Contract management can be a difficult art to master for any organisation. With £250bn spent on goods and services each year, it’s important to be attentive with public sector contract management, otherwise there could be significant and detrimental impacts to your organisation.
As you may have seen on the news the mismanagement of contracts has often resulted in wider public services failures, from millions of pounds lost in the over-billing for prisoner electronic tags to the more recent collapse of Carillion. In light of these recent events, we have listed out 5 top tips for successful public sector contract management, we are hoping these few hints will help you steer clear of the common mistakes that so many organisations get wrong:
1. Structure, Format and KPI’s
It’s hugely important to set out what the purchasing party wants from the start. By defining the contract structure and format, you can determine how you want the relationship with the supplier to work.
Key performance indicators should be used to demonstrate supplier performance. By converting them into contractual obligations with the supplier, the process can show how committed a supplier is to delivering against KPIs.
2. Consider Relationships and Contract Duration
Building relationships is key for any successful business, and it is possible to have both a contract and a relationship with your supplier. Before a contract is put in place you might have to make specific arrangements to define how each party agrees the relationship shall work in practice around the contract. However, this should lead to both parties having a sense of commitment to each other and thus will work in each others best interests.
Whilst concentrating on relationships is an important factor in the contract process, it’s key to take into account how long you want the contract to last too. This is influenced by a combination of aspects, including conditions within the market, how easy it is to switch suppliers and how much leverage you have over the suppliers. Taking that into account will impacts the relationship you want to have with your supplier.
3. Monitoring, Reviewing, and Managing Issues
You might think or hope that once the contract is signed you can put it away and forget about it, chancing that the supplier will keep up requirements on their side. Monitoring and reviewing performance throughout the contract period is more likely to ensure compliance from the supplier and guarantee you get what was agreed upon.
Even when you think you have everything in place things can still go wrong and performance can falter. Any issues that arise should be managed in a way which sees a resolution with the supplier, and that the correct action can be put in place which also prevents the issue arising again.
4. Review With the Supplier and Manage Contracts
It’s important to undertake regular supplier reviews to focus on the relationship and ensure you have their full attention. By reviewing the performance and compliance you can create an action plan on where things need to change and improve. If you manage multiple contracts with a supplier, you can also gain leverage through deploying a united approach to managing your relationship.
5. Planning Your Exit and Managing Contract Expiration
It might seem weird, but planning how you will exit a contract is an important aspect to consider before you’ve signed the contract itself. You never know what’s going to happen even when you have a fantastic existing relationship with your supplier, so it’s a good move to know where each party can exit the contract if the need arises.
Don’t let contract expiration creep up on you. This can limit your options if you try to renegotiate a new contract. If you put in place a system to flag contract expiration with enough time to spare you can make sure appropriate arrangements are put in place.
Get involved in the conversation!
What issues has your organisation faced regarding public sector contract management? What advice can you give other organisations about successful contract management practice?
We’d love to hear from you. You can tweet us using #UMGTraining @UModernGov.
If you would like to discuss any of the details you have read in this blog; including our ‘A Guide to Successful Contract Management’ course on Thursday 5th July, please contact us on 0800 542 9440 or email [email protected].
Can’t make the date?
We can also run this course for you In-house, at your organisation or a venue of your choice, on a date to suit you.
Contact our In-house training team on [email protected] or call 0800 542 9414 to find out more.