Procurement Guidance Note PGN 01/12 CONTRACT MANAGEMENT PROCEDURES AND PRINCIPLES

Procurement Guidance Note PGN 01/12 CONTRACT MANAGEMENT PROCEDURES AND PRINCIPLES Issued: 16 January 2012

PROCUREMENT GUIDANCE NOTES Northern Ireland Public Procurement Policy was approved by the Northern Ireland Executive in 2002. In approving the policy the Executive took the decision that legislation was not necessary to ensure that Departments, their Agencies, non- Departmental Public Bodies and Public Corporations complied with the policy. Instead it considered that compliance could be achieved by means of administrative direction. These Procurement Guidance Notes are the administrative means by which the Northern Ireland Public Sector is advised of procurement policy and best practice developments. They are developed by Central Procurement Directorate (CPD), in consultation with the Centres of Procurement Expertise (CoPEs), and are subject to the approval of the Procurement Board. Once endorsed by the Procurement Board, they are issued to Departments for implementation and copied to CoPEs to develop, if necessary, underpinning procedures supporting the implementation of this guidance in their particular sector. CPD is responsible for disseminating advice and guidance to the NI public sector on public procurement policies and for monitoring implementation. Procurement Guidance Notes are also published on CPD s website. The following Procurement Guidance Note was approved by the Procurement Board on 11 November 2010 for use by those bodies covered by Northern Ireland Public Procurement Policy. This revision of the guidance was approved by the Procurement Board and published on 16 January 2012. DF1/15/853800 Page 2 of 43

CONTENTS PAGE 1.0 Introduction...4 2.0 Background...5 3.0 Why is Contract Management Necessary?...6 4.0 The Objectives of Contract Management...7 5.0 The Essential Aspects of Contract Management...8 6.0 Assessing the Appropriate Level of Contract Management...9 Conflict of Interest...9 7.0 Chances, Variations and Extensions within the Contract...10 Material Changes and the Pressetext Case...10 Processes for Different Types of Change...12 8.0 Dispute Resolution...13 9.0 Process for the Management of Contracts.....13 Assessment of a Contractor s Performance...13 Construction Works and Services Contracts...14 Supplies and Services Contracts...17 Dealing with Unsatisfactory Performance...18 Escalation of Poor Performance to Senior Management in a CoPE...19 10.0 Management of Long Term Service Contracts (over 5 Years)...20 11.0 PFI Contracts...20 12.0 Records...21 13.0 Further Information...21 ANNEXES Annex A The Seven Principles of Public Life....22 Annex B Northern Ireland Civil Service Code of Ethics.....23 Annex C Contract Monitoring Procedures Flowchart....28 Annex D1 Sample Contractor Assessment Form (Supplies Contracts)... 29 Annex D2 Sample Contractor Assessment Form (Services Contracts)...30 DF1/15/853800 Page 3 of 43

Annex E Protocol for Managing Poor Contractor Performance...31 Annex E, Appendix 1 Sample Letter One......36 Annex E, Appendix 2 - Sample Letter Two...38 Annex E, Appendix 3 - Sample Letter Three...39 Annex E, Appendix 4 Certificate of Unsatisfactory Performance...40 Definition of Terminology In the preparation of this guide, the term contractor/supplier has been used to denote an organisation that contracts directly with a Department, whether it is a supplier, a service provider or a construction contractor. The term Department has been used to refer to those bodies subject to Northern Ireland Public Procurement Policy including Departments, Non-Departmental Public Bodies and Public Corporations. The term etendersni has been used to describe the current web-based portal used by the wider Northern Ireland public sector to advertise and tender its available contracts. The term lowest acceptable price has been used to refer to the lowest price after unacceptably low prices have been excluded. Each case should be treated on its merits. There should be no automatic exclusion and tenderers whose tenders are considered to be significantly low should be given the opportunity to justify their prices. DF1/15/853800 Page 4 of 43

