Contract Management Case Study - CIPS Speaker... · Contract Management Case Study • Individuals...

Contract Management Case Study

Graham Collins

[email protected]


• Experience drawn from three local authorities (County Councils)

• All have significant scale (c £280-£400m spend per annum)

• Each is undergoing significant transformation and change as they shift to ‘commissioning’ organisations and face budget pressure

• 60%+ of their non schools income is spent externally. Dependency and risk relating to third parties is increasing

• The spectrum of services/suppliers is wide (3500+ commercial relationships)

• Governance in relation to contract management is tactical (selective intervention)

Context for the presentation 1


• Strong focus on ‘regulated’ procurement and the front end of the commissioning process

• Lack of transparency and consistency (though some pockets of good practice)

• No natural owner • Devolved activity, little sharing of knowledge or

skills across silos • Contract management not really

professionalised, skills and development ‘adhoc’ • Little appreciation of the difference between

contract management and relationship management and confusion between contract ‘monitoring’ and management

• Use of technical and often alien language • No mechanisms to make informed decisions

about resource allocation and risk

The contract management problem ……. 2


• Good contract outcomes result from actions and decisions made across the commercial cycle

• Whilst the contract represents the ‘legal’ agreement, success depends on wider factors

• For those the organisation needs to agree some basic principles

The broader picture first …. 3

Contract Management


“Equip the organisation for the future, mitigate risk, save money and improve outcomes. An activity that should pay for itself ”

• A consistent approach that applies to all third party relationships

• Improve the awareness of contract management activity and its contribution to the future agenda

• Recognise the distinctive commercial skills and capabilities that contract management requires

• Provide the necessary support, knowledge sharing, training and systems

• Build a pragmatic and flexible approach that draws upon NAO/CCS and other best practice

Gaining support ….. 4

“a management process that ensures that contract outcomes are delivered and where possible exceeded though pro-active management of third party relationships” Working definition of contract management


• Local flexibility within a common (corporate) approach

• Clear ownership and accountability – who does what

• Risk based prioritisation

• The same standard for all - contract management practice assessed against a common standard

• Agreed actions and improvements driven by ‘gaps’

• Standardised reporting

– Of contract management practice

– Of contract [supplier] performance

• Supported implementation with skills development, tools and a system

The “Contract Management Framework” 5


Implementation approach 6

Training & Skills

Delivered by a team representing all major parts of the organisation – with a senior sponsor.


• Segmentation provides a basis for prioritisation and resource allocation as well as building consistency within each segment

• Categorised by risk and value into 4 types uses aggregate values if there are multiple contracts. Value threshold can be varied.

• Names are important!

• Different requirements & practice ‘standards’ for each segment, for example; – Platinum – mandatory SRO, joint assessment,

mandatory reporting

– Gold – stronger focus on monitoring

– Sliver – stronger focus on commercial management

– Bronze – basic ‘hygiene’

Segmentation 7

Platinum 35%/0.1% Gold 20%/20% Sliver 30%/0.1% Bronze 15%/c80%

Category Typical £%/#


Role of the Contract Manager & SRO 8

• An SRO (senior relationship officer) is accountable for the effective oversight and governance of Platinum and selected Gold relationships. The SRO is normally the main budget holder or statutory officer

• Each contract is required to have a named Contract Manager who is responsible for ensuring the effective day-day management of the contract in line with the standards defined in the Framework and the requirements of the contract

• The contract manager will lead the assessment work


Assessment process 9

• Purpose – To establish a clear view of what is being done

– Reference to the ‘standard’ for the segment

– Based on evidence

– Enabling rather than threatening

• In three parts – Gather some basic information

• Company details

• Location of the contract or contracts

• Resources being applied and level of skill

• Savings or other planned improvement

– Undertake an assessment • About 2-3 hours

• Evidence provided

– Agree outcomes and gaps • Action plan

• Reporting to SRO

• Summary reports to Audit/Scrutiny Committee/Chief Exec Team


Assessment process 10

• The assessment process is comprehensive and looks for evidence across 60 separate areas of good practice

• The responses are rated into one of 5 categories based on the level of compliance demonstrated

• Assessments are also be subject to selective independent (internal) audit

• Different assessments for each segment

Structure and Resources1. Planning & Governance Comments

Preparing for contract management and providing oversight

Evidenced By(outline areas of concerns / issues and potential

resolutions)

1.1 Contract management roles and responsibilities have been allocated in accordance

with OCC Contract Management FrameworkRACI, Job Description

1.2 Contract management plan is in place

Contract management plan (summary of T&Cs; schedule of

key trigger points - notice period, break point, extension;

formal meeting dates; key milestones; key obligations /

deliverables, SLA, KPI)

1.3 Contract is managed with appropriate governance

Compliance to Contract Management Framework; audit;

Business Continuity Management (BCM); example minutes

of service review meeting and commercial / contract

meetings; senior management overview of contract and

developments.

