The Attributes of effective contract management?

Tuesday, March 25th, 2014

Reading a cemetery contracting audit report – we really do love procurement here at Brian Farrington:) – can confirm that procurement principles apply in all situations where third party expenditure is involved.

The audit comments are thought-provoking – here are 6 examples:

1.       “We found that due to the City’s weak contract management and oversight over the cemetery contract, the City has no assurance that the contractor is providing all the services for which the City is paying”

 2.       “Since we are unable to identify all of the elements that constitute the cemetery contract, we recommend that PARD [the buy-side organisation] management coordinates with the Purchasing Office and the Law Department to determine what constitutes the cemetery contract”

 3.       “During our review, we were unable to identify what constitutes the contract because different parties provided different sets of documents; additionally, documents provided in the same set contained conflicting information.”

 4.       “The cemetery contract did not include the ‘integration clause’ which clarifies which document has priority in case of conflicting information, nor was the contract reviewed by the Law Department prior to being presented to the City Council for approval”

 5.       “Lack of a clear contract impairs the City’s ability to enforce contract terms and limits its ability to obtain legal recourse.”

 6.       “On site reviews had rarely been performed and documented.”

A litany of failings, highlighting, yet again, the virtues of audit, contract management, and robust processes.

The Take-away:   Effective Contract Management is essentially a PRO-ACTIVE process demanding ‘commercial awareness’.

An appropriate definition of commercial awareness is the ability to understand and act on general business principles and practices and to make the most of available opportunities to deliver the business benefits required from contract performance.

The disciplines of effective Contract Management therefore need to be employed throughout the contract cycle – underpinned by commercial awareness. 

This requires a concentration and provision for the subsequent management of the contract PRIOR to it being tendered or let.  These preventative steps will help ensure that the contract, once let, and the Contractor once chosen, perform effectively and efficiently.  Contract Management generally and specifically for the subject contract has major implications on budgeting and finance within organisations.

When the contract is let, Contract Management requires a professional focus upon monitoring, measurement, reporting, milestone achievement, relationship management, risk management, contractual compliance and achievement of required performance.

Knowledge, skills and behaviour of contract management are challenging! How is its effectiveness being addressed in your organisation?

Thanks

Steve

 

www.Procurisk.com – The evolution of risk management For more information and instant access to the free demo site please contact Ray Gambell on 01744 20698, or r.gambell@brianfarrington.com

Interested in insight on managing supplier performance? We recommend reading: “Contract Management failures again?

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