1.0 INTRODUCTION 1.1 Contract management is the phase of the procurement cycle in which a contractor 1 delivers the required goods, services or works in accordance with a Department s 2 specification and Terms and Conditions of Contract. The Department s and contractor s approach to managing their relationship is critically important to ensuring successful contract delivery and best value for money for the taxpayer. Departments regard contractors not delivering contract requirements as a serious matter. It means the public purse is not getting what it is paying for and when things go wrong, the failure can be expensive in financial terms and management time. The reputation of the Department and contractor can be damaged by a poorly managed contract that does not deliver the outcomes required for the people of Northern Ireland. 1.2 This guidance note includes a protocol for dealing with poor contractor performance. Continued poor performance cannot be ignored and Departments should, through increased monitoring and management, work with the contractor in order to ensure they do meet contract requirements. As a result this protocol takes a graduated approach to addressing poor performance affording contractors two opportunities to address serious delivery failure. However, in recognition of the potential consequences of repeated failure on behalf of contractors and the duty on Departments to safeguard the taxpayers money, Departments may regard such repeated failure as grave misconduct. This could, as a result, lead to the contractor being excluded from all procurement competitions being undertaken by CoPEs on behalf of bodies covered by the Northern Ireland Public Procurement Policy for a period of twelve months on the grounds of grave misconduct in the course of the business or profession of the contractor 3. 1 In the context of this guidance the term contractor is used to include all economic operators (i.e. contractors, suppliers and services providers). Regulation 2(1) of The Public Contracts Regulations 2015 and Regulation 4(1) of the Utilities Contracts Regulations 2006 (as amended). 2 In the context of this guidance the term Department is deemed to apply to Departments, Agencies, Non Departmental Public Bodies and Public Corporations and all other bodies acting as a Contracting Authority as defined by Regulation 2 of the Public Contracts Regulations 2015. Departments are also advised to refer to PGN 01/07 on The Use of Grant in Procurement in relation to public procurement being taken forward by bodies to which Northern Ireland Procurement Policy does not apply. 3 Article 57 4(c) 2014/24/EU and Regulation 57 (8)(c) of the Public Contracts Regulations 2015. DF1/15/853800 Page 5 of 43

1.3 Good management of this operational phase of the procurement cycle is therefore critical for the successful delivery of the benefits to the public purse. It ensures that all parties fully meet their respective obligations as efficiently and effectively as possible, in order to meet the business and operational objectives required from the contract. It involves building an effective working relationship between customer and provider which continues throughout the life of a contract whilst also maintaining an appropriate degree of commercial tension between the parties. Contract management must also aim for the achievement of continuous improvement in performance over the life of the contract. 2.0 BACKGROUND 2.1 The purpose of this procurement guidance note is to provide Departments and those responsible for the day to day management of goods, works or services contracts with guidance on contract management procedures. The guidance concerns activities after the formal award of a contract, although the foundations for contract management are laid in the procurement stages before contract award. Successful contract management is strongly influenced by the Terms and Conditions of Contract, the contract requirements that have been agreed and the understanding between Department and contractor that has been established during the tendering/contract award phase. 2.2 All contracts should have a nominated contract manager (a project manager fulfils this role in the case of construction contracts), whose responsibility it is to ensure full compliance with the contract. He/she is also responsible for ensuring value for money for the taxpayer who is paying for these services. It is the contract manager s responsibility to ensure that any failure is dealt with promptly and in accordance with the conditions of contract. This guidance provides a structured approach which will promote best practice contract management. DF1/15/853800 Page 6 of 43

