Procurement in a Nutshell: Contract Management Playbook

The Playbook provides commercial, financial, operational, project delivery, policy and other professionals with guidelines, rules and principles that will help them to avoid the most common errors observed in managing contracts.

You can view the Contract Management Playbook here.

Who is the Playbook for?

The Playbook provides strategic and operational guidance for contracting authorities to support effective contractual management across the whole of the public sector.

The Playbook applies to all contracts for the provision of goods, works or services. This includes all contracts that are subject to the Procurement Act 2023 (PA 2023) or Predecessor Legislation, including exempted contracts and contracts that have a value above the relevant threshold set out in the PA 2023 or Predecessor Legislation.

What is contract management?

The Playbook defines contract management as including all the day-to-day contract administration, but it goes beyond this and it can involve any decisions or actions that affect:

• Obligations of suppliers and contracting authorities.
• All contract management activity.
• Supplier relationships.

In terms of the contract manager, they will undertake a range of activities which span from the pre-award and post-entry stages of the contract.

The contract management role may also be undertaken by one or a number of individuals under different titles. In some contracting authorities, one team may be responsible for the procurement and contract management of a contract.

Additionally, six key objectives are highlighted as areas of importance for ensuring effective contract management:

1. Delivering value and high-quality services.
2. Effective governance.
3. Knowledge sharing and collaboration.
4. Digital transformation and cyber security.
5. Innovation.
6. Alignment with contract management standards.

Contract management in pre-award stages

The pre-award stage covers the period before the contract is awarded and commences. This includes market engagement, business case development, and the procurement process.

Early involvement of contract managers at these stages ensures that effective contract management capabilities are built in from the start. As such, the Playbook highlights that contract managers should collaborate with the sourcing team on key areas, such as:

• Scoping and establishment requirements.
• Business case.
• Preliminary market engagement.

Procurement activities where contract managers can add value

Contract managers can also add value to activities throughout the procurement process. Their support is often helpful to business case development and finalisation, performance measures and connecting the procurement team to stakeholders across the business and externally.

With the procurement process in mind, the Playbook identifies the following key areas that should be given particular attention:

• Setting up performance measures such as metrics for the supplier scorecards, SLAs and KPIs.
• Establishing cross-functional stakeholder engagement.
• Contract authorisation.
• Mobilisation and transition planning.

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Managing contract delivery and exit

One of the key responsibilities in contract management is facilitating the effective delivery of contract deliverables through performance management. This relies on strong collaboration between the contracting authority and the supplier.

Contract financial performance

Financial performance is important to continuously monitor to ensure that spend is within budget and costs do not exceed the approved limits. The Playbook identifies three specific areas that require attention: contractual spend, invoices and supplier financial standing.

Contractual spend

This may include reviewing:

1. Time and materials.
2. Fixed price.
3. Milestones.
4. Costs plus.
5. Retainer.

Payment process

The typical payment process is as follows:

1. Requisition.
2. Purchase Order.
3. Invoice.

It is important to note that invoices need to be reviewed, validated and paid on time in accordance with the relevant provisions of the contract and there are implied payment terms under the PA 2023 that must be adhered to.

Supplier financial standing

Contracting authorities should use the Contract Tier tool available to them to identify their key suppliers and monitor their economic and financial standing on an ongoing basis. The frequency of the review should reflect the contract criticality, perceived risk of failure and the frequency of the supplier’s own financial reporting regime.

For suppliers of Silver and Gold contracts, monitoring should be carried out at least annually.

Where the supplier is an SME there may be limited publicly available information to allow contract managers to assess the supplier’s ongoing financial standing. In these circumstances, having regular engagement, a strong relationship and leveraging contractual provisions for information sharing (if applicable) are the best strategies for monitoring the supplier’s financial standing.

For further information please contact Tim Care or Melanie Pears in our Public Sector team.