Better contract management outcomes: A principles based framework

Better contract management outcomes: A principles based framework
The Client: NSW State Government client
Key Consultants: Dr Stefan Gassner

Grosvenor worked with a public organisation in New South Wales to improve their contract management. Our client not only required the confidence that the organisation complies with all regulation but at the same time wanted to increase the value they receive from their contracts.

The importance of contract management is supported by Aberdeen Group. According to their research, value lost due to poor compliance and lost negotiation effectiveness accounts to between 25% and 32%.

Contract management at our client was largely dependent on the individual managing the performance of a supplier. Their approach was often focused on getting the day-to-day activities right, rather than improving commercial outcomes.

The procurement team knew the path to improved contract management would be to increase overall capabilities and apply a consistent approach across all contracts.

The project would touch on more than 60 contract managers across four major categories of spend. To ensure consistency any solution would have to be applicable to contracts as diverse as Professional Services, Facilities Management, Operations and Event Management. At the same time, the solution would have to be practicable and take the unique value and risk profile of each contract into account. To gain the crucial support of contract managers, the solution would also need to allow enough flexibility for the contracts to be managed in a manner not dramatically dissimilar to today.

Grosvenor approached this project in two phases.

Phase 1: Advanced Contract Management Training

First, we completed advanced contract management training with all 60 contract managers. We adopted a workshop style training method to flesh out what currently works for practitioners and where areas of improvement lay. Our training concentrated on the critical steps of contract implementation, performance management and relationship management.

Phase 2: Contract Management Framework

Secondly, we helped our client develop a Contract Management Framework. The Framework is based on 30 contract management principles built to allow a consistent approach to the management of suppliers. As the Framework is based on principles rather than rules, the individual contract managers have enough flexibility to suit their own personal contract management style.

The development of a digital version of the Framework proved to increase the acceptance of practitioners. Available via the organisation’s intranet site, the tool displays the relevant principles, examples and forms based on the value, risk profile and the category of spend.

Procurement’s role in managing the Framework is to ensure consistency across all contracts through two initiatives. Firstly, in parallel to the tender process, Procurement works with the business to develop a Contract Implementation Questionnaire detailing how the contract manager will address each of the principles. The second initiative is six monthly contract health checks to ensure the contract is managed within the principles.

What next?

We assisted our client in the implementation for a flagship contract. To assure that the organisation receives the anticipated benefits from the Framework, we will complete a post implementation review in three months’ time.