2.3 It is important that those involved in contract management should adhere to the principles of probity and act in a manner consistent with Northern Ireland Public Procurement Policy, The Seven Principles of Public Life (Annex A), NICS Code of Ethics (Annex B), if applicable, or other ethical standards that apply to CoPEs outside the NICS. 3.0 WHY IS CONTRACT MANAGEMENT NECESSARY? 3.1 Contract management is necessary to:- ensure the objectives of the contract are delivered; ensure the goods/works/services provided comply fully with the Department s requirements as laid down in the contract specification and the Terms and Conditions of Contract. Note: Contracts that are awarded on the basis of the Most Economically Advantageous Tender (MEAT) require the commitments given by contractors during the selection and award stages of procurement to be fulfilled during the performance of the contract; ensure the roles and responsibilities of those involved in the process are clearly defined and understood; ensure best value for money is achieved including any equality and sustainable development requirements included in the specification or conditions of contract; ensure all anticipated benefits are fully realised; ensure accountability and effective control of budgets; provide evidence of regular contract monitoring and audit trail of issues raised and resolved; ensure, where it is appropriate, that there is a proper handover from a CoPE to a Department making clear the distinction between the CoPE s role in putting the contract in place and formally recognising that the Department has responsibility for the commercial day to day management of the contract; and DF1/15/853800 Page 7 of 43

bring about continuous improvement realisation in terms of quality, cost, sustainability and service. 3.2 Article 57 4(c) 2014/24/EU and Regulation 57 (8)(c) of the Public Contracts Regulations 2015 provide that Departments may treat an economic operator as ineligible or decide not to select to him/her on the grounds of grave misconduct committed in the course of his business or profession. However, in order to do so the Department must be able to clearly demonstrate misconduct. In view of this it is important that contract managers keep detailed and accurate records of performance, in line with the recommended procedures set out in this guidance note, in order to support the issue (or not) of a Certificate of Unsatisfactory Performance. A copy of the certificate should be forwarded to CPD and Heads of CoPEs for information. Please see Section 9 and Annex E for information and protocol in relation to Certificates of Unsatisfactory Performance. 4.0 THE OBJECTIVES OF CONTRACT MANAGEMENT 4.1 The objectives of contract management are to ensure that:- value for money is achieved for the taxpayer through full compliance with contract requirements; the Terms and Conditions of Contract are met in full; the goods/services/works provided by the contractor meet the Department s specified requirements including the delivery of equality and sustainable development goals and the Department gets what is paying for on time and within budget; documented evidence of good performance is provided to assist in evidencing the achievement of value for money and benefit realisation; and documented evidence of poor/unsatisfactory performance is provided:- (i) to facilitate improvement and to build up a performance history; and (ii) in exceptional cases, to permit early recourse to the Department's rights under the default provisions. DF1/15/853800 Page 8 of 43

5.0 THE ESSENTIAL ASPECTS OF CONTRACT MANAGEMENT 5.1 The essential aspects of contract management are:- all contract managers should hold a contract management initiation meeting at the commencement of the management process to ensure there is a clear understanding of contract requirements; meeting the specifications formal monitoring against the key performance indicators (KPIs), performance targets to be achieved by the contractor and providing feedback to the contractor. This should take the form of regular review meetings; managing/supervising delivery of the contract this will include regular routine monitoring of contract delivery (as above) in association with the contractor and client audits; establishing a benefits realisation plan, if appropriate, to clearly detail what the contractor has offered; payment checking invoices, times, rates, workload and paying for the goods/works/services within the agreed timeframe; assessing service credits, if applicable; records keeping appropriate records for audit purposes; managing a change control regime to ensure continued compliance with original scope to ensure no new contract is formed (see Section 7); management of any extensions and price increases allowed under the Terms and Conditions of Contract (see Section 7); management of exit strategy and risk mitigation in the event of contractor failure/default. Note: In addition to terminating the contract because of contractor default, a Department has the right (if the contract contains a specific clause) to terminate a contract in all or part at any time by giving sufficient written notice to the contractor (usually at least six months) but procurement and legal advice must be sought before taking this action; and DF1/15/853800 Page 9 of 43

