Relationship management underpins overall successful contract management. A sound basis for the relationship should have been established in the earlier contracting phases. If the manager is new to the contractual arrangement, efforts will need to be made to understand the relationship that exists between the contractor and the acquiring entity and to develop a specific relationship for this phase as soon as possible. It is particularly important for the manager to understand the background to the relationship and be aware of any problems or issues that have arisen at earlier stages of the procurement process.

The type of contract, its size and duration as well as the culture of the parties and the personalities of the people involved will influence the relationship between the parties. It is important to establish and maintain a constructive relationship and regular communication. Providing positive and constructive feedback will assist in maintaining such a relationship.

Payments, including those for performance, should also be made without unnecessary delays, in line with the acquiring entity procedures. It is also important to listen to the contractor, to identify any problems, address them promptly and explain decisions in an impartial way.

It is better practice for entities to adopt a structured approach to managing their relationship with the contractor. This particularly applies to contracts that involve ongoing service delivery or the provision of consultancy services that extend over a reasonable period of time. In such contracts the management of the relationship with the contractor could consist of:

• informal, day-to-day discussions and interactions between the contractor, the contract manager and relevant entity staff; and

• formal meetings at pre-determined intervals with nominated personnel from both the acquiring agency and the contractor. Some entities have found it beneficial to have different parties undertake the contract management and the relationship management.

It is better practice for entities to adopt a structured approach to managing their relationship with the contractor.

A typical approach to managing relationships adopted in a long-term services contract is outlined below.

Managing relationships

Overall responsibility

Each party nominates one person with the appropriate skills and experience as its representative to be responsible for the coordination and management between the parties over the life of the contract.

Weekly performance review meetings

Nominated representatives, including the contractor's service delivery manager and the acquiring entity's contract manager, meet formally at least once a week to review performance. This meeting is aimed at discussing and resolving any minor issues relating to the performance of the contract.

Contract management committee

At least quarterly, or otherwise agreed, a formal meeting is held of this committee. The committee comprises senior people from the acquiring entity and the contractor as well as the contractor's service delivery manager and the contract manager. The purpose of the meeting is to formally monitor performance of the contract, consider any ways in which services may be improved, consider any amendments to service levels and resolve, where possible, any issues that remain unresolved from the weekly contract meetings.

Bi-annual senior management meetings

A meeting is held at six monthly intervals between senior executives of both parties. These meetings review matters that have been addressed at contract management committee meetings, review the overall relationship between the parties and consider opportunities for the contractor to contribute to the acquiring entity's business.

Maintaining a good relationship does not mean that the terms of the contract are not enforced where this is warranted. It is about enforcing the terms of the contract in a professional manner based on evidence of contractual performance. Provided the acquiring entity has fulfilled its responsibilities, has provided early warning of performance problems and has maintained a professional relationship, enforcing the terms of the contract should be seen as a reasonable course of action and therefore one that should not adversely affect the relationship between the parties. Acquiring entities must enforce contract conditions as necessary to achieve Australian Government requirements.

Where performance is being discussed, the contractor should be given the opportunity to present material on any factors that have caused performance difficulties and to discuss any proposed remedial action.

Relationships should be managed in a professional manner and be based on cooperation and mutual understanding, taking into account the need for probity and ethical behaviour.

Relationships should be managed in a professional manner and be based on cooperation and mutual understanding.