Contract Management & Performance – Terminology

Acceptance

The act of receiving the good or service by an authorized representative with the intention of approving
the good or service for payment.

Alternative Dispute Resolution (ADR)

A process or procedure used voluntarily between parties to resolve issues without the need to resort to
litigation. ADR may include, but is not limited to, mediation, fact-finding, and arbitration.

Closeout Checklist
A checklist used to ensure all contract administration tasks are completed and all required documents
are contained in the Closeout File.

Closeout File
The file within an entities archive containing all relevant information regarding a closed contract.

Conflict of Interest

A situation that can undermine a person due to self-interest and public interest.

Contract Administration Plan (CAP)

A framework focusing on who, what, when, where, and how the contract is to be managed for
successful completion, from start to finish. The goal of the CAP is the clear communication of obligations
and expectations of the contract.

Contract Administration

The functions that are performed after the parties have signed the contract. Typical contract
administration activities are goal oriented and are aimed at ensuring compliance with the contract terms
and conditions while giving attention to the achievement of the stated output and outcome of the
contract.
Contract Administration Team Members

• Contracting Officer
• Project Manager
• Subject Matter Expert
• Quality Assurance Specialist
• Reliability Engineer
• Material and Services Price and Cost Analyst
• Legal Counsel
• Program Office Representative
• On-Site Representative

Contract Formation

Planned functions that are to be performed before the parties have signed the contract. Typical contract
formation activities include development of the solicitation, scope of work, terms and conditions, and
negotiation of a contract that is mutually beneficial for the entity and the contractor.

Contract Management

The overarching process that includes the functions of both contract formation and contract
administration.

Contract Modification

Any written alteration in specifications, delivery point, frequency of delivery, period of performance,
price, quantity, or other provisions of the contract, accomplished by mutual agreement of the parties to
the contract.

Contract Modification Types

Bilateral Modifications

Bilateral modifications are changes to a contract that require the agreement and signatures of both
parties.

Unilateral Modifications

Unilateral modifications only require execution by the entity’s Contracting Officer.

Contract Payment Types

Completion Payment

Provides for full payment after work required by the contract is completed or delivered by the
contractor and subsequently inspected and accepted by the entity.

Partial Payments

Permit the contractor to invoice the entity at intervals that coincide with the delivery and acceptance of
incremental supplies or services.

Progress Payments

Permit the contractor to submit invoices for payment as progress is made in performing the contract.

Milestone Payments

A form of progress payment that ties payments to the successful completion of predetermined
milestones that are considered significant indicators of progress toward contract completion.

Advance Payments

Payments made in advance of the start of contract performance for supplies or services not yet
performed.

Contract Price Types

Fixed Price Contracts

A type of contract providing for a price that is not subject to adjustment on the basis of the contractor’s
cost experience in performing the contract.

Cost-Reimbursement Contracts

Reimburses the contractor for all incurred costs that are allowable and allocable under the terms of the
contract and applicable laws and regulations; may include profit or fee. May also be referred to as a Cost
Plus Contract.

Contract Termination

Occurs when the authority has determined that the contract should be terminated for cause, default, or
convenience.
Contract Termination Types

Termination for Convenience

A contract clause that may be contained within boilerplate language that allows for contract to be
ended at the discretion of the governmental entity. Action by which the purchasing entity, in accordance
with contract provisions, unilaterally cancels all or part of the contract work for the best interest of the
jurisdiction, and with no reflection on the contractor’s performance.

Termination for Default

A contract clause that may be contained within boilerplate language that allows either contracting party
the right to cancel a contract, either in whole or in part, due to failure of the other party to perform
satisfactorily.

Delivery Types

Definite Delivery

Involve a specific requirement quantity and delivery date.

Indefinite Delivery

May not necessarily contain a concrete delivery date or quantity.

Indefinite delivery with a definite quantity

Occurs when a quantity of supplies or services is specified, but the time of delivery is flexible.

Indefinite quantity and indefinite delivery contracts

Used to establish a minimum and maximum quantity that can be ordered within a definite delivery
period.

Requirement delivery contracts

Used when the entity agrees to purchase all requirements for a certain period of time from the
contractor.

Dispute

A contractual disagreement or misunderstanding between contracting parties specific to contract

provisions or language. Contract remedies are normally sought through pre-established administrative
procedures. When a resolution cannot be achieved, the parties may resort to alternative dispute
resolution or litigation.
Elements of a Contract

To be legally enforceable, all contracts must have the following six elements:

• Offer and Acceptance

• Definiteness of Purpose
• Consideration
• Mutuality of Obligation
• Capacity of Parties
• Legality of Purpose

Inspection

Examining and testing supplies or services to determine whether they conform to contract
requirements.

Liquidated Damages

Damages that allow the entity to be compensated for specific breaches as defined in the contract.

Performance Assessment Plan (PAP)

Provides specific information on how the Contract Administration Team will observe and evaluate
performance according to the standard required by the contract.

Post Award Meeting

A meeting held with the contractor who was awarded the contract prior to the beginning of contract
performance. It ensures that the contractor fully understands the expectations, performs accordingly,
and can provide the foundation for an effective contract effort.

Prompt Payment Act

The Prompt Payment act ensures the Federal Government pays their invoices in a timely manner. The
Act requires that proper invoices (as defined in the contract) are to be paid within 30 days of receipt by
the federal entity. It prescribes an interest “penalty” that accrues from each day beyond the 30-day
period in which the invoice is not paid.
Rejection

Refusal of a delivered supply or service that does not meet contract specifications or requirements.

Remedy

The means by which a contractual right or obligation is enforced or the violation of such a right is
prevented, reduced, or compensated. Remedies may be defined in the contract, by agreement between
the parties such as by accord and satisfaction, by arbitration, by operation of law, or judicial remedy
such as by action or suit.

Reporting Types

Observation Record

Used to document contractor performance on a periodic basis, either through scheduled or non-
scheduled visits. An inspector will visit the site of delivery and evaluate the progress of the delivery.

Receiving Report

Identifies the item, quantity, and expected delivery time and includes a space for receiving personnel to
indicate actual quantities received and note any discrepancies or problems.

Discrepancy Report (Nonconformance Report)

Used to document the details of any contractor’s action or inaction that does not comply with
contractual requirements.

Status Reports

A status report describes the level of completion of the work or the cost of the contract, with the term
“percent complete” often used to describe the contract’s status.

Performance and Activity Reports

Performance and activity reports describe any activity on the project.

Cost Data Reports

The contract may contain special requirements for deliverables that address cost issues related to the
contract.

Surveillance Plan

A framework for effectively and efficiently conducting systematic surveillance of services.

Transition Plan

Identifies what is to be done, by whom, and by when. When a contract is awarded, Transition Plans are
used to implement the contract with minimal issues or disruption to the entity.