certification confirming that the goods/works/services have been completed/delivered to the required standards and within the contracted timescales. 6.0 ASSESSING THE APPROPRIATE LEVEL OF CONTRACT MANAGEMENT 6.1 Departments should always ensure that all contracts are delivered to the required specification and Terms and Conditions of Contract. However, contract management should be proportionate to the value, risk and complexity of the contract. Simple purchase contracts will usually only require inspection on receipt to ensure the order has been accurately supplied and invoice paid. For complex or high value contracts it may be necessary to appoint a full-time contract manager or contract management team to develop and deliver a contract management plan in line with the Terms and Conditions of Contract. 6.2 As the level of risk increases, the benefits which may be derived from reducing these risks through more formal contract management processes also increase. A contract that has little inherent risk attached to it and little opportunity for additional value would not warrant a large amount of contract management resource, as the benefits that could be achieved from greater contract management would be small. However, even if contract risk is low, the potential to generate additional value from the contract should never be overlooked and could, on occasions, justify increasing levels of contract management resources and activities, possibly for short or intermittent periods. Extra value could come, for example, from cost reduction through process development or from encouraging and helping a contractor to increase service levels without additional cost. 6.3 Conflict of Interest 6.4 It is the Department s responsibility to ensure that there are no conflicts of interest or the perception of bias at any stage. Any connections between a member of staff and a contractor must be formally disclosed and documented at the earliest possible opportunity. The Department should then take (and record) DF1/15/853800 Page 10 of 43

action deemed appropriate in each particular circumstance. Staff should not accept gifts or hospitality from contractors and comply with DAO (DFP) 10/06 Revised guidance on acceptance of gifts and hospitality September 2009. 7.0 CHANGES, VARIATIONS AND EXTENSIONS WITHIN THE CONTRACT 7.1 Changes may be required during the period of a contract, particularly in the case of large, complex, construction and service contracts. Legal issues may arise if the value or scope of the contract is either reduced or increased significantly. In the case of an increase, Departments should consider carefully whether a change is likely to significantly affect the scope of the original contract as this could be viewed as constituting a new contract, which has effectively been awarded without a competition. Moreover, the changes made to UK Procurement Regulations as a result of the implementation of the Remedies Directive, could result in the revised contract being declared ineffective (i.e. cancelled) if it is found to have been varied to the point of being materially different from the original contract. Managing the change control regime will help ensure continued compliance with the original scope of the contract and ensure a new contract is not formed. Before amending or varying an existing contract to the point where the amendment could constitute a new contract, procurement advice should be sought from CPD or the relevant CoPE. Legal advice should also be sought if appropriate. Uncontrolled contract variations are one of the most significant risks to Value for Money and have, in the past, attracted criticism from the Northern Ireland Audit Office and Public Accounts Committee. 7.2 Material Changes and the Pressetext Case 7.3 In the Pressetext case 4 the European Court of Justice (ECJ) held that amendments to a contract, which are "materially different in character from the original contract such as to demonstrate the intention of the parties to 4 Pressetext Nachrichtenagentur GmbH v Austria Case C-454/06 DF1/15/853800 Page 11 of 43

renegotiate the essential terms of the contract" could constitute a new contract. The ECJ helpfully defined what it considered to be material changes as those that:- introduce conditions which, had they been part of the initial award procedure, would have allowed for the admission of tenderers other than those initially admitted, or would have allowed for the acceptance of a tender other than the one initially accepted; extend the scope of the contract considerably to encompass services not initially covered by the initial award procedure; and change the economic balance of the contract in favour of the contractor in a manner not provided for in the terms of the initial contract. 7.4 It is recommended that Departments consider at an early stage of the process whether a contract needs to contain specific clauses which allow for mechanisms and procedures for future change, where this is legally permissible. 7.5 Regulation 72 of The Public Contracts Regulations 2015 sets out the circumstances when contracts and framework agreements may be modified without a new procurement procedure being necessary. Regulation 17 of The Utilities Contracts Regulations 2006 provide, in certain very limited circumstances, for a new contract to be awarded directly without advertisement or competition 7.6 Guidance on the award of contracts without a competition (also known as single tender action) can be found in Procurement Guidance Note 03/11. 7.7 In order to ensure effective handling of permissible changes in the contract the following should be given consideration:- the contract is regularly reviewed (with a view to updating where necessary) to ensure it meets evolving business needs; processes are in place that clearly lay out the governance of contractual DF1/15/853800 Page 12 of 43