1.4 Contract management issues and performance are reported through the governance

structure with senior level engagement

Examples of Issues and performance reporting; outline of

engagement model displaying interfaces to board level

internally and with supplier

1.5 Contract management effort is proportional to value and criticality of contract in

accordance with OCC Contract Management Framework

1.5% - 2.5% of Contract Value; alignment with contract

management framework (segmentation Platinum-Bronze)

1.6 Contract management knowledge and good practice is shared with users and wider

community

Systematic capturing of knowledge, use of intranet, forums,

etc. to share good practice

2. People Comments


resolutions)

2.1 The contract manager has detailed knowledge of the contract and other relevant

matters, such as service level agreements and ongoing supplier performance

Contract management plan (summary of T&Cs; schedule of

key trigger points - notice period, break point, extension;

formal meeting dates; key milestones; key obligations /

deliverables, SLA, KPI); examples of MI reporting related to

SLA, KPIs

2.2 The contract manager has the appropriate skills (contract management and more

general commercial awareness skills), with access to relevant training and development.

Experienced contract managers are utilised on key contracts in line with the OCC

Contract Management role family

Show compliance to OCC Contract Management

Framework roles and responsibilities, job description.

Training records.

2.3 Contract management staff have personal objectives related to performance

improvement outcomes Personal objectives linked to performance improvements

3. Administration Comments


resolutions)

3.1 Hard copy contracts are appropriately logged and stored - preferably on ProContract -

and are easily accessible when required; for complex contracts, a summary and/or

contract operations guide is produced. Where is hard copy held and by whom?

Example of contract register / repository with contract

details and evidence of a copy of the contract stored in the

repository; for complex contracts, a summary and/or

contract operations guide. For example is hard copy

signed contract held by legal, procurement, commissioning

etc?

3.2 The register / repository is used for key information, to give, for example, search

capability; relevant ongoing contract management information and documentation is

retained and managed

Contract register complete and up to date

3.3 There are mechanisms in place within the register / repository for identifying key

contract ‘trigger points’, such as extensions, break points, contract changes, expiry date,

termination etc.

Trigger points are accurate and up to date and aligned with

key contract points

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Managing the physical contract and the timetable for making key decisions

Please Tick the appropriate box



Ensuring the right people are in place to carry out the contract management activities

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Example


• Individuals often become contract managers but may not have the skills or support to do it well

• Segmentation helps – People can learn or benchmark against each other

– Training can be targeted by segment

• For example – Passport to practice – a practitioner level of accreditation

for Platinum/Gold/Silver contract managers

– Basic induction for Bronze contract managers

• Training, support and access to standard tools and information runs in parallel to the assessment process

• Peer-group learning and knowledge share sessions help build a ‘community of practice’

Skills and support for contract managers 11


• Not designed around contract management activity

– Bolt on to finance system like ‘SAP’

– Bolt on to e-procurement system

• Now need be contract manager ‘centric’ and built to support the process;

– Document management

– KPI Monitoring + information exchange with supplier

– Contract expenditure

– Customer complaints, supplier audits, visit and meeting information

– CMF assessments

• As well as; – Providing standardised corporate reporting

• CMF assessment status by segment and supplier

• Standard supplier performance dashboard

• Risk

Systems 12


• All three organisations responding very positively. Contract management has a high profile. Positive energy and a desire to do better

• Beginning to see informed discussion about investment in contract management and sensible resource allocation

• Need for improved systems and skills development remains, one is now leading with the development of a ‘cloud application’ which supports the whole process

• The role of SRO – and managing and developing ‘relationships’ rather than just contracts still needs to be strengthened

• Embedding does take 12-18months or more

So where are they now? 13


• Early days but ..

– Segmentation is leading to more targeted communication and engagement (for example in relation to apprentices, treatments of SME’s and sustainability)

– Encouraging collaboration around common ‘platinum’ suppliers

– Encouraging use of common systems and training particularly the ‘passport to practice’ scheme

– Very strong Member interest and support from Audit and Performance Scrutiny Committees, consistent reporting and classification is particularly helpful

Future potential ….. 14


Questions ? 15

Thank You !

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