Contract and Vendor Management Guide

Transcription

1 Contents 1. Guidelines for managing contracts and vendors Purpose and scope Introduction Contract and Vendor Management 2.1. Levels of management/segmentation Supplier relationship management matrix Supplier relationship management reporting Measuring successful supplier relationship management Management and escalation procedures Contract management objectives Probity and transparency Retention of documentation Contract Management Plans Issues and disputes Vendor meetings and performance reviews Key stakeholders Managing compliance to contract obligations Providing advice Reviewing contract expiries and managing extensions Monitoring and reporting benefits realisation Managing variations Maintaining records / disclosure obligations Conducting post-contract reviews Relevant links: Benefits Realisation Plan and Report template Contract Management Plan template Contract and Vendor Management Guide DOC15/ Version 2.9, 24 November 2015 Page 1 of 10

2 1 Guidelines for managing contracts and vendors 1.1 Purpose and scope The purpose of these guidelines is to assist all staff within the Department who are responsible for overseeing contracts to ensure successful and best-in-class contract management. Contract management involves those activities during the contract, once established, including: Confirming contract requirements Developing a Contract Management Plan Developing risk and performance management frameworks Implementing contract strategies including communication and contract review Implementing purchase to pay arrangements Managing probity Managing the business relationship Managing performance of the contract, including the development of innovation and financial improvements Managing contractual issues (variations to contract, performance, disputes, conflicts and negotiation) Benefits realisation implementing and tracking Implementing a communication/information strategy Implementing a contract review strategy. 1.2 Introduction The objective of a contract is rarely achieved simply by entering into an agreement. Unless it is monitored and responsibilities for achieving the objectives shared, it is unlikely to deliver the expected value. How the contract is to perform and how it will be managed must be incorporated during the tender and negotiation process to ensure it is effective. Contract and Vendor Management Guide DOC15/ Version 2.9, 24 November 2015 Page 2 of 10

3 2 Contract and vendor management The contract and vendor management approach is defined by the levels of risk and value. DoE must ensure appropriate levels of management are applied to the process in line with the importance and risk to the Department. The segmentation will define the level of management that should occur. Contracts and their vendors should be segmented as follows: 1. Operational (low importance) For the supply of back office commodity items or services that are deemed to be low risk, low volume, have multiple suppliers, little or no front line impact and are typically of a low value. 2. Tactical (low or medium importance) For the supply of back office goods or services that are deemed to be low or medium risk. There may be multiple or stable vendors that can supply the required goods or services and the impact to front line is typically minor. 3. Strategic (high importance) For the supply of goods and or services that directly impact the front line or are highly sensitive. In most situations, issues with the supply of the goods or services will impact the Department at varying degrees of severity. 2.1 Levels of management/segmentation Levels of management can be confirmed based on the value of the contract expenditure per annum and the importance as defined in the Procurement Strategy document. Refer to the table below. SPEND VALUE Operational and Tactical Operational Operational, Tactical and Strategic Operational and Tactical IMPORTANCE Operational management The nominated Contract Manager within the Department is responsible for ensuring that the goods and or services are delivered based on the requirements of the agreement. Standard contract management best practise should be applied. Therefore, meetings should be held (using the Vendor Operational Meeting template) to ensure complete delivery and visibility of the requirements are being met. Regular reporting of basic measures should be submitted to ensure that potential issues are managed prior to escalation. The focus of these meetings is at the operational level. It is anticipated that any issues, challenges or risks associated with the delivery of the required goods and or services will be addressed within this level of management. The Contract Manager must monitor the contract to ensure the objective is realised within budget. Tactical management This level of management must ensure regular meetings, as agreed by both parties. The management will focus on ensuring that the key conditions of the agreement are being met and that opportunities to improve Contract and Vendor Management Guide DOC15/ Version 2.9, 24 November 2015 Page 3 of 10

