of a body of numerical data. Being deductive and

particularistic, quantitative research is based upon formulating research hypotheses and verifying

them empirically on a specific set of data.

3.2 Study population

Population of the study will approximately involve 25 people from the selected departments

which are major stakeholders on contract management. This is because of easy accessibility and

they will be the ones who get in involved in managing contractors’ performance throughout the

contract period.

3.3 Sample size and selection strategies/techniques

These refer to the methods or techniques by which the researcher will select representative

elements from the population. Purposive sampling technique will be used because there is need

to specifically get information from those members of staff who deal more often with contract

related duties. The sample will be taken from selected civil servants employed by Bundibugyo

district local government and it will be estimated to have a population of 25 permanent

employees. The sample size will be of twenty four (24) respondents. It will involve departments

of ;Accounting and finance, Human Resource, marketing and production, planning, Education,

Health, works and technical services , Administration, Natural resources, Community based

services, Procurement and disposal unit . The researcher will use purposive technique of

sampling to identify the employees and will be arrived at according to TOYA YAMANE (1967)

formulae that is denoted as below;

n= N
1+N (e) 2
Description:
Where; n=Sample size
N=Study population (21)
E=Margin of error (It will range between 0.01 to 0.05)
n= 60
1+60(0.05)2
 n=52

Table 2: showing questionnaire distribution per department

S/N DEPARTMENT TARGET SAMPLE

POPULATION(N) SIZE(S)

1 Accounting and finance 5 2

2 Human Resources 5 5

3 Marketing and production 5 5

4 Planning 5 5

5 Education 5 5

6 Works and Technical services 5 5

7 Administration 6 5
8 Natural Resources 6 5
9 Community Based Services 6 5
10 Health 6 5
11 Procurement and disposable unit 6 5
TOTAL 60 52

Source: Adopted by the researcher from secondary data and Krejcie and Morgan’s table (1970)

3.4 Data collection methods

To obtain the required information, the researcher will mainly use questionnaires to obtain

quantitative data. The questionnaire will contain questions aimed at collecting quantitative data.

Interview method of data collection will also be employed to collect supplementary data from

the respondents. The interview guide will contain questions aimed at collecting qualitative data

from respondents.

3.4.1 Questionnaire
This will be the main method of data collection. The questionnaire will be constructed basing on

the objectives and research questions of the study. It will be self-administered so as to obtain a

high response rate. The researcher will design structured, open and close ended questions in the

questionnaire and will deliver them in person to respondents in order to minimize mishandling,

misplacement, getting lost or delay. Most of the questions will be open ended because they allow

the respondents freedom to offer other more detailed answers and freedom of expression. A

questionnaire guide which has well defined, simple and objective oriented, open ended and

closes ended questions will be used in collecting primary data of the study and will guide the

respondents in answering the questions of the study.

3.4.2 Interview

The interview method of data collection will be employed by the researcher to collect data from

selected respondents to adequately inform the researcher. An interview guide will be designed to

direct the interviews. This is advantageous because it allows consistency and a high level

organization as well as a chronological flow of questions and answers. It will also help to collect

supplementary data / information. An interview guide will be scheduled in accordance to the

research objectives to enable the researcher stay focused on the study.

3.5 Measurements of variables

The instruments will be presented to other experts in the field of study and will be modified

where necessary. The instruments will be pre- tested and pilot tested before final data collection.

In pre-testing and pilot testing, a sample comparable to a sample of 50 respondents will be

selected and the questionnaire will be administered to this sample. The pre-tests of the research

instruments will be done before the actual administration of the questionnaire for reliability. The

pre-test at a three week interval period will help confirm that the instruments are suitable for the

study or whether questions will be interpreted correctly.

3.6 Sources of data

The sources of data will be primary data from surveys obtained by questioning individual

employees of Bundibugyo district local government and from secondary sources such as text

books, journal articles, dissertations, television news, newspaper abstracts and internet.

3.6.1 Primary data

Primary data is data originally obtained through the direct efforts of the researcher using surveys,

interviews and direct observation. Primary data sources will be used by the researcher to collect

information from the field with the help of questionnaires.

3.6.2 Secondary data

Secondary data is the data that has been already collected by the researcher and readily available

from other sources. It is obtained through published sources. This includes; data obtained from

journals, magazines, newspaper articles and text books from libraries. The researcher will visit

public libraries and internet cafe to collect data that will supplement the primary data while

generating information.

