Authorities should recognise the importance of contract management as the application of best practice 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;
• ensure accurate and timely reporting of performance; and
• provide early warning of potential issues (e.g. avoiding a scenario where the Authority pays for capacity not used due to Contract Waste tonnages falling below a guaranteed minimum).
Contract management requires the investment of significant levels of resource. Whilst, in 2011, the focus is on realising savings wherever possible, Authorities should be aware of making false economies in relation to contract management. For an Authority paying a Unitary Charge of £10m per year, a Contract Management Team that prevented an increase of just 1% would be saving the Authority £100,000 per year.
A 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.