Contracts requiring ongoing assessment of the performance of the contractor should generally contain provisions for monitoring progress and assessing performance. It will generally be appropriate for such contracts to include provisions that cover: who will undertake performance monitoring, including responsibility for collecting and analysing data; how frequently monitoring will take place; and the reporting arrangements and any processes to review the arrangements. However, generally not all aspects of monitoring and assessment will be covered in the contract itself. These may be developed by the contract manager as part of a contract management plan or checklist. The development of a contract management plan is discussed later in this part.

Monitoring can be undertaken directly by the acquiring entity, by the contractor or by a third party. Where monitoring is undertaken by the contractor or by a third party, accountability for achieving contract outcomes remains with the acquiring entity.

Monitoring can be undertaken directly by the acquiring entity, by the contractor or by a third party.

Direct monitoring by the acquiring entity ensures that the entity has control of the process, and can obtain assurance that is independent of the contractor. Direct monitoring can be used when the necessary data is available and sufficient resources are available in the acquiring entity to undertake monitoring in a timely and effective way.

Monitoring by the contractor is appropriate where the data is embedded in its operating systems and the need for independent assurance is low. However, it can be better practice to obtain some independent assurance regarding contractor performance at regular intervals, through for example, end-user surveys or audits of the data.

If monitoring is undertaken by a third party, the acquiring entity needs to be assured that information used for monitoring purposes is accurate and reliable. Reports from third parties about progress and performance should also be periodically tested through, for example, the end-user follow-up.

Monitoring by a third party is more appropriate where particular technical knowledge is needed to assess the data and provide independent assurance for both the contractor and the acquiring entity.

Different approaches to monitoring may be used at different phases in the contract delivery or for particular aspects of performance. Whatever monitoring arrangements are determined, they should be cost-effective to implement and manage, and the necessary skills should be available.

Different approaches to monitoring may be used at different phases in the contract delivery or for particular aspects of performance.

The following case study discusses an approach to monitoring contractor performance.

Case Study: Monitoring call centre performance

In a contract involving services by a call centre, much of the key performance data (such as queuing times, number of calls) will be held within the systems of the contractor. These systems usually have sophisticated analysis and reporting capabilities. So it is most practical in this case to have the data collection and analysis for measures such as call waiting time undertaken by the contractor in accordance with the needs of the acquiring entity.

However, assessment of the satisfaction of callers with the politeness of operators might be best undertaken by a third party survey firm. In this case the contract should provide for the contractor to facilitate such a survey (for example by assisting the third party to contact callers). The accuracy of advice given might only be able to be assessed by staff of the acquiring entity, based on recordings of a sample of actual calls. Accordingly, the contract would need to make provision for such recordings and the associated protection of privacy. In addition, given that the acquiring entity is relying on the contractor's internal systems, it would also be important to ensure the contract allowed for appropriate audit access to those systems to provide confidence that the information provided by the systems was reliable.