An important component of effective contract management lies in developing and implementing appropriate mechanisms to monitor the performance of parties, and encourage their optimum performance.
Contractual mechanisms to monitor performance enable the parties to better manage the project agreements and allow evaluation of the partnership relationship in light of policy objectives, to ensure attainment of a 'value for money' outcome.
Contractual incentives and performance indicators should themselves be monitored to determine whether they are, and remain, appropriate and effective. This is particularly important for long-term projects, during which government's requirements may alter. Monitoring of performance indicators also allows the parties to assess whether a project is providing value for money, and whether any changes are necessary.