Before drafting a contract consider whether or not a separate written contract is required or whether some other arrangement will be suitable for the particular circumstances. Instances where a separate written contract may not be required include:

•  where the acquiring entity's standard purchase order includes suitable terms and conditions

•  simple low value purchases or off the shelf purchases, where, for example, a purchase order could be used

•  the purchase of commercially available software which comes with a standard licensing agreement

•  using a credit card to purchase goods, and

•  low value, low risk short term services, for example, after dinner speakers, or delivery of standard short training modules or awareness sessions. In these situations an exchange of letters may suffice.

Although a separate formal written contract may not be required in some cases, written evidence of the arrangement that has been agreed should be documented. There may also be steps that can be taken to manage the risk that faulty goods or below standard services are provided. For example, if training modules are being provided then supporting written material could be requested beforehand to check quality and suitability.

It may be appropriate to seek professional advice where it is not clear whether or not a written contract is appropriate to the circumstances.

In most circumstances, it is better practice in the Australian Government context to have a written contract. A written contract is generally accepted as the appropriate means of managing procurement risk particularly to specify requirements such as price, performance, duration, termination, confidentiality, risk management and intellectual property. Contracts do not need to be lengthy or complex documents. They do, nevertheless, need to be sufficiently comprehensive to facilitate timely delivery of goods or services that meet specified performance measures and provide value for money.

The need to specify in contractual arrangements the matters listed below, demonstrates the importance of contracts being evidenced in writing:

•  significant expenditure is involved requiring formal protection of the interests of the parties by documenting the deliverables and basis for payment

•  the specific outcomes and performance measurement being sought require explanation and the contractor's performance needs to be monitored and managed over time

•  specified, nominated or key personnel are required by the acquiring entity to undertake the contract obligations

•  termination for convenience is necessary to enable contracts to be terminated by the acquiring entity at its discretion

•  intellectual property rights exist in material being provided by either party to the contract and both parties need to agree ownership and rights to use the property

•  confidential information provided by either party needs to have protection for its use and disclosure in a contract

•  privacy of personal information collected or disclosed in the course of contracting must be protected in line with the requirements of the Commonwealth Privacy Act 1988

•  security matters such as the need for security clearances for personnel exists or where sensitive information provided under the contract is to be transmitted electronically

•  Commonwealth policy requires the contractor to comply with particular Commonwealth requirements, for example, recordkeeping in line with the Archives Act 1983, audit requirements or compliance with the Protective Security Manual, and

•  the law requires a written contract, for example, in relation to acquisitions or dispositions of interests in land, dispositions of equitable trusts and assignment of copyright. In this case the requirements of State, Territory and Commonwealth law need to be considered.

In most circumstances, it is better practice in the Australian Government context to have a written contract.