3.7 Validity and reliability

This refers to the appropriateness, meaningfulness and usefulness of any inferences a researcher

draws based on data obtained through the use of an instrument. The researcher will administer

the questionnaire on a small group of respondents to examine the effectiveness, relevance and

appropriateness of the language to be used and questions will be administered using the pilot

testing to test the validity of the instrument. Adjustments and corrections will also be made

before the questionnaires are delivered and given to the respondents.

Reliability on the other hand refers to the consistency of scores or answers provided by an

instrument. Thus, this will be indicated by a coefficient. The researcher will also administer the

same questionnaire twice to the same group of respondents after an interval of one month has

elapsed in order to test its reliability.

3.8 Data collection procedures

The data will be collected by researcher with the assistance of various stake holders at

Bundibugyo district local government including top managers, middle managers, line managers,

departmental heads and other employees will also be contacted. Questionnaires will be given to

the respondents to fill after seeking and thoroughly obtaining informed consent from the

company. The respondents will be assured of confidentiality of all information sought or

provided. The researcher will distribute the questionnaires in person and a period of one month

will be used for distribution and retrieval of the questionnaires. After collecting the information

from the respondents, the researcher will briefly thank them for their confidential responses and

assure them of how the data will be of great value to the various stake holders from various

higher institutions of learning, universities, government and privately owned companies and

other institutions.

3.9 Data presentation and data analysis

The data will be explained, processed, organized and edited manually. After collecting data from

different primary sources such as surveys, opinions, facts and Secondary sources, data will be

analyzed by using statistical packages for business software like SPSS. Descriptive statistics will

be presented as bar graph, pie charts and frequency distribution tables to show frequency

distribution of scores as well as percentage to fulfill the research objectives accordingly and

Conclusion will be made for future recommendations.

3.10 Ethical consideration

It is always good to ensure confidentiality for any data or information collected for purposes of

the research exercise as well as ensuring that the rights of the respondents are respected and as

such the researcher will ensure the following ethical considerations;

An introductory letter will be picked from the University’s department of undergraduate research

to confirm to the respondents that the information or data collected from them will purely be for

academic purposes and that will be kept with utmost confidentiality.

The researcher will make sure that there is informed consent whereby the participants will be

informed by the researcher about their involvement in the study by adequately explaining to

them about their rights, the benefits of the study, the risks and dangers involved.

Proper reporting of the information availed by the respondents will greatly be paid attention to

and this will be made possible by the researcher’s use of proper data collection methods such as

interview guide and questionnaires so as to avoid distortion of information, exaggerations,

subjectivity and biases.

3.11 Limitations of the study

In carrying out this study, the researcher anticipates to encounter the following anticipated

limitations or challenges;

Limited funding that is to say; the funds to sponsor and facilitate the research exercise will

ideally be inadequate and as such, this will affect the commencement and smooth execution

(flow) of the whole research exercise.

However, the researcher will mobilize enough funds from close relatives and friends to facilitate

him during the study period.

Weather changes or vagaries that is to say; rainy or sunny weather patterns or changes will also

cause a limitation on certain occasions for example on days when it is raining, it will be difficult

for the researcher to access all other avenues for collection of data or information.

However to overcome this, the researcher will equip himself with an umbrella, rain coat/jacket

and sun glasses respectively to overcome this challenge.

Shortage of time (inadequate time frame) whereby the researcher will encounter limited time for

the research exercise as inconveniences shall arise from the submission of the research proposal,

extensive research exercise as well as preparation of the researcher’s final Academic semester.

However, the researcher will design,draw or draft a time table that will contain a list of activities

on a daily basis ranging from most important activities to least important activities that will

guide the researcher in executing his research activities timely and consecutively.

Financial hardships in that the researcher will have to incur different costs from time to time and

in most cases these will be personal costs such as the cost of printing and photocopying,

transport expense and among others. In addition to that; some respondents will at first think that

the researcher is paid a lot of money to conduct a government-related programme funded by an

NGO and thus this will make them to develop the mentality that the researcher is financially

sound.

However, the research will always equip himself with an introductory letter to prove to the

respondents that the researcher’s project is purely for academic purposes only and this will

enable them to co-operate by availing data to the researcher.

 CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.0 Introduction
This chapter presents empirical findings of the effects of contract management on contract

performance of the public sector in Uganda. The findings are from analysis of questionnaires and

are presented in figure, tables, frequencies and percentages in accordance with the objectives to

be achieved. These findings were obtained from primary sources of information and that is the

respondents. The findings are computed basing on the information collected from 52

respondents.

4.1 Presentation of findings

Figure 1: Showing gender of the respondent

Female
37%
Source:
Primary
data

From the
Male
63% above figure,

38% were

female while

62% were

Male. This indicated to the study that most of the workers at Bundibugyo district local

government are male and this is commonly said that male employees are better contract

managers or employees than female because Male employees seem that they can do every task as

connected to contract management than their female counterparts.

Table 1: Showing Age bracket of the respondent

Response Frequency Percentage

20-30 years 15 29%
31-40 years 25 48%
41 years and above 12 23%
Total 0 100%

100
90
80
70
60
50
40
30 Frequency
20 Percentage
10
0
s s e l
ar ar ov ta
ye ye ab To
0 0 d
0 -3 1 -4 an
2 3 s
ar
ye
41

Source: Primary data

From the table and figure above, most of the respondents involved in the study were between

the age brackets of 31-40 years thus contributing to 48%, 29% of the respondents were between

the age bracket of 20-30 years while 23% of the respondents were between the age bracket of 41

years and above. This validate that the local government employs more youths especially in its

functional areas like contract department thus ensuring that their performance will improve day

by day.
Table 2: Showing Level of education of the respondents

Response Frequency Percentage

Master’s degree 21 41%
Diploma 13 25%
Certificate 11 22%
Graduate 7 12%
Total 0 100%
Source: Primary data

From the table above, results obtained indicated that most of the respondents who involved in the

study agreed that, they have Master’s degree as their level of education thus contributing to 41%,

25% of the respondents were diploma holders, 22% of the respondents were certificate holders

while 12% of the respondents were graduates from different Universities and different

professions. Therefore conclusions can be made that almost all the employees at Bundibugyo

district local government have attained education and therefore able to give positive response to

the researcher.

Figure 2: Showing role of the respondent in contract management process

4%
23%
35%

demand manager
sourcing manager
budget holder
others

38%

Source: Primary data

From the table above, data indicated that, most of the respondents that took part in the study

were sourcing managers thus contributing to 38%, 35% of the respondents were demand

managers, 23% of the respondents were budget holders while 4% of the respondents agreed that
they play other roles in the contract management process. This therefore implied that, almost all

the respondents that took part in this study plays different roles in contract management process.

4.2 Influence of risk management on contractor’s HSE

N Mean Std.
Deviation
Having appropriate risk management process to identify risks and 52 1.67 ,879
mitigation measures put in place
Enhanced good relationship with contractors by making sure their 52 2.21 1,391
payments done in time
Key performance indicators being used to monitor contractors 52 2.21 1,226
Health Safety Environment performance through performance
review meetings
KPIs being used to monitor contractors Health Safety Environment 52 1.33 ,760
performance through performance review meetings
The right contractor being selected through objectively, transparent 52 1.77 1,022
and fair evaluation process
Competent contract management team with clear roles and 52 1.63 ,908
responsibilities are being involved from the initial contract planning
phase, managing contractor's performance until end of the contract
Average total 1.80
Source: primary data

Legend

Very low Low Medium High Very high

5 - 4.20 4.19-3.39 3.38-259 2.58-1.78 1.77- 0.98

Therefore, from the above legend, it is evident that risk management has a high influence on

contractors’ health, safety and environment performance and this was indicated by mean value of

1.80.

Data from the above table indicated that, having appropriate risk management process to identify

risks and mitigation measures put in place influences contractor’s health, safety and environment

thus contributing to a mean of 1.67 and standard deviation of 0.879. This therefore implied that,
most of the respondents strongly agreed with the given statement concerning the influence of

risk management and contractors’ health, safety and environment performance.

Data also indicated that, risk management also enhance good relationship with contractors by

making sure their payments are done in time thus having a greater influence thus contributing to

a mean of 2.21 and a standard deviation of 1.391. This therefore implied that, most of the

respondents agreed with the given statement thus implying that the influence of risk management

is moderate.

Findings also indicated that, risk management makes sure that key performance indicators being

used to monitor contractors Health Safety Environment performance through performance

review meetings thus contributing to a mean of 2.21 and standard deviation of 1.226. Basing on

the findings it is evident that most of the respondents agreed with the given statement and thus

implying that risk management moderately influences the contractor’s health, safety and

environment performance.