4 outcomes and ensure any challenges associated with the delivery of goods and or services are understood and mitigated. Download the Vendor Tactical Meeting template. In most instances, this level of management will be facilitated by the relevant Contract Manager with the Procurement Solutions Directorate Category Manager attending periodically or as required, along with the Suppliers senior management. Reporting should be completed monthly and reviews attended by senior management of both sides should occur annually. A Benefits Realisation Report is to be submitted at least quarterly. Strategic management This requires high level stakeholder engagement to ensure that focus is applied at senior management levels to keep the contract functioning in a positive manner. The focus of strategic management is ensuring that senior management of all parties have high level visibility of the relationship, the goods and or services being supplied, the challenges associated with the supply of the goods and or services and an understanding of the long term objectives between both parties. Monthly operational meetings to review KPIs, reports and address any issues are expected (use the Vendor Strategic Meeting template). Formal six monthly reviews should be held with high level attendance (e.g. the CPO, CIO, DoE Directors or Senior Executives and the CEO or equivalent from the vendor party). A Benefits Realisation Report is to be submitted each month. 2.2 Supplier Relationship Management Matrix. The following matrix summarises the levels of management, frequency and required staff. Note that if a Contract is deemed to require Operational and Tactical Management, then both levels of relationship management must apply. Strategy Level Meeting & Report Frequency DoE Representative Vendor Representative Benefits Report Operational Management Periodically as required (e.g. reports may be weekly for short term contracts) Contract Manager Operational Account Manager responsible for the delivery of required goods and or services. At conclusion (if less than 9 month term) or 6 monthly. Tactical Management Monthly Reports Meetings as agreed (e.g. monthly or quarterly) Annual Review Contract Manager Category Manager, where appropriate and at Annual Review with Senior Management Operational Account Manager responsible for the delivery of required goods and or services. Senior Management at Annual Reviews At least quarterly Strategic Management Monthly, 6 monthly and Annual Reviews Contract Manager, Category Manager as appropriate and at Half and Full Year Reviews with Senior Management, CPO/CIO Director where required. Account Manager monthly, Senior Management with full delegation/ownership as required and with CEO or equivalent at Half and Yearly Reviews Monthly Contract and Vendor Management Guide DOC15/ Version 2.9, 24 November 2015 Page 4 of 10

5 2.3 Supplier Relationship Management reporting The need for supplier reporting is paramount. It is important to note that reporting is required at each level. The following provides an indication of the types of information required. This is not a fully comprehensive list, should additional information be required, it should be agreed with all parties and implemented accordingly. Operational management Agreed frequency reporting suite Risk plan and status Issues Logs & Service Improvement Reports where applicable Compliance to Project Plans (where applicable) Performance against agreed Key Performance Indicators (KPIs) (scorecard reporting where applicable) Management / operational reports that validate KPIs / Performance (delivery of services and or goods, etc.) Compliance to other contractual requirements Tactical management Agreed frequency Reporting suite Risk plan and status Issues Logs & Service Improvement Reports where applicable Compliance to Project Plans (where applicable) Detailed spend and savings Key Performance Indicators (KPI) (scorecard reporting where applicable) Management / operational reports that validate KPIs / Performance (delivery of services and or goods, etc.) Summary of performance against the objective over the agreed period Compliance to other contractual requirements Strategic management Agreed frequency Reporting suite Risk plan and status Issues Log & Service Improvement Reports where applicable Compliance to Project Plans (where applicable) Detailed spend and savings Key Performance Indicators (KPI) scorecard reporting Management / operational reports that validate KPIs / Performance (delivery of services and or goods, etc.) Summary of performance against the objective over the agreed period Future opportunities, including innovation. 2.4 Measuring successful Supplier Relationship Management The key outcome of Supplier Relationship Management is the ongoing satisfactory performance of the contract at a minimum with a goal of driving improved value and innovation wherever possible. Improvements through proactive management can be delivered at all three levels of contract management. Performance Reviews are to be conducted on a regular basis by the Contract Manager, and, where required, the Category Manager and high level management. Contract and Vendor Management Guide DOC15/ Version 2.9, 24 November 2015 Page 5 of 10

