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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 to public sector contract management, otherwise, there could be significant and detrimental impacts to your organisation.
The mismanagement of contracts can result in wider public services failures, something every public sector organisation wants to avoid.
To help you steer clear of common pitfalls so many organisations get wrong...
we have listed our 5 top tips for successful public sector contract management...
1. Structure, Format and KPIs
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 deliver 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 other's 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.
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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 the correct action can be put in place which also prevents the issue from 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 by deploying a united approach to managing your relationship.
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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 good 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.
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