Part 8: Managing the contract

Procurement guidance for public entities.

Contracts can be arranged in a variety of ways. For example, they may be negotiated between the public entity and the provider as part of a relational contractual situation, negotiated with a preferred supplier as part of a selective procurement, or the result of a competitive tender or proposal process.

Regardless of how the contract or agreement is arranged and whether it is a conventional or relational contract, a public entity is responsible for the ongoing management of:

  • the contract; and
  • the relationship with the supplier of the goods or services.

A public entity needs to monitor and manage the supplier’s performance to assess whether the public entity is receiving value for money. It should determine the extent of the managing and monitoring based on risk management and cost-benefit assessments.

Monitoring and managing supplier performance should be a priority when the value and the risks associated with the procurement are high.

The transition to a new supplier


We expect a public entity to prepare a transition plan when service delivery could be affected by the transition from one agreement or contract to the next.

In relatively routine, straightforward procurements, transition arrangements may be covered in the contract management plan. More complex procurements will require a detailed transition plan and may require advanced change management skills.


A public entity should consider including guidance in its relevant policies and procedures on when a transition plan may be needed. The need for a transition plan should be considered at the procurement planning phase, because it may have an effect on the timing of the procurement.

The public entity should also include guidance in its policies and procedures on what the transition plan should cover. The amount of detail needed in the plan will depend on the goods or services being procured, and the plan should be proportionate to the scale, complexity, and risk of the transition. For example, a relatively minor, routine contract may not require any transition plan, or may require only a statement that outlines the adequacy of existing procurement procedures. However, a contract involving the outsourcing of significant aspects of an entity’s activities may require a detailed transition plan.

For more complex procurements, the plan may need to address:

  • a timeline of activities and events;
  • reports on progress;
  • additional resource requirements;
  • important roles and responsibilities;
  • training requirements;
  • communications requirements (for example, communications plans), including any reporting structure that the public entity may need;
  • risk and risk management;
  • matters connected with the entity’s fixed assets;
  • matters to address any effects on customers;
  • any transitional arrangements that may need to be negotiated with the incoming or outgoing supplier;
  • managing the outgoing supplier’s performance through to the conclusion of their contract; and
  • situations where a contract is terminated before its natural end date and how to deal with the implications of early termination.

For fixed assets, the plan should address:

  • the effect of the contract on land, facilities, equipment, or machinery; and
  • identifying and assigning responsibilities such as ownership, insurance, access, usage, and transfer.

For the effects on customers, the plan should address:

  • the need for a customer communication strategy;
  • consultation to identify any customer needs during the transition period; and
  • notification of any interim arrangements, or changes to staff and service delivery schedules.

A public entity should also be aware of incumbent supplier issues – for example, issues relating to confidentiality, bias or impartiality, and access to information – and have a strategy to deal with these issues.

Types of contract management

Conventional contract management

To achieve good contract performance, public entities should ensure that the terms of the contract are adhered to, and that all parties to the contract understand their respective obligations.1


We expect a public entity to ensure that the terms of the contract are adhered to during the contract by regularly monitoring that the goods or services are delivered:

  • on time;
  • at the agreed cost; and
  • to the required quality.

We also expect a public entity to maintain records of the monitoring and contract management that they have carried out.

Planning for the management of the contract should start at the procurement planning phase and continue through the evaluation and the contract negotiation.

A contract management plan should be prepared. The contents of the plan will depend on the value and risk associated with the goods or services procured.

The contract management plan will be a living document that is updated throughout the life of the contract.


A public entity should include guidance in its relevant policies and procedures on how the delivery of goods or services will be managed.

Managing the delivery of goods or services is about ensuring that what has been agreed is delivered, to the appropriate quality standards. It is about assessing and managing the performance of the supplier to ensure value for money. Procedures may include:

  • assessing whether the goods or services are delivered to the agreed levels or volumes;
  • assessing the quality of the goods or services – a measurement tool should be created that will allow the quality to be assessed, even in areas where it is hard to quantify;
  • agreeing, before the contract starts, a baseline from which improvements in the goods or services can be measured (for example, benchmarking, or comparing performance across different organisations and providers, is another useful way to gauge improvements or pricing levels); and
  • ensuring that any other additional requirements under the contract have been fulfilled by the supplier (for example, reporting).

