Contract evaluation should encompass the overall performance of the contract and of the acquiring entity's management of the contract. The evaluation of the operation of the contract and of contract outcomes can be very useful in understanding and improving overall contract management, improving contractor performance and can assist in future stakeholder decision-making. An evaluation should be undertaken at the end of all contracts and should be planned for in advance. When a transition from one contract to another is to occur, it is better practice for an evaluation to be undertaken before the contract ends so that any problems that have occurred with aspects of the contractual arrangement are identified and, where appropriate, improvements made in the future contractual arrangements.

Evaluations can be conducted in-house by the acquiring entity or a third party can be contracted to undertake the evaluation. This latter approach has advantages in providing an independent view of the contracting arrangement. Whatever the approach used, there are some principles that can assist to make the evaluation relevant and useful. These include having:

•  an evaluation plan that sets out clear terms of reference, methods and sources of data collection and analysis, budget, clear timeframes and reporting arrangements;

•  relevant skills to manage and conduct the evaluation (either in-house or through contracted personnel);

•  senior management support;

•  an evaluation report in which conclusions are supported by the data; and

•  recommendations that provide an indication of their likely benefits.

Contract evaluation should encompass the overall performance of the contract and of the acquiring entity's management of the contract.

The evaluation will need to be tailored to the particular circumstances but should consider both the effectiveness and efficiency of the arrangement. For contracts, the evaluation should be a thorough and independent review that is informed by those involved in establishing and managing the contract.

To get the best out of the evaluation, entities should:

•  review all aspects of contract performance and its management;

•  provide feedback to the contractor; this should not be done as part of another procurement process;

•  report to stakeholders; and

•  identify lessons learned.

For contracts, the evaluation should be a thorough and independent review that is informed by those involved in establishing and managing the contract.

Potential sources of information that can be used to inform the evaluation include: notes from meetings; performance data; interviews with management and the contractor; client and end-user feedback; quality assurance reports; complaints data; and reports of any disputes.

Evaluation checklist

The checklist listed below provides a basis for conducting an evaluation of the contract.

  Has the contract facilitated the achievement of the activity identified in the approach to the market?

Review the requirements set out in the original business case and tender. Assess how these requirements have developed during the life of the contract, then analyse the effectiveness of the contract in achieving the stated requirements. This should involve a comparison of planned and actual milestones and activities carried out under the contract.

  Did the contract achieve its objectives?

  Were stakeholders' requirements met?

  Did the contract deliver quality outcomes?

  How well did the performance regime work?

Review performance against all the standards and indicators set in the contract. Assess whether the contractor provided all the required goods and services in line with agreed timeframes. Examine the monitoring and assessment arrangements, including the performance regime established in the contract to ensure that they assisted with achieving contract outcomes.

  Did the management arrangements established by the acquiring entity facilitate achievement of contract outcomes?

Examine how the relationship was managed and whether the level of resources and/or skills was sufficient to achieve the contract outcomes.

The following case study discusses a situation where a contract evaluation was used to improve the new contract.

Case Study: Evaluation shapes next contract

An entity's IT services were provided under contract. It evaluated the operation of the existing contract, as part of preparing to issue a new request for tender. The review was conducted by the contract manager, in conjunction with senior staff in operational roles and the Chief Financial Officer. Overall conclusions were:

•  The services had been generally provided in accordance with the contract. The contract had focused on minimising the costs of basic services at required service levels, and this had been achieved.

•  There was scope for fine-tuning a number of detailed contract clauses.

•  The entity had faced a number of significant changes and new requirements during the three years of the contract, and that the contract had not anticipated this. Accordingly achieving the required changes had been more difficult and expensive than desirable.

•  The agency is now considering options for specifically including flexibility as an objective in the next contract.

Comment: In addition to examining the detailed operation of the contract, the review also considered how well the contract supported the strategic objectives of the organisation.