According to the NIGP, The Institute for Public Procurement, “the primary responsibilities of contract administration are to document performance of the contract in a procurement file, monitor performance of the contract, and resolve any issues related to the contract.”
Public contracts are state laws, statutes and codes, as well as local ordinances, regulations, and rules. Procurement teams spend time and resources to conduct a solicitation, evaluate bids/proposals, negotiate, and finally award a contract. To obtain the full value for that contract, it must be managed properly. But doing so the old fashioned way, by manually filing in progress and closed contracts, can prove cumbersome.
Once a contract is awarded, it must then be managed over the lifespan of the contract, sometimes up to 3 to 5 years. In these instances, option years need to be negotiated, insurance certificates collected, and any minor changes or deficiencies in performance addressed. Often, even completed and closed contracts must be kept and maintained for several years after work has been completed, in the event of an audit, emergency, litigation, or other event.
If contract management is delegated to a customer department or end user, then training must be provided to ensure consistency in contract management across the organization. Policies should be established to allow procurement teams to conduct or delegate necessary contract administration activities, such as:
- Ensuring maintenance of proper contract documentation.
- Managing performance of the contract, including contract compliance.
- Resolving any contract issues or disputes.
Contract Documentation
Transparency and compliance are important to the integrity of any procurement process. To ensure both, agencies must maintain documentation from the initial solicitation to the ultimate contract award, as well as ongoing maintenance. This can include, but is not limited to, specifications and scope of work, terms and conditions, insurance certificates, required bonds, performance issues and resolutions, option year renewals, and any other correspondence related to the contract.
While it is important to maintain this documentation, it is just as important that it is easily and quickly retrievable. Accessing documentation is important to ensure protests are effectively addressed or public information requests are responded to within a reasonable timeframe. In the worst-case scenario of an accident or potential litigation, it is prudent for an entity to have all relevant documentation related to the contract to quickly provide to their assigned legal counsel.
But hard copy files of contracts in filing cabinets across multiple offices or campuses can often be difficult to quickly retrieve when needed. An eProcurement software solution that can manage contracts and maintain them for easy access in the case of an audit or other request can help alleviate note only the administrative burden of searching through thousands of files, but also the environmental impact of storing those files.
To learn about Contract Management in the PlanetBids system, click here.
Managing Performance of the Contract
Contract management ensures that all parties comply with the terms of the contract, such as milestones, metrics, and deliverables. A good Contract Management Plan (CAP) should be established for the organization to ensure standard policies across the organization for all awarded contracts. It also provides guidance and direction for departments or end users who are not formally trained in procurement duties.
Depending on the type and complexity of the procurement, a contract kickoff meeting may be conducted to establish roles and responsibilities and provide any needed clarification. Key contacts for both the entity and contractor should commit to complying with the contract’s scope of work and terms and conditions. Regular communication is essential to ensuring the contract is routinely monitored and any issues quickly addressed.
Procurement and contract managers should be contacted when a milestone is not achieved, product quality is in question, deliveries are not being made, terms and conditions are breached, or other challenges arise. It is important that issues are documented and proactively addressed.
Managing and monitoring of contract performance may include ensuring:
- Any established milestones are achieved.
- Compliance with delivery schedules.
- Received product or service meets the specifications.
- Customer service and client satisfaction levels.
- Social goals, such as sustainability or DBE/SBE goals, are met.
- The invoiced price matches the contract price.
- Receipt of insurance certificates on an annual basis.
- Receipt and validation of bonds.
- Reports, inspections or testing are received as required.
Once again, a Contract Management system within an eProcurement solution can be key to ensuring that vendor performance meets contract specifications.
Resolution of Contract Disputes
When an issue arises with a contract, it should be addressed immediately. Depending on the infraction, it may require the involvement of management and legal counsel. Providing contract managers with a methodology and consistent approach can assist their decision-making process and provide consistent messaging for contracted suppliers. One way is to categorize contract issues into minor and significant with directions on how to handle each scenario. In addition, documentation of any conversations, correspondence or actions should be maintained in the contract file.
It is up to the procurement agency to decide whether an issue might be minor or significant, and to determine the desired method of dealing with the issue. For example, office supplies not being delivered consistently might be addressed with a phone conversation, followed by a letter reminding the supplier of the terms of delivery. This might be considered a minor offense. However, chemicals not being delivered properly or in a timely manner to a water treatment plant may cause operational challenges or water quality concerns and would likely be considered more significant. This situation may involve a site visit, in-person meeting, and legal counsel involvement.
In the end, procurement can determine if the breach of contract is significant enough to consider cancellation of the contract, pulling a bond, or pursuing legal action.
Read about how the City of Fort Myers, Florida, utilized the PB System™ to manage contracts more efficiently.
Why is Contract Management Important?
As billions of taxpayer dollars are spent each year by public agencies across the country, it is important for government and educational teams to serve as good stewards to ensure budgets are spent properly for commodities, services, and construction projects that will improve constituents’ lives or experiences. Good contract management is key to achieving that goal.
To learn more about how PlanetBids can help you streamline bid and vendor management, including better contract maintenance, contact us today.
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