Findings from the field also indicated that, risk management makes sure that KPIs being used to

monitor contractors Health Safety Environment performance through performance review

meetings thus influencing contractor’s health, safety and environment performance hence

contributing to a mean of 1.33 and a standard deviation of 0.760. This therefore implied that,

most of the respondents strongly agreed with the statement and hence implying that the influence

of risk management on contractors’ health, safety and environment performance is very high

according to the results.

More so, data from the field indicated that, risk management ensures that the right contractor is

being selected through objectively, transparent and fair evaluation process thus contributing to a

mean of 1.77 and standard deviation of 1.022. Basing on the findings it was evident that most of

the respondents strongly agreed with the given statement.

Additionally, data indicated that, risk management ensures that competent contract management

team with clear roles and responsibilities are being involved from the initial contract planning

phase, managing contractor's performance until end of the contract thus contributing to a mean of

1.63 and a standard deviation of 0.908. Basing on the findings it was evident that most of the

respondents strongly agreed with the give statement and thus implying that the influence of risk

management on contractors’ health, safety and environment performance is very high according

to the legend.

4.3 How contractor selection help in achieving cost effectiveness and compliance during
contract execution

N Mean Std.
Deviation
Appropriate risk assessment in place to for early problem 52 1.59 .695
identification and put the right mitigation in place to avoid
contract cost impact
Contractor being selected based on realistic rates offered as per 52 2.74 1.236
contracts specifications requirements
Robust scope of works and specifications sent to potential bidders 52 1.76 .947
to submit their offers, which reduce a chance of variations due to
unforeseen details.
Cooperation and support are given by contractors for early 52 2.28 .971
problem identification to reduce the cost impact to the completion.
Competent contract management team are involved in managing 52 2.54 1.160
the contract variations when becomes necessary to complete work
Total 2.18
Legend

Very low Low Medium High Very high

5 - 4.20 4.19-3.39 3.38-259 2.58-1.78 1.77- 0.98
Therefore, from the above legend, it is evident that the level at which contractor selection help in

achieving cost effectiveness and compliance during contract execution is high and this was

indicated by mean value of 2.18.

Data in the above table indicated that, contractor selection helps in appropriating risk assessment

in place for early problem identification and put the right mitigation in place to avoid contract

cost impact thus achieving cost effectiveness and compliance during contract execution hence

contributing to a mean of 1.59 and a standard deviation of 0.695. This therefore implied that

most of the respondents strongly agreed with the given statement.

Findings also indicated that, Contractor being selected based on realistic rates offered as per

contracts specifications requirements is also one of the ways through which contractor selection

help in achieving cost effectiveness and compliance during contract execution thus contributing

to a mean of 2.74 and a standard deviation of 1.236. This therefore implied that most of the

respondents that took part in this study agreed with the given statement.

Still, the findings of this study indicated that, robust scope of works and specifications sent to

potential bidders to submit their offers, which reduce a chance of variations due to unforeseen

details is also another way in which contractor selection helps in achieving cost effectiveness and

compliance during contract execution thus contributing to a mean of 1.76 and a standard

deviation of 0.947. This therefore indicated most of the respondents strongly agreed with the

given statement.

More so, data indicated that, contractor selection ensures that Cooperation and support are given

by contractors for early problem identification to reduce the cost impact to the completion thus

contributing to a mean of 2.28 and a standard deviation of 0.971 hence implying that most of the

respondents that took part in this study agreed with the given statement.

Additionally, findings from the field study indicated, contractor selection enables Competent

contract management team to be involved in managing the contract variations when becomes

necessary to complete work thus helping in achieving cost effectiveness and compliance during

contract execution hence contributing to a mean of 2.54 and a standard deviation of 1.160. This
therefore implied that, contractor selection has a high influence in achieving cost effectiveness

and compliance during contract execution.

4.4 Determinants of effective contract management

N Mean Std.
Deviatio
n

Putting in place structures and resources 52 2.24 .648

52
Ensuring the right people are in place 2.05 1.371
52
Clear roles and responsibilities that is to say defining the 1.88 .324
responsibilities of both parties in contract management
52
Feedback and communication mechanism. Regular and routine 1.92 .820
feedback is given on contractors’ performance
52
Continuous contract risk assessment being done throughout the 2.36 1.089
contract period to revisit the risk and update the mitigation in place
52
Contractors’ performance compliance being monitored using key 1.96 1.096
performance indicators during the performance review meetings.

