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Insight

Getting Contract Management Right

Last week, the National Audit Office (NAO) released its report on the delivery of major projects in government. In it, the NAO found that one third of major government projects due to be delivered in the next five years were either in doubt of successful delivery or appeared to be unachievable.

Last week, the National Audit Office (NAO) released its report on the delivery of major projects in government. In it, the NAO found that one third of major government projects due to be delivered in the next five years were either in doubt of successful delivery or appeared to be unachievable.

Delays, cost increases or project failure are not new issues, nor ones confined to the public sector. Successful contracts, particularly those which are complex, transformational or business critical, are not achieved by accident and require good planning, adequate resourcing and hands on management throughout their lifetime.

Here are some thoughts on achieving project success based on my experience.

Requirements: It’s inevitable that the need to change requirements in contract causes delay and price increases. Despite this, it’s still surprising the number of contracts that are entered into with either very high level requirements (to be developed and agreed later) or ones which have not been properly tested against the business need. Getting the requirements right first time will save a lot of headaches down the line.

Procurement timetable: Projects can suffer because procurement timetables are either too conservative (which tends to lead to procrastination and over complication) or too ambitious (leading to rushed negotiations or deferred agreements). Getting the balance right is easier said than done but will result in a project which is more clearly understood by both parties (in the same way) and achievable.

Contract Management Resourcing: While the procurement phase is often heavily resourced, the contract management phase receives relatively less attention. However, the level (and capability) of resource needed to deal with ad hoc contract issues, iron out misunderstandings between the parties or just manage delivery should not be underestimated. Dealing with in contract issues swiftly can help to minimise the impact on the project and avoid minor issues becoming more significant.

Knowledge transfer: Turnover is a fact of any project. People and teams roll off after completion, transition or transformation, others move on to new roles within the organisation and elsewhere.   Retaining this knowledge within the project is crucial but requires planning, cost and time (for example work shadowing, training and handover notes). However, this is all well spent – knowledge about the contract and the rationale for decisions made during the procurement can save significant time and arguments when resolving issues or queries.

Contract Guides: There are varying schools of thought on the need for and usefulness of contract guides. In my view they have their place and can help project success, provided they are user friendly, well thought through and drafted for contract management (for example by including worked examples and a list of dates for contract performance).

Follow the contract: While not every issue will (or should) be dealt with or resolved to the letter of the contract, there is a need to keep close alignment with the contract, particularly when it comes to dealing with performance failures (on both sides). A failure to do so can lead to disagreements and misunderstandings later down the line (as well as the legal risk that breaches have been waived or the contract affirmed).

Build a win win contract: Procurement competitions are often (but not always!) built as a race to the bottom with suppliers expected (or choosing) to tender with rock bottom prices and/or overly ambitious timetables. While from a customer perspective this seems good in theory, in reality suppliers who are constantly in breach, who have no contingency for unforeseen issues or are not making a reasonable profit are not motivated to successfully deliver the project for their customer. Better to agree a contract which allows the supplier to make a fair margin, includes sensible contingency and requires delivery to a realistic timetable. Doing so increases the chances of the project being successfully delivered on time and on budget and will allow both parties to win. 

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