6 A template Supplier Scorecard is provided in the Contract Management Plan template to assist the Contract Manager to prepare the KPI performance reporting and develop the calculation methodology that will assist in the scoring. These performance reviews should comprise the following: Operational Delivery of the required goods and or services. Where appropriate these can be measured, weighted and scored as part of the KPI scorecard process (refer Contract Management Plan template). Management, financial and reporting Delivery of financial, reporting and risk management obligations as contracted. The supplier s ability to develop and apply innovation should also be considered as part of the contract management requirements. This can include baseline price and savings deliverables, process efficiency recommendations and improved products and or outcomes Details are submitted in a timely manner, gaps discussed and addressed, and risk practices met and documented at each meeting/review. Satisfaction Where the contract involves delivery of goods or services to other parties, surveys should be conducted periodically to gauge satisfaction, with issues noted in the issues and actions log. Evidence of an outcomes focused approach The supplier must also report the performance of the contract against the objective of the contract to allow a Benefits Realisation Report to be submitted. 2.5 Management and escalation process In managing the Supplier relationships, issues can occur that may have an impact on the contract deliverables. These issues may vary from minor operational to major strategic issues. Whenever an issue arises, the following should be taken into consideration: What is the nature of the issue? What is the impact of the issue? Can the issue be addressed in a short time frame? Will the issue require a contract review/contract variation? Is it a recurrent issue, has it occurred more than once? All issues and risks should be addressed immediately as they occur direct with the Supplier Relationship Manager. Consider ways to resolve the issue and implement agree actions. If the issue is significant and / or attempts to rectify the issue directly fail, refer to dispute resolution clauses for formal escalation of the issue to resolution. NB: all evidence of attempt to resolve must be documented and stored within the Department s approved document storage system (TRIM) and placed with the copy of the agreement. These records may be drawn upon throughout any dispute resolution process. 2.6 Contract management objectives The Contract Manager should ensure the Supplier is treated and represented fairly and honestly, as well as verifying that the Supplier has fulfilled its obligations and accepts its responsibilities under the contract. Adherence by both parties to the agreed terms of the contract will result in: Contract and Vendor Management Guide DOC15/ Version 2.9, 24 November 2015 Page 6 of 10

7 Optimal contract performance Value for money outcomes Probity in outcomes Accuracy and timeliness Cost effectiveness. 2.7 Probity and transparency During the contract management process it is important from a probity perspective that: Detailed records of all contractual and performance documentation and written communications as well as records of meetings, s, phone calls and conversations are kept. At least two Department representatives attend every Supplier meeting and at least one takes notes of the meetings. Regular reviews are undertaken to ensure the performance measurements are still relevant. Independent auditing or sample auditing of supplier reports (e.g. by internal audit) are conducted where applicable. Anyone involved in a procurement project should sign the Code of Conduct for Procurement Activities, as it includes a declaration of interest statement and a non-disclosure agreement. 2.8 Retention of documents As well as the need to retain documents on a contract file for information and audit purposes, it is necessary to comply with the requirements of the Department s record keeping policies and procedures. 2.9 Contract Management Plan Contract Managers are to contribute to the development of and approving Contract Management Plans. The Contract Management Plan should be established within the schedules of the Contract from the outset with details negotiated and agreed with the supplier prior to execution. The Contract Management Plan is to be implemented and used throughout the contract as agreed. It should be reviewed as required, but at least annually Issues and disputes Issues are identified through ongoing review of usage and performance data and by ensuring users and suppliers know who to contact when things are not going plan. The Department s designated Contract Manager must be actively involved in resolving any supply or technical issues that arise from the contract. While users should initially look to resolve this at the operational level, the Contract Manager must take action if initial attempts fail. This may be as simple as an to the relevant parties or it may require meetings, negotiations and agreed action plans. Contract Managers should seek support from a Category Manager if required or where matters are escalating before any formal dispute processes are applied Vendor meetings and performance reviews Regular meetings should be held with the vendor during implementation of the contract and then ongoing with frequency based on whether the contract / vendor is segmented into Operational, Tactical or Strategic. Contract and Vendor Management Guide DOC15/ Version 2.9, 24 November 2015 Page 7 of 10

