Monitoring focuses on collecting and analysing information to provide assurance to the acquiring entity that progress is being made in line with agreed timeframes and towards providing the contract deliverables. As discussed in Part Two, monitoring can be undertaken directly by the acquiring entity or through a third party arrangement.

Whether monitoring is undertaken directly by the acquiring entity or indirectly by another party, final accountability for accepting contract deliverables remains with the acquiring entity. Information provided by a third party or the contractor for monitoring purposes should be reviewed and audited, as necessary, to ensure its accuracy and reliability. It can also often be tested through consulting end-users regarding the goods and services they have received.

While the broad arrangements for actual monitoring over the life of the contract should generally have been set out in the contract itself, they may need further or more detailed explanation at contract start up or during the transition in phase. The level and formality of any approach to monitoring needs to be governed by the complexity of the contract and/or the degree of risk involved. In some cases the approach to monitoring may be set out in a checklist, in others, a plan setting out detailed monitoring arrangements may be needed.

It is important to focus monitoring activity on key deliverables; very detailed monitoring can be costly and can unduly shift the focus away from achieving contract outcomes. This may mean establishing priorities for what will be measured at specific time intervals. Collecting too much information is also costly and the acquiring entity may not have the resources to analyse it to assess performance adequately.

Having a systematic approach to monitoring which includes the sort of information required and when it is required, can assist in identifying any potential problems and allow early remedial action to be taken. It also allows timely reporting to senior management and other stakeholders. Obtaining relevant information and data may need to be supported by management information systems or data bases. Some information may be able to be provided electronically.

Monitoring activity should be focused on key deliverables.

Good Practice Tip: Schedule key dates and milestones

It can be useful in the monitoring of contract performance to diarise or maintain a listing of all key dates and milestones. This information should be made available to all staff involved in managing the contract and to the contractor.

It is important to collect and analyse all relevant information needed to assess performance. After analysing the information, feedback should be provided to the contractor in a professional and constructive manner (and in line with any communications protocol that exists). This is discussed further under the performance assessment section.

The following case study discusses a situation involving too many performance indicators.

Case Study: Too many performance measures

An entity had specified comprehensive performance information to be provided under the contract. The contractor fully complied with the requirement. Each month the contract manager received by email a report of nearly 100 pages of detailed statistics on all aspects of the contract for the previous month. After the first few months, the report was only used as the basis for authorising payments. It was not useful for a higher level assessment of performance or of potential problems, as it contained so much information, with no analysis or indication of whether corrective action had been taken on any service shortfalls. The contract manager negotiated the addition of appropriate management summaries to give an understanding of the overall performance and evidence of effective management by the contractor.

It is important to collect and analyse all relevant information needed to assess performance.

Details of areas that need to be monitored include:

• specific goods or services provided on time to the required quality

• client or user satisfaction

• performance against contract requirements, and

• invoicing and payments.

In addition to data collected for the purpose of measuring performance, assessment of a contractor's performance can also be assisted by other information sources such as records or minutes of meetings and discussions, reports from third parties, stakeholder, end-user and client surveys, site visits and observations, complaints, reported delays and the need for contract variations.