A public entity’s relevant policies and procedures should also say how risks will be managed. Fulfilling the contract may be endangered by several kinds of risk – some in the supplier’s control, and some outside it. To manage a contract, it is vital to identify and avoid or minimise the risks to the contract. This includes controlling those risks that are carried by the supplier under the contract.

Business continuity planning and contingency planning are an important part of managing risk. They help prepare the public entity for the situation where the supplier cannot deliver. A contingency plan proportionate to the scale, complexity, and risk of the contract should be prepared before the contract takes effect. For low value or low risk services, this may not be necessary. The plan may simply recognise that some delay could occur in restoring services, or dealing with problems, should the contract fail.

The management of relationships will vary, depending on the contract. Where appropriate, a public entity should ensure that:

  • both parties understand and agree on an appropriate type of relationship model for each particular contract;
  • the contract’s management structures support good relationships between the parties, and that staff at all levels show their commitment to it;
  • the flow of information and communications are established at the start of a contract, and maintained through its life – the three primary levels of communication in a contractual arrangement are operational (end users and technical support staff), business (contract manager and relationship manager on both sides), and strategic (senior management and board of directors); and
  • procedures for raising issues and handling problems are set up, so that any issues or problems are dealt with as early as possible and at the appropriate level in the public entity.

How the contract will be administered should also be included in a public entity’s policies and procedures. Procedures should be in place for managing activities in the main contract. These procedures should be included in the contract management plan, and may include:

  • contract variations, including control of any changes – the contract documentation must continue to reflect the arrangement accurately, and any changes to it that are required by changes to services or procedures need to be carefully controlled;
  • charges and cost monitoring;
  • ordering and payment procedures;
  • time management;
  • management reporting; and
  • asset management.

Clear administrative procedures will ensure that all parties to the contract understand who does what, when, and how.

The public entity’s policies and procedures should include guidance on the information required in a contract management plan. Depending on the value and risk associated with the procurement, these may include:

  • a summary of milestones, including any review of the contract and the lead time needed for any re-tender/proposal or renewal;
  • a list of the main individuals and their responsibilities (for both the public entity and the supplier) – for example, the contract manager and the governance board;
  • a schedule of risks that have been identified and that are being monitored and managed;
  • the frequency and content of a supplier’s reporting, and the content, frequency, and distribution of any reporting within the public entity – for example, monthly reporting to the senior management team on important service statistics;
  • a schedule of meetings, and any standard agenda items;
  • the processes by which some of the contractual obligations are to be achieved;
  • the procedures for managing any specific activities in the contract;
  • details of the process and authorities for approving variations to contracts (including delegations);
  • details of any ordering procedures, such as ordering of hardware, travel services, and printing; and
  • payment procedures, such as the level of detail to be provided in invoices (for example, asset numbers), and the format for any electronic invoices.

The frequency and type of meetings required to review contract performance should also be covered in public entities’ policies and procedures. These may include:

  • regular progress meetings that involve the supplier, the contract management team, and key staff of the public entity, to discuss performance, contract events or milestones, changes to user demands, and proposed actions or responses to current or potential problems;
  • technical meetings, as required, that involve specialist technical representatives of the contract management team and the supplier, to review technical reports and performance data and discuss technical issues; and
  • longer-term reviews and audits, to consider the achievement of objectives, results against budget, user satisfaction, the extent to which value for money is being achieved and requirements are being met, and how to address any emerging need for changes.

The appointment of a contract manager, and that person’s responsibilities, should also be covered in a public entity’s policies and procedures. The responsibilities may include:

  • translating the entity’s requirements into contractual provisions;
  • acting as a single point of contact for all formal and legal correspondence for the contract;
  • maintaining contract performance measures;
  • monitoring contract performance and reporting at an overall service or business outcome level;
  • approving payment and making payments according to the contract;
  • representing the public entity’s interests to the supplier at contract level;
  • overseeing the operation of the contract;
  • negotiating remedies with the supplier and taking remedial actions;
  • maintaining and developing contract specifications;
  • setting up regular reporting procedures, both formal and informal, and ensuring that they are used;
  • promoting an understanding of the business practices and common techniques of both parties to the contract; and
  • approving deliveries and completions.

