Contract Management

Background
Roles and Responsibilities
Approach to Contract Management
Service Level Agreement (SLA) and Key Performance Indicators (KPIs)
Management Information
Contract Review Meetings
Summary

1.     Background

The purpose of this Guide is to outline a consistent approach to the management of the University’s ‘call-off’ contracts.  A call-off contract is defined as an arrangement for the provision of goods or services which are purchased on an ‘as required’ basis during the course of the contract. 

The requirements for the management of ‘call-off’ contracts for commodities or services should be established either prior to tendering the requirement or by agreement with the appointed contractor.

In respect of contracts managed by a School(s) or Directorate(s), the member of the Procurement team responsible for the contract will provide the necessary advice and guidance in this regard, and should therefore be the main point of contact should any issues arise - for example, regarding the supplier’s quality of service/supply or any associated dispute with the supplier.

2.     Roles and Responsibilities

There are a variety of contract management arrangements within the University.  Currently, University contracts are managed by:-  

• the Procurement Office, or
• the School or Directorate for which the arrangement was established, or
• jointly between the Procurement Office and the School or Directorate for which the arrangement was established, or
• jointly between several Schools or Directorates – each of which avails of the arrangement.

Regardless of whether the contract is managed by an individual or by a team, the responsibilities of the contract manager(s) include the following:-

• Oversee the operation of the contract
• Establish and manage an effective communication framework
• Represent the University’s interests with the supplier
• Maintain/develop contract specifications
• Act as a point of contact for all formal and legal correspondence relating to the contract
• Establish regular reporting procedures and ensure that they are used
• Monitor contract performance and maintain reports on overall service outcome levels
• Determine and take remedial actions by agreement with the supplier
• Escalate contract problems as necessary, in conjunction with the Procurement Office
• Manage the dispute resolution process

3.     Approach to Contract Management

The approach to contract management will depend on a number of factors including the nature, profile, value and criticality of the contract.   Other factors which need to be considered are the nature of the supplier’s relationship with the University at the point of engagement and whether the contract itself represents a new initiative or a change in modus operandi which necessitates closer monitoring of both the arrangement and the supplier.

Where a baseline is identified at the outset of a contract, if there is either improvement or deterioration in service, then consideration should be given to implementing a change in the management approach, during the course of the arrangement.

As a guide, the approaches to contract management which should be considered are detailed in the table below:-

The above lists of examples are, by no means, exhaustive.  Hence, the management approach adopted for any contract should be established based on all relevant factors.

In relation to those contracts to which a high or medium priority level is applied, and which are managed at School or Directorate level, where possible and practical, the Procurement Office should be involved in contract review meetings every six months.

4.      Service Level Agreement (SLA) and Key Performance Indicators (KPIs)

The use of a Service Level Agreement and/or Key Performance Indicators will very much depend on the nature and size of the contract and the level of monitoring required on a daily basis. To this end, SLAs with appropriate KPIs should be established for all University service contracts, as well as for commodity contracts where the service element is key to delivery of the commodity.  Again, the Procurement representative responsible for tendering the contract can advise in this regard.

The Procurement Office uses a contract management system (In-Tend CX) to establish standard supplier KPIs which will ensure ease of performance monitoring at an operational level.  With a structured scoring mechanism, KPIs also give a clearly defined view of the contractor’s performance.

Other methods of performance management – such as incentivised KPIs, where the supplier pays a penalty for non-performance – are also used by the University, particularly in relation to Estates Services contracts.

An example of a simple KPI and scoring mechanism would be:-

The Contractor will deliver all goods within 24 hours of receipt of on-line order.

Score:
1          =          More than one incident of non-compliance
2          =          One incident of non compliance
3          =          Compliant

If the contract has, say, 10 KPIs in total, then the maximum score achievable by the contractor would be:-

3 (compliant) x 10 (KPIs) = 30 (or 100%)

The actual score is calculated as:

(sum of individual scores / maximum possible score)*100.

The results would then be classified as:

Greater than 90% - Excellent
Greater than 85% - Good
Greater than  80% - Satisfactory
Less than 80% - Unsatisfactory

On appointment of the contractor, those involved in managing the contract will be guided on the use of KPIs, if applicable, by the Procurement representative.

5.      Management Information

Management information (MI) provided by any contractor is fundamental to understanding whether the contract is being undertaken in line with the specification and whether the contractor is meeting his/her contractual objectives.  It also provides key information for discussion at contract review meetings.

It is therefore vital that the content and format of the MI is established and agreed with the contractor at the outset.

6.      Contract Review Meetings

The review meeting will be the forum at which the contractor’s performance will be discussed. 

As a general rule, the following should be discussed at each contract review meeting:

Where a Service Level Agreement or Key Performance Indicators are being used with the contract, then the contractor’s performance for the previous x months, using these forms of measurement, should be discussed. 

7.     Summary

The Procurement Office would emphasise the need to apply and maintain adequate and robust controls, in respect of contract management – not least to ensure that the University achieves value for money in all its supply arrangements.  It is therefore the duty of the contract manager to be aware of, and discharge his/her responsibilities, in line with this guidance.

For further guidance please refer to the attached Contract Management Checklist click here and Management Plan click here