Total 1.90

Source: Primary data

Legend

Very low Low Medium High Very high

5 - 4.20 4.19-3.39 3.38-259 2.58-1.78 1.77- 0.98
Using the legend key above, it is evident that effective contract management is highly

determined by different determinants according to the legend since the mean value was indicated

by 1.90.

From the table above, data indicated that, Putting in place structures and resources is one of the

determinants of effective contract management in an organisation thus contributing to a mean of

2.24 and a standard deviation of 0.648. This therefore implied that, most of the respondents
agreed with the statement and hence indicating that putting in place structures and resources

determines effective contract management in an organisation.

Findings presented in the above table also indicated that, ensuring the right people are in place is

also another determinants of effective contract management in an organisation thus contributing

to a mean of 2.05 and a standard deviation of 1.371. This therefore implied that most of the

respondents agreed with the statement.

More so, findings also indicated that, setting clear roles and responsibilities that is to say

defining the responsibilities of both parties in contract management is also another determinant

of effective contract management in an organisation thus contributing to 1.88 and a standard

deviation of 0.324. This therefore implied that, most of the respondents strongly agreed with the

given statement.

Additionally, findings also indicated that, Feedback and communication mechanism that is to

say, regular and routine feedback is given on contractors’ performance is also considered also to

be another determinant of effective contract management thus contributing to a mean of 1.92 of

the respondents and a standard deviation of 0.820. This therefore implied that most of the

respondents strongly agreed with the statement concerning the determinants of effective contract

management in in organisation.
4.5 Relationship between contract management and contract performance

Table 5: Showing Pearson Correlation between contract management and contract

performance

Correlations

Contract Contract
management performance
Contract Pearson Correlation 1.000 .960*
management Sig. (2-tailed) . .000
N 85 85
Contract Pearson Correlation .960* 1.000
performance Sig. (2-tailed) .000 .
N 85 85

Correlation is significant at the 0.05 level (1-tailed).

Table above indicates that there is a very strong positive relationship between contract

management and contract performance at r= 0.960 and at level of significance 0.05, this implies

that there is a strong and positive relationship between contract management and contract

performance in the public sector and in this case Bundibugyo District Local government.

Therefore in order to improve on contract performance, there is need to develop a contract

management plan. This is in relation with Mullins (2003) who also found out that there is strong

positive relationship between contract management and contract performance.

The Correlation analysis reveals a significant positive relationship between contract management

and contract performance. The findings confirm to assertions by PPDA act, (2001) which states

that internal audit provides a foundation for accountability in an organisation. It is further argued

that internal audits are designed to ensure that a ministry, agency or department carries out its

required function effectively and efficiently, that its financial reporting is reliable and complies

with relevant laws and regulations (Policy belief, 2004).

 CHAPTER FIVE

DISCUSSION, CONCLUSION AND RECOMMENDATIONS

5.0 Introduction

This chapter generates the, discussions of the findings and conclusions casted from the study

based on the findings presented in data analysis and the study objectives. The chapter also brings

forward the recommendations of the study.

5.1 Discussion of the findings

5.1.1 How Risk management influences contractor’s Health, Safety, and Environment

(HSE) performance at Bundibugyo district local government.

From the findings, data indicated that, having appropriate risk management process helps in

identifying of risks and mitigation measures put in place influences contractor’s health, safety

and environment. In relation to literature reviewed, Bautista and Ward (2009) recommend that,

the entire procurement team should also be engaged in managing the post award contracting

activities. Contract Administration processes and activities such as monitoring and measuring

contractor performance, managing contract change process, and managing contractor payment

process should be integrated with other departmental core processes such as customer service,

financial management, risk management, schedule management, and performance management

Additionally, data indicated that, risk management also enhance good relationship with

contractors by making sure their payments are done in time thus having a greater influence.

