Contract Management Cycle

Planning and scoping means you are preparing to work smartly, focusing on priorities, resources and risk, considering the success factors and developing KPIs.

• Define what the contract will (and won’t) cover and achieve, adding actions and deadlines.
• Decide which performance criteria to use to ensure both the contractor and your organisation, meet their obligations.
• Consider the specification, and the whole life and cost of the asset, including disposal or maintenance, and how to move smoothly from contract to contract at either end of the process. 

Extra information to consider for this step:

• Benefits Realisation
• Contract Management Guide
• 'Develop Strategy' (from the Procurement Cycle)
• Project Management
• Resource Planning

It's important to have good working relationships between all internal and external stakeholders. The external relationship could be simple and transactional, or a more collaborative one.

• A stakeholder definition can be users, providers, influencers and governance.
• Stakeholder management includes identifying, analysing, planning and mapping stakeholders’ interest and influence for each contract.
• Developing communication plans help engage and influence the main stakeholders.
• The contract holder, project manager and finance manager should work together internally, all with a shared understanding of the terms of the contract.

Extra information to consider for this step:

• Leadership and Promotion
• Stakeholder Management

What is contract administration? It is pre-contract formation to agree the wording prior to agreement with all parties and before implementation.

• Good contract administration is fundamental to the success or otherwise of a contract.
• Monitor dates for decision-making, reporting, activity, and notices of termination or exit via clear and well-defined processes, using an appropriate level of technology.
• Log and communicate any amendments to the contract on a timely basis.
• Once a contract has been agreed and signed, the work as a schedule of activities and responsibilities which must be adhered to.

Extra information to consider for this step:

• Template Contract T & C's

To effectively maintain relationships for contract delivery, the contract manager must clearly understand their role and that of others.

• Ensure internal and supplier-side roles are clear, and reinforced through regular communication.
• Define dispute resolution processes and remedies unambiguously, dealing with problems effectively and quickly.
• Include a feedback mechanism for the supplier to aid early recognition of potential issues which can then be resolved.
• Remember, relationship management skills might be different to those needed to perform or deliver the contract, so be prepared to train existing staff.

Extra information to consider for this step:

• Staff Development
• Soft Skills
• Influencing skills
• Supplier relationship management

Your performance management process needs to be structured to operate effectively. At the outset of the contract, set up a framework that includes details of all:

• Service Level Agreements (SLAs) and Key Performance Indicators (KPIs).
• Metrics or criteria to be used.
• Reporting responsibilities.
• Problem resolution and escalation processes.
• Contact points.
• Invoicing and payment process.
• How Liquidated Damages are set against contract breaches or service failure.
• Assessment and reward for improved efficiencies and improvements.
• Formal performance review methods.
• A comprehensive, objective outline of the contract milestones.

Extra information to consider for this step:

• Setting KPI's
• Supplier Performance Analysis

Terms of payment will be negotiated as part of the contract, and failure to pay on time is a breach of contract.

• If the client is late paying for high-value contracts, where time is of the essence, this could be considered a material breach of contract: one party fails to perform a major part of the contract, so the non-breaching party is no longer obligated to fulfil the contract.
• The legal position is the same when incentives are built into contracts. Non-payment in these circumstances could have the opposite effect with a supplier, and dis-incentivise them to improve.
• If you do not have the authority to ensure payments are on time, involve someone authorised to negotiate contract payment terms (see Stakeholders).

Extra information to consider for this step:

• Spend Analysis
• Stakeholder Engagement

The CIPS Resilience Tool asks general questions designed to stimulate thinking around the resilience of your organisation.

• Access the tool here, and on completion, consider what additional responsibilities you might wish to share with your suppliers, and include in contract negotiations.
• Generally, this means considering what obligations and remedies you can share with your supplier to mitigate risk and ensure resilience in the areas of: legal compliance; Government-level disruption in the market; corporate ethics; geographical, functional, performance and technical risk, particularly cyber interactions between your two organisations.

Extra information to consider for this step:

• CIPS Resilience Tool
• Cyber Security
• Mitigating supply chain risk

During the course of any contract, things will change. Establishing effective contract development processes is key.

• External changes such as at governmental or legislative level, or new disruptive technologies or process can effect the need for contract development.
• Altered project dependencies can mean suddenly adapting to new or altered criteria.
• Regularly review the contract from start to finish, to identify and ensure that the ripple effect of any change is understood throughout the contract.
• Change in project scope will need to be signed off at the appropriate authority level and communicating to stakeholders.

Extra information to consider for this step:

• Change Management

The supplier should deliver the contract you have agreed. Ideally, however, supplier development means building efficiencies that bring additional benefit to the contract, such as time and cost savings, or quality improvements.

• Collaborate with your supplier on an ongoing basis looking at continuous improvement activities.
• Explore whether cheaper or more sustainable materials could be effectively used.
• Review manufacturing flow to identify potential bottlenecks and establish how to remove them.

Extra information to consider for this step:

• Continuous Improvement
• Innovation & Value Generation
• Performance Measurements
• Supplier Collaboration

Good supplier relationship strategies help to create the right relationship and environment in which to work on new developments and evaluate ways to streamline processes.

• Remember, the ultimate goal is to realise efficiencies which will add value and increase your organisation’s profitability.
• Having the right supplier relationship management in place may be the difference between being first to market with a new concept or in a difficult supply market ensuring you have continuity of supply and reducing your risk.

Extra information to consider for this step:

• People and Skills
• Risk Management
• SRM and SC Management

Planning your exit strategy from a contract is essentially your vision for what you wish to achieve at the end of the project. Of course, the project should complete on-time, to budget, and all stakeholders satisfied, but how do you recognise this state?

• Agree a sign-off procedure in advance, with clear criteria.
• Ensure you have stakeholder acceptance, formalised if necessary, and a dispute resolution process in place.
• If one of the goals is continuity to a second phase with the same supplier, establish the whole agreement at the beginning of the first phase. Successful contract termination is well planned.

Extra information to consider for this step:

• Exit Strategy
• Legal

Over time, assessments should be carried out to determine if business requirements have changed, whether the agreement is still required and fit for purpose, what can be learnt from the process and how improvements can be incorporated next time.

• This takes us back to the start of cycle, which begins again.
• Remember to calculate and account for end-of-life costs, including decommissioning, removal or disposal of assets.

Extra information to consider for this step:

• Whole Life Costing