8 The meetings will cover operational matters and performance as established in the scorecard. Formal review meetings will include presentations covering the Department s and the industry environment and future direction. Any performance issues must be addressed with action plans for rectification established and followed up. Consequences as outlined in the contract plan / contract and next steps are discussed and actioned as required Key stakeholders If the contract is being used by or impacts others in any way it is important to ensure that it continues to meet their needs by providing them with avenues for feedback and input to future direction. Procurement Solutions Directorate Category Managers will hold regular category management meetings to review benefits realisation and future direction for categories and strategic contracts. Contract Managers represent various parties to individual contracts at these meetings and so should understand their needs and level of satisfaction with their contracts at all times Managing compliance to contract obligations Contract Managers are to ensure that obligations of all parties continue to be met throughout the term of the contract. From a supplier s perspective these should mostly be covered within the KPI scorecard, including service delivery, business continuity, insurance currency, etc. The Department can be deemed to have accepted certain behaviours (e.g. delivery outside agreed timeframes) if it does not address it as soon as it starts to occur. The Department can be at risk if the supplier s insurances lapse or if their disaster recovery processes are not established or sound the Contract Managers must therefore verify that these are being maintained. Similarly, if the Department does not act in accordance with the contract it can be at risk of, for example, penalty, breach or reputational damage. The Contract Manager must ensure the Department s contract parties, (e.g. users, accounts payable, etc.) understand and follow the requirements of the contract Providing advice The Contract Manager is the expert on their contracts. They should advise The Vendor on any developments within the Department, where such developments are likely to affect the contract. Contract users on the benefits and use of the contract and their rights and responsibilities, e.g. delivery timeframes, warranty processes, service levels, etc. Category Managers of any changes or issues with a contract and likely implications, including a reduction or increase in forecast benefits. Senior management to ensure awareness of business benefits or risks associated with the contract at any given time Reviewing contract expiries and managing extensions Contracts are to be reviewed months prior to their expiry dates and decisions made whether they are to be extended, lapsed or renewed based on what will deliver the best value for money. Considerations will include procurement policy regarding contract terms and extensions, performance to date and benefits realised against forecast; current and future usage and needs; changes in best practice processes, products or technology; and external market factors. The decision should be made in consultation with stakeholders and the relevant Category Manager. Contract and Vendor Management Guide DOC15/ Version 2.9, 24 November 2015 Page 8 of 10

