Contract management refers to all the activities undertaken by an entity, after the contract has been signed or commenced, to manage the performance of the contract (including any corrective action) and to achieve the agreed outcomes.
Each contract will be different. The aim of contract management is to ensure that all parties meet their obligations to deliver the objectives of the contract. In a simple procurement, the focus of contract management may be on ensuring the goods or services purchased are provided on time, to the agreed standard, at the agreed location and for the agreed price. For a more complex or strategic contract, contract management may also look at other aspects of the contract, such as performance management or continuous improvement regimes, integration with existing systems or assets, implementation of technological or industry advancements or innovations.
It is important that contracts are managed consistently and actively throughout their life in accordance with their terms. This will ensure that supplier performance is satisfactory, stakeholders are well informed, and all contract requirements are met thereby ensuring that the contract delivers the anticipated value for money.
Phases of the Procurement Life Cycle | ||||||
Procurement Phase | Contract Management Phase | |||||
Planning for Contract Management | Contract Start Up | Contract Performance | Contract Closure | |||
Procurement Planning | Approach to Market | Evaluation | Negotiation & Award | |||
Contract management can be distilled to the following elements:
• Contract Governance: establishing the stakeholder engagement mechanisms, oversight arrangements, systems, processes, decision making and reporting.
• Performance Management: the measuring, monitoring, and assessment against agreed performance measures to enable early warning of, and response to, performance issues. The monitoring and assessment of deliverables to enable acceptance and achieve contract outcomes.
• Supplier Relationship Management: includes putting in place collaborative engagement mechanisms with the contractor.
• Contract Administration: the administrative activities undertaken to support day-to-day contract activities, meet legislative requirements for records management, and establish an audit trail to meet transparency requirements.2
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2 Department of Defence - Defence Contract Management Handbook Version 1.0 - 02 July 2018