Contract management when contracting with non-government organisations

The Treasury has issued Guidelines for Contracting with Non-Government Organisations for Services Sought by the Crown. The Treasury guidelines include a section on managing the contract and monitoring, against which a public entity can gauge its own policies and procedures.

The expectations for contract management for non-government organisations will depend on the type of funding arrangement that has been entered into. If the arrangement is more in the nature of a conventional contract, the arrangements will be similar to those outlined in paragraphs 8.13-8.28.

Contract management and relational purchasing

Contract management of relational purchases will be similar to conventional contract management. Public entities will need to consider preparing a contract management plan for high value, high risk relational purchases and may need to appoint a contract manager. The management of risks still needs to be considered. The types of risks may well differ under a relational contract – for example, where there is no effective market, business continuity planning and contingency planning may be more important.

The contract management plan will need to focus on maintaining close relationships between the public entity and the supplier during the period of the contract. The nature of the goods or services procured under these contracts, as well as the intended procurement outcome, may make the normal contract deliverables more difficult to ascertain, and these deliverables may change during the term of the contract. This means that the public entity and the supplier may have to work more closely to maintain an understanding of:

  • the goods or services being delivered;
  • how the quality of these goods or services will be assessed; and
  • how the cost of the goods or services will be benchmarked in the absence of an effective market process.

Completion and contract review


We expect a public entity to remain aware of the contract’s expiry date so that it can plan for future provision well before that date. This may include communicating with the current or other possible providers or a re-tender/ proposal.

The public entity should review and evaluate the contract to assess how well the objectives have been achieved and determine where it can make any improvements.

Where appropriate, the public entity should carry out a formal documented contract completion2 process (including debrief) when the contract expires or ends.


A public entity should include guidance in its relevant policies and procedures on the need for, and the requirements of, the review. The review should consider questions such as:

  • Does this contract meet current and future needs (in terms of the goods or services provided)?
  • Does the contract represent value for money?
  • Does the supplier’s performance meet current and future needs for:
    • the levels of service required?
    • contract management?
    • reporting?
  • Are new goods or services available that were not previously available?
  • If the public entity chooses to go back to the market for these services, what are the costs, risks, and benefits of this process?
  • What options are there under:
    • the contract (that is, does it provide for a renewal term)?
    • the Mandatory Rules for Procurement by Departments?
    • the entity’s own procurement policy?

After completing the review, the public entity should prepare a report that includes recommendations on the lessons learned.

If the contract allows the term to be extended without the public entity inviting new providers or suppliers, a public entity should carefully consider the benefits and costs of extension before agreeing to it. Relevant factors may include:

  • the current provider’s or supplier’s performance;
  • the public entity’s performance in meeting its obligations;
  • constraints on intellectual property and confidentiality;
  • user satisfaction;
  • the effectiveness of the contract, and whether any improvements could be negotiated;
  • developments in the market;
  • the existing supplier’s competitiveness compared with that of other suppliers; and
  • the costs associated with new service provision and the transition to a new contract.

Completion requirements will vary, depending on the nature of the contract and the general and special terms applicable to it. A public entity should ensure that the supplier honours all its obligations before it is released from its commitments – subject to its rights under the contract. Completion may be in stages. It may be:

  • when the work is completed; or
  • when the maintenance period has finished.

In some circumstances, warranty commitments and obligations or insurance liabilities will continue for a period of time. Confidentiality requirements and intellectual property obligations may continue to apply after the end of the contract. A process will need to be put in place to monitor these obligations until they no longer apply.

The completion of a contract may involve:

  • issuing a certificate of completion;
  • complying with instructions relating to bank guarantees and retention monies;
  • conducting the transition and handover to an incoming contractor;3
  • ensuring that all loaned items have been returned;
  • returning unused material; and
  • preparing and considering final reports on contract performance.

A public entity should consider keeping an existing specification under regular review, so that it is up to date and ready for the next tender or proposal process.

A new specification should reflect any:

  • changes in needs, organisational structure, or operational processes;
  • effects of new technology; and
  • improvements in general processes.

1: For an example of guidance material on contract management, see Partnerships Victoria, Australia (June 2005), Contract Management Guide,

2: Completion involves bringing the parties’ relationship to an end, because the goods or services have been supplied in full.

3: Handover may involve the revaluation and transfer of assets, intellectual property, and rights.

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