A. Whose responsibility is it?

So, you’re at the end of a procurement process and ready to award a contract to the successful bidder. It’s been a long procedure and you’re already thinking about the next project. But what happens to the con-tract now?

Of course for more complex University, there may be a project or contract management team to support the contract but in most cases the service manager will look to ensure that the provision/delivery/ installation meets expectations and targets.

To procure a contract and neglect to put sufficient re-sources into contract management, seeing it perhaps as an unnecessary overhead, is not conducive to on-going best value

Best practice insists that organisations recognise the value that contract management can add - much more than just administration, contract management in-volves ensuring contractual obligations are met, ser-vices are delivered efficiently and commercial risks are identified and managed.

B. When is Contract Management valuable?

Whether a contract requires dedicated contract man-agement depends on a number of criteria, such as:

Contract value; Contract length; Complexity of services; Level of risk.

A relatively low-risk supply-only contract would benefit from the attentions of a contract manager at the start (or ideally a few weeks before the contract is signed) to implement core contract management processes, produce a contract summary if required and assess the risks and/or opportunities that may require action in the future. After that, monthly or even quarterly contract management reviews may be sufficient, with a focus on risk management and contractual compliance matters such as price increases and management information. Frame-work contracts for purchase of goods may fall in this category, requiring minimum contract manage-ment as long as the supplier is performing adequately.

For more involved contracting arrangements, such as contracts for service, detailed performance management regimes, a reasonable level of expected change, ongoing obligations on either party such as disaster recovery testing or benchmarking, or performance slippage or disputes, you should really be thinking about dedicated and skilled contract management as part of overall planning. 

1Procurement Team: University of Exeter August 2010

Procurement Manual: Good Practice 1

1. Contract Management: Responsibilities and Du-ties

A. Whose responsibility is it?

B. When is Contract Management valuable?

C. Contract Manager Duties

D. Relationship Management

E. Change Control Process

C. Contract Manager DutiesA good place to start is to read the contract all the way through a couple of times . Although you may have been involved in the award of the contract; to understand the possible pitfalls, difficult negotia-tion points, and the commercial and contractual risk in the deal you may wish to discuss with col-leagues in the procurement team.

A useful, if laborious, way of becoming more familiar with the contract is to develop a tool for tracking contract obligations and deliverables. This can be an Excel spreadsheet with the following sug-gested headings:

Contract document (e.g., “main terms” or “schedule 1”); Contract section (e.g., “business continuity”); Contract reference (e.g., “para 1.1”); Title (e.g., “prepare draft business continuity plan”); Description (e.g., “Supplier shall provide a draft business continuity plan for review by the parties”); Due date (e.g., the date the first draft is due); Responsible party (e.g., “supplier”); Frequency (e.g., “one-off”); and Status (e.g., “in progress”)

Ideally a Contract Manager should go through the whole contract carefully and note every instance where there is a requirement, a deliverable or a specific obligation (look for “The Supplier shall....” and “Both parties will ensure that...”). In most instance these will have been set when writ-ing the specification and scope for the tender documents (planning like this in advance is always an advantage). You could add sub-categories to filter all obligations relating to invoicing, for example, regardless of where they are in the contract. You can sort the spreadsheet by “Due date” to plan forthcoming requirements or use it as a checklist to ensure the supplier complies with their obliga-tions.

One important point is about access to the contract itself. People will come up with all sorts of rea-sons as to why they should have a copy, and there may be no apparent harm in letting them see it. However, a wise contract manager will limit access to those who need it. Keep a log of who has a hard copy and only send electronic copies in PDF. Otherwise you may be swamped by “lay contract managers” interpreting and quoting the contract without the necessary context and understanding. Remember also that their copy of the contract will be out of date as soon as the first change control note is agreed. This, and the administration required to keep on top of this, is enough reason to limit access in the first place.

Another important function for the contract manager is providing contract guidance and education. This can be a detailed summary of key terms, risks and opportunities produced for senior managers (restricted distribution). Or it could be a users’ guide to the services being delivered under the con-tract so users understand what they should get and what to do if they don’t. Contract changes may affect the services, so consider a standard communication template to inform users of relevant changes.

2Procurement Team: University of Exeter August 2010

D. Relationship ManagementEncouraging a co-operative and trusted relationship with the service provider can really help if the going gets tough, as it will at some point in a long-term contract. A good contract manager will be naturally inclined to dig into every nook and cranny, looking at things from different angles to identify risks, solutions and opportunities that others may not see. Their work may require them to build rela-tionships with every area of the business, from finance and IT to project managers and operational users. Being able to capitalise on this central position in the business is what makes the contract manager different.

Most importantly, the contract manager should have strong commercial awareness, an inquisitive probing approach and an inclination to assume the worst in order to flush out risk. However, to really add value, the contract manager should not only identify possible downfalls but also come up with creative solutions to enable work to go ahead, albeit with less risk.

However, the University may have legal accountability for the quality of the product or service further along the supply chain and will be held to account if there is a failure. Contract management must ensure an appropriate level of governance and sufficient monitoring, supported by external audit where necessary, to be confident the supplier’s assurance process is working and they have acted responsibly

E. Change Control ProcessCore contract management processes include the change control process, dispute resolution, per-formance management, managing contractual documentation, and contractual/commercial risk man-agement. You may not be aware that the contract manager is responsible for all these processes too!

A distinction may be made between contract change control and “operational” change control, which is not necessarily best managed by the contract manager but can include an interface into the con-tract change control. The contract will usually contain high-level procedures, for example the change control procedure, and the contract management process should sit underneath this procedure to detail the internal steps, sign-off requirements and implementation plans.

If performance monitoring indicates an unacceptable level of non-compliance then immediate correc-tive action is required. How this is notified to the supplier and how quickly the supplier has to re-spond is usually defined in the contract. The performance issue may also trigger service penalties and, depending on its seriousness, require escalation. Each event should be fully recorded and, once resolved, investigated and action taken to prevent any reoccurrence. 

Other useful references

Procurement Manual Good Practice 2: Risk Management and Handling ChangeProcurement Manual: Good Practice 3: Supplier AppraisalProcurement Manual: Good Practice 4: Assessing Supplier Performance

3Procurement Team: University of Exeter August 2010