Findings also indicated that, risk management makes sure that key performance indicators being

used to monitor contractors Health Safety Environment performance through performance

review meetings. In relation to literature reviewed, Blankson (2015) asserts that African

countries public procurement entities are facing challenges in ensuring contract execution and
delivery of the required services by the contractors because of the way procurement functions

and the procurement personnel perform internal and external processes and procedures in order

to achieve their objectives for example Failure to submit contract management records and

failure by some members of the contract management team especially the end users, to take

ownership of the contract. Public entities in Uganda having established sound contract

management processes are able to generate a great deal in that service delivery will be in

compliance with agreed contract conditions and standards, ensures value for money through

performance monitoring of the contractor against contract requirements, the potential service

difficulties are identified and alternative strategies devised, costs are monitored and kept within

budget constraints, identify service improvement opportunities, meets both parties’ business

requirements and manage all necessary service changes (Rendon, 2007 as cited by Nguyen,

2013). On the other hand, ineffective contract management can lead to cost overrun and this has

led to loss of tax payers’ money, lack of value for money, procurement, failure to keep

procurements within budget constraints and failure to identify the potential service difficulties

such that alternative strategies are devised together with the contractors of the Entity (Gordon

2009).

5.1.2 How contractor selection affects cost effectiveness and compliance during contract

execution at Bundibugyo District Local Government

Findings indicated that, contractor selection helps in appropriating risk assessment in place for

early problem identification and put the right mitigation in place to avoid contract cost impact

thus achieving cost effectiveness and compliance during contract execution. Findings also

indicated that, Contractor being selected based on realistic rates offered as per contracts

specifications requirements is also one of the ways through which contractor selection help in

achieving cost effectiveness and compliance during contract execution. Still, the findings of this

study indicated that, robust scope of works and specifications sent to potential bidders to submit

their offers, which reduce a chance of variations due to unforeseen details is also another way in
which contractor selection helps in achieving cost effectiveness and compliance during contract

execution. More so, data indicated that, contractor selection ensures that Cooperation and

support are given by contractors for early problem identification to reduce the cost impact to the

completion. In relation to literature reviewed, Aberdeen Group Research (2009) indicated that,

Contract negotiations are one of the many ways that companies can leverage savings

opportunities. Given today's highly volatile currency and commodity market environments,

organizations need to identify savings opportunities that can take advantage of market conditions

versus sacrificing savings to them. Many companies involved in global -- and even regional

contracting observe that it is difficult to increase their visibility into contract exposure around

multiple currencies and commodities. Because procurement organizations often denote contracts

in both local currency and the dollar it is often difficult to track specific exposures.

5.1.3 Determinants of effective contract management.

From the findings, data indicated that, Putting in place structures and resources is one of the

determinants of effective contract management in an organisation, ensuring the right people are

in place is also another determinants of effective contract management in an organisation. More

so, findings also indicated that, setting clear roles and responsibilities that is to say defining the

responsibilities of both parties in contract management is also another determinant of effective

contract management in an organisation. Additionally, findings also indicated that, Feedback and

communication mechanism that is to say, regular and routine feedback is given on contractors’

performance is also considered also to be another determinant of effective contract management.

In relation to literature reviewed, Minahan (2007) observes that it is possible to design contracts

that are robust enough to profitably continue operations in the face of expected deviations and

unexpected disruptions and quickly recover from disasters. The foundation is a strong, stable

supply network forged from good supply base management, strong supplier links, and

continuous improvement and a corporate culture that embraces change and flexibility.
5.2 Conclusion of the study

Basing on the findings from this study, it was evident that, contract management has a significant

positive effect on contractor’s performance and therefore a well-structured contract management

plan can enhance contractors’ performance. It was also found out that poor performance of

contractors has been caused by various factors including lack of capacity and necessary

personnel to execute the contract, undefined specifications, scope of works and terms of

reference for the required products, works, and services, corruption and conflict of interest and

the study also established that poor contractors’ performance can be mitigated through Ensuring

that the right people are put in place to manage the contract, proper supplier selection, ensuring

that Feedback and communications mechanisms are put in place and mechanisms for managing

risks are also established.

5.3 Recommendations of the study

The study recommends that, Bundibugyo district Local government should endeavor to give the

contractors enough time to execute the contracts and plan the procurement n time and also

include the contract management plan in the preliminary planning of the procurements such that

contractors’ performance can be enhanced.

The study also recommends that, Bundibugyo District local government should attempt to fulfill

all the requirements and obligations of a framework contract. These involve clauses, conditions,

commitments and mileposts that need to be tracked and managed to maximize business benefits,

reduce associated risks and costs thus helping in improving contract performance.

From the findings, the study also indicates that, the individual procurement staff should endeavor

to define correctly the Terms of Reference, Specifications and Scope of Works such that the
contractors are made aware of what they are supposed to perform and a contract management

team should also be put in place and planned prior to the commencement of the contract.