Contracts

Effective Contract management and reporting of contract performance will be a key contributor IPART’s achieving its operational outcomes.

The IPART Contracts Register will capture and manage IPART contract information. This will include as a minimum the following information:

  1. Nature of goods and services being supplied.
  2. Contract Value.
  3. Supplier details.
  4. Tenure of contract (start and end dates).
  5. Any variations (Amendments or Flow-on actions) to the contract.
  6. Extension options.
  7. Closure/transition options.
  8. All original signed contracts along with all their original signed variations are to be sent to the IPART Procurement Manager who will update the IPART Contract Management System.

A scanned copy of the executed contract will then be filed by the Procurement Manager in the IPART RM8 system.

High level planning for the management of contracts commences in the PLAN phase of the PLAN, SOURCE and MANAGE process.

It is a continuum of the procurement process and derives from the:

  • Contract management planning strategy
  • Complexity assessment
  • Market analysis and review
  • Market approach
  • Contract negotiation
  • Implementation and
  • Outcomes evaluation.

Contract planning and management covers all activities at the commencement of, during and after the contract period. It is the process that ensures both parties to a contract fully meet their respective obligations as effectively and efficiently as possible, in order to continually deliver both the business and operational objectives required from the contract.

The following should be associated with this guide (see Contracts Library section):

  1. Contract Risk Segmentation Tool.
  2. Criticality to IPART.
  3. Contract Management Plan – Short.
  4. Contract Management Plan – Long.
  5. Check Lists.
  6. RACI.
  7. KPI and Supplier Performance Scorecard.
  8. Customer Satisfaction Survey.
  9. Issues Log.
  10. Contract Strategy Planning Tool.

There are four key components in contract management:

  1. Risk analysis,
  2. Commercial,
  3. Suppliers and contract, and
  4. Reporting.

These four components provide a context for contract planning and management at the individual procurement activity level.

Contract planning differs from contract management which ensures that a contract delivers what has been specified, within defined timelines, in accordance with stated performance standards, without defect and delivered at the agreed price/costs.

Contract planning ensures delivery of desired procurement outcomes. It may consider a broad range of factors that include:

  • Driving continuous improvement;
  • Value preservation and additional value creation;Performance management;
  • Risk mitigation, role clarity, and the value of supplier relationship; and
  • Quality assurance.

The contract planning and management process is dictated by the complexity of the individual procurement, its criticality to the organisations core operations and associated risk profile.

The level of applicability and frequency of the factors discussed in this guide are scalable based on the nature of the procurement. At the strategic end of the complexity scale the relevance of contract planning is more significant compared to the transactional end of the procurement complexity scale.

Contract planning and contract management build on the process steps that lead to the creation of a contract and the delivery of an outcome to the contracting body. The ability to leverage off the contract management planning strategy and complexity analysis facilitates targeting of advice to procurement practitioners in the form of tools and templates that is task relevant, clear and scalable as required.

The assessment of complexity has been used as a key determinant in defining the scope of issues and considerations that need to be taken into account at various stages of the procurement process. To simplify the complexity to contract planning and contract management alignment, procurement assessed as strategic aligns directly to the strategic segment. Similarly complexity of a transactional nature aligns directly to the operational segment.

The critical decision for procurement practitioners is then only to determine whether complexity of a leveraged or focused nature is of high or low risk, as these impacts on the scope of tasks that apply in contract planning and contract management. A segmentation analysis tool has been provided to assist in:

  1. Differentiating high risk from low risk contracts, and
  2. The degree to which the contract is critical to business of the organisation.
  3. Where the risk rating is above five, the contract management segment would be ‘high risk’ or ‘strategic’. If less than five it will be ‘transactional’ or ‘critical to business’. Where the criticality to business rating is above five, it will fall under the ‘strategic’ or ‘critical to business’ segments. If less than five it will be within the ‘transactional’ or ‘high risk’ segments.

The two ratings’ score will determine the final contract management segments. For example, a risk rating of six and a criticality rating three, would indicate that the contract management segment will be ‘high risk’.

Although the tool has applicability to procurement assessed as being of leveraged and focused complexity, it can also be used to monitor risks over the life of a long-term contract (three+ years) and contracts of a strategic nature.