9 The decision may also hinge on whether the supplier is prepared to offer additional benefits, e.g. upgraded products or services, better pricing, etc. in return for an extension. The Department only has this opportunity if the supplier knows there is sufficient time to go elsewhere if necessary; this is why the Contract Manager must ask the question well in advance of the expiry date. Contract Managers can obtain guidance with negotiations from the Contract Negotiation Guidelines, or by contacting Procurement Solutions Directorate for further advice. Where the decision is to renew, Contract Managers should engage the Procurement Solutions Directorate, who can program the project and provide any support or manage the project as required. Where the decision is to lapse or extend, the Contract Manager must ensure all parties are notified in writing, including Procurement Solutions Directorate so that the Department s contracts register can be updated accordingly. All documentation and communications pertaining to the decision must be duly filed with the contract Monitoring and reporting benefits realisation Every contract is established for a reason. The Contract Manager must ensure the contract meets and continues to meet the original objective and continues to deliver value for money. Contract Managers are to record the benefits of the contract at commencement and then monitor and report them periodically, as defined in the Benefits Realisation Plan established when completing the sourcing project. Guidelines and templates for developing and managing detailed benefits realisation plans are available on the Department of Finance, Services & Innovation website. Contract Managers are responsible for ensuring high-level contract benefits are recorded against the Contracts Register managed by the Procurement Solutions Directorate. The Department is required to report its contracts realised benefits to the NSW Procurement Board Managing variations The Contract Manager must manage and record all variations. Regardless of whether variations are instigated by the supplier or the Department, they must be formal and documented. This includes changes to products, pricing, service or contract terms. Where applicable, changes to products and pricing may be managed through the Department s ecatalogue the process for which is available in the Procurement Operations Manual refer to your Category Manager for advice. The principles of the changes however will apply as agreed in the contract and Contract Management Plan (i.e. whether products are to be tested first, if price increases are requested they should be when agreed and calculated against the appropriate drivers with verification of changes to those drivers). The underlying objective of value for money must be considered and continue to be achieved despite changes. Action must be taken where the contract is no longer delivering value to the Department. Supplier-instigated variation the supplier is required to formally approach the Department in writing requesting a variation. The formal advice must include: What is being varied For contract variations, reference to specific clauses in the contract that the supplier is requesting be varied and why If price or product variations are proposed, the supplier is required to provide justification for the increase. If the variation is driven by a third party, formal notice from the third party to the supplier is required Contract and Vendor Management Guide DOC15/ Version 2.9, 24 November 2015 Page 9 of 10

10 Department-instigated variation the Department is required to formally approach the suppliers in writing requesting a variation. The formal advice must include: What is being varied For contract variations, reference to specific clauses in the contract that the Department is requesting be varied and why If product or price variations, reasons for the request with evidence based information leading to the request for the supplier to consider. Other considerations for managing variations include: Instruct a variation only within the general scope of the Contract, unless the Contractor agrees. An instruction can only be given by the Principal s representative and must be in writing. Where possible, instruct a variation only after the full cost and time implications have been evaluated and agreed in writing with the Contractor (the instruction will constitute approval to the cost and time impacts agreed with the Contractor). Do not alter a Contractor s written quotation without the agreement of the Contractor. If there is a change agreed, it is preferable to have the Contractor submit a revised quotation. Alternatively, if verbal agreement is reached, confirm that agreement in writing. Instructions should include a brief description of the variation work and a requirement that the work is undertaken in accordance with the identified instruction, the Contract Documents or any other document referred to in the instruction. A short summary of the variation is sufficient if reference is made to other documents describing the agreement in detail. Only instruct a variation only if it is within the authority delegated by the client and sufficient funding is available. If agreement to cost and time cannot be reached before the commencement of an unavoidable variation, attempt to reach agreement at the earliest possible time. If agreement cannot be reached on a variation that is unavoidable, consider whether it is preferable to defer the change to the works so it can be done more economically done by others at a later date. Do not instruct a variation after Completion unless the variation relates to rectifying defects Maintaining records / disclosure obligations All documents and dealings with contracts and suppliers are to be recorded in sufficient detail on the contract file to provide an audit trail. This includes s and file notes of telephone conversations where decisions or allegations are made, agreements reached or instructions given. Contract Managers are responsible for ensuring the Department s contracts register is accurately maintained in respect to their own contracts by reporting major changes and benefits to Procurement Solutions Directorate. Details of new and significantly varied contracts must be publicly disclosed via as per the Government Information (Public Access) Act 2009 (GIPA Act) requirements, via Procurement Solutions Directorate Conducting post-contract reviews At the conclusion of a contract the Contract Manager should review its overall performance and document outcomes, performance and any learnings for future reference. Provide a summary to the Procurement Solutions Contract Manager and file in the contract file. Ensure performance is reported for consultants and contractors engaged under the Performance Management Prequalification Scheme as required under that Scheme. Contract and Vendor Management Guide DOC15/ Version 2.9, 24 November 2015 Page 10 of 10