Contract Administration & Management Pulse Blog For public procurement professionals whose job duties include contract administration, it can be tempting to leave contracts alone unless – or more accurately: until – there is an issue. Increasingly, however, procurement offices are recognizing the value of utilizing contract administration best practices to improve their relationships with suppliers and increase the value of their contracts.
Effective contract administration requires a straightforward understanding of what contract administration is and the best ways to perform its activities at each stage of the contract’s life. Though you may have heard the two terms used interchangeably, contract management and contract administration are not quite the same.
As with many other aspects of public procurement, the time and energy required by contract administration activities will depend on the complexity of the contract, as well as the dollar value and significance. If your entity is small and the contracted supplier’s company is small, contract administration may be less time-consuming and less complex. As the sizes of both organizations increase, the effort you put towards effective contract administration will likely increase. It’s important to remember that meaningful contract administration is a shared responsibility between the buyer and the seller; you’ve both agreed to the terms and conditions within the contract and you both must keep those contractual promises for the contract to succeed.[2] Ultimately, effective contract administration is focused on the quality of the relationship between your entity and your supplier, as well as the outcomes of that contracted relationship.
Beginning
At each stage in a contract’s lifecycle, there are actions that the procurement professional can take to remain proactive and to ensure that they are receiving the best value goods and/or services from their supplier. Within the first year of a contract, for example, you should focus on effective contract implementation.
Begin by asking yourself a few important questions:
Is this the first time your entity has purchased these goods or services?
Is this the first time this supplier has earned a contract? As with most relationships, the partnership between your office and your supplier is only as good as the communication between them.
Does the signed contract have expectations regarding who is involved in implementation?
Is there a designated timeline for the first six months or the first year?
Especially if you were not the person who drafted the initial contract, it is critical that you begin with an understanding of the terms and conditions to which the supplier (and your entity) have agreed.
Once you have a firm grasp of the contract terms and expectations, an orientation meeting makes a great start to implementing the contract and beginning effective contract administration. Not only will this meeting – by video conference or in-person – give you the chance to clearly state the expectations for the contract, but it will also open the door for ongoing communication. This will be an incredibly useful tool throughout the contract lifecycle, allowing for both parties to agree upon the contract requirements, roles, and responsibilities mutually, which will reduce future problems due to miscommunication or misunderstanding. No matter what else happens during the contract’s life, setting a clear expectation regarding open and reciprocal communication will provide the groundwork from which to build a successful contract; both the procurement office and the supplier should feel that they are working together towards the goals laid out in the contract and that any issues which arise will be overcome fairly and within a reasonable timeframe. Good communication will allow you to build rapport with the supplier, ultimately ensuring that you receive the best value goods and/or services exactly when and where you need them.
Middle
By about the halfway point of a contract’s life, you’ve hopefully set a good cadence for communication. Maybe you meet quarterly with your supplier to review purchase data and supply trends; maybe you’ve had an issue or two come up. Midway through a contract is a great time to review some of the processes and procedures in place.
What data points are you tracking?
What does your supplier’s delivery accuracy look like, for example?
What issues have you found and how did you learn about them?
How often does your entity meet with the supplier?
What information is being documented?
In an ideal world, the contract and the relationship with the supplier will be going well after some time has passed, but it is critical for the procurement office to assess the contract’s success year over year.
It may become necessary to “re-orient” the supplier or the procurement office to the contract terms to remind those involved of their responsibilities; maybe there has been some turnover or just a gradual departure from the original levels of communication, accuracy, and timeliness. Whatever they are, issues should be addressed and corrected as soon as you become aware of them to minimize bad feelings for the supplier and for the end users of the contract.
There are many supplier management tools available – from trainings to templates to automated e-procurement modules – which require different levels of approval and funding. A tool that can be implemented with a lower impact on policy and price is a variation of a Corrective Action Plan (sometimes called CAP). This document can be as formal or informal as you need but should include a detailed description of the issue and the supplier’s agreed solution, which should be measurable. A CAP, among other efforts to communicate, will ensure that any problems are addressed and resolved as quickly as possible.
End
Eventually, your contract must come to an end. In the final year or two of the contract’s life, the procurement office should determine whether there will be another solicitation for the goods and/or services on this contract. If there will be a new solicitation, the communication and documentation from the contract’s life will serve you well. The procurement professional should review not only the terms and conditions of the existing contract but should also consider any new or updated clauses that may be needed. The data collected throughout the contract’s life and the documented issues or successes can be valuable in the market research phase of solicitation development. While this process is ongoing, it’s important for communication between the procurement office and the supplier to remain as consistent and open as possible to ensure a smooth transition between contracts.
Arguably one of the most important aspects of contract administration comes at the end of the contract’s life; if you have determined that your entity will solicit for the goods and/or services again and will sign a new contract, it is critical that your existing contract end successfully. Ideally, the communication throughout the contract’s life has been ongoing and appropriate, any corrective action has been taken as soon as possible, and there are no bad feelings between the supplier and the end users. Existing goodwill allows the procurement office to enter into a new contract trusting that they have access to all the information they need to continue the success of the previous contract, whether the new contract is won by the same supplier or a different one.
Even though it may be less initial effort to sign a contract and only return to it when there is a problem, it does not serve the procurement office in the long run. Throughout the life of a contract, utilizing and developing best practices for contract administration brings incredible value – both to the contract and the goods and/or services received and to the relationships with suppliers.
[1] NASPO. (2020, July 15). Contract Administration Best Practices. Retrieved from /contract-administration-best-practices/
[2] National Contract Management Association (NCMA). (2011). Contract Management Body of Knowledge, 3rd Edition. NCMA.
[3] Office of Federal Procurement Policy (OFPP). (1994, October). A Guide to Best Practices for Contract Administration. Retrieved from https://www.gsa.gov/system/files/BestPracticesContractAdministration.pdf.
[4] NASPO. (2019). State and Local Government Procurement: A Practical Guide, 3rd Edition. NASPO.
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