1.5 Authorities should recognise the importance of good contract management. An example of a good explanation of the aim and impact of good contract management, from an operational PPP project, is detailed below:
Purpose of contract management "Contract management is the process that enables both parties to a contract to meet their obligations in order to deliver the objectives required from the Contract. It also involves building a good working relationship between customer and provider. It continues through the life of the Contract and requires the parties to be proactive to anticipate future needs as well as managing proactively immediate situations that arise. The primary aim of Contract Management is to ensure that the needs of the Services and Capital works programmes are satisfied, the Authority receives what it is paying for, within the boundaries of the Contract whilst achieving value for money. This means optimising efficiency, effectiveness and economy of the service or relationship described by the Contract, balancing costs against risks and actively managing the customer-provider relationship. Contract Management also involves aiming for continuous improvement over the life of the Contract." |
1.6 Good contract management will:
• maximise the chances of contractual performance in accordance with the contract's requirements by providing continuous and robust contract management which supports both parties;
• optimise the performance of the project;
• support continuous development, quality improvement and innovation throughout the life of the contract;
• ensure delivery of best value;
• provide effective management of commercial risk;
• provide an approach that is auditable;
• support the development of effective working relationships between both parties;
• encourage effective and regular communication underpinned by clear communication mechanisms;
• allow flexibility to respond to changing requirements;
• demonstrate clear roles, responsibilities and lines of accountability, and
• ensure that all works and services are in compliance with legislation, relevant Health & Safety requirements, and Council procedures.
1.7 Failure to implement an adequate contract management system could result in:
• an Authority paying for services which are not being received or are not being performed satisfactorily;
• the contract not performing as anticipated, thus jeopardising project benefits;
• changes to the balance of risk negotiated in the contract; and/or
• an Authority being unable to foresee Contractor failure or put in place contingency measures; a breakdown in relationship with the Contractor
1.8 Contract managers are there to make sure that the works and services which the Authority has procured are delivered and that the contract continues to provide a high level of compliant service to its users. It is important that Authorities do not view contract management as a stand alone activity which is detached from the procurement of the project. Signing the contract and the completion of the construction phase are milestones and measures of success, but it is the provision of the services over the life of the contract which is central to the satisfaction of users of those services and the delivery of the benefits sought.
1.9 During the construction phase, the contract will continue to require to be monitored to ensure that the facilities provided reflect the Project Agreement; to progress items such as staff transfers; to assist the Contractor in managing the decant strategy and to provide the required sign off and approvals for areas such as Reviewable Design Data and Contract Changes.
1.10 During the operational phases, key actions for the contract monitoring team change and cover areas such as managing payment regimes including insurance and utilities; actioning the results of customer surveys; looking for continuous improvement in the service and performance monitoring. The planning and preparation for the operational phase should be undertaken throughout the procurement and, where applicable, construction phases.