change who needs to approve what and how it will happen with a focus on effective and prompt change implementation; there is a clear process for the management of minor changes and contract variations, with a focus on the cost/effort being proportionate to the importance and value of the change; there are more rigorous processes to handle more complex contractual changes (which are not materially different in character from the original contract - see paragraph 7.2) including clear approval mechanisms and accountabilities, and controls to demonstrate that changes offer value for money; where appropriate, value for money testing of existing services takes place through benchmarking or other processes; there are processes to cover the introduction of new services under the contract, including market testing where necessary; and dispute handling processes are in place to handle change related issues. 7.8 Processes for Different Types of Change 7.9 Processes should be in place to ensure that:- both Departments and contractors have a clear understanding of the arrangements for any new contract (both scope and time) and related issues; non-material/minor commercial (financial) changes to the contract are handled in a fair and structured manner. Please Note: Any changes to the contract should not be material changes (see paragraphs 7.1 and 7.2). 8.0 DISPUTE RESOLUTION 8.1 There maybe disagreements over aspects of a contract. It is unlikely that DF1/15/853800 Page 13 of 43

even the best drafted contracts will cater for every possible eventuality. However, not every difference of opinion needs to trigger a dispute between customer and contractor. 8.2 Good communication is key to maintaining relationships with contractors and fixing problems. It is imperative that both parties agree there is an issue and work through the problem. How the message is communicated sets the tone for how the dispute will be resolved. 8.3 Departments must never terminate a contract or threaten to do so without carefully considering what the contract provides for, and in all cases should take procurement and legal advice. To do otherwise risks breaching the contract, which could result in litigation and a claim for damages. 8.4 The Terms and Conditions of Contract should have provision for dispute resolution (e.g. arbitration, adjudication (for construction contracts) or mediation). Procurement and legal advice on the process to be followed should be sought in all cases. 9.0 PROCESS FOR THE MANAGEMENT OF CONTRACTS 9.1 Assessment of a Contractor s Performance 9.2 The assessment of a contractor s performance is necessary:- to ensure that performance meets the customer s requirements as specified; to uncover poor or unsatisfactory performance at the earliest opportunity and to implement immediate corrective action. Failure to improve could eventually result in exclusion from future contracts; to protect the Department s investment in the supply or service relationship and to ensure Value for Money is provided through the contractual arrangement thereby protecting the public purse; and to provide a historical record of the contractor's performance for future reference. This is particularly necessary where continued unsatisfactory DF1/15/853800 Page 14 of 43

performance could lead to termination of the contract and/or legal proceedings. In such cases documentary evidence is essential. 9.3 Annexes D1 and D2 can be used for assessing contractors for supplies and services contracts respectively (see paragraphs 9.15 and 9.16). Construction Works and Services Contracts 9.4 The Policy Framework for Construction Procurement has at its centre the Achieving Excellence in Construction initiative. This initiative is focused on delivering quality projects on time and to budget. Departments should have in place documented procedures to control and manage capital projects, which as a minimum include the principles set out in Achieving Excellence. Departments should liaise with their Achieving Excellence Champion and CoPE to ensure these principles are fully embedded in the management of contracts for the delivery of construction works and services. Further information on the Policy Framework for Construction Procurement and Achieving Excellence can be found in Procurement Guidance Note 06/10 on the Procurement of Construction Works and Services. 9.5 A key principle of Achieving Excellence is robust proactive contract management. CoPEs have agreed to adopt the NEC3 form of contract for procurement of construction works and services 5. It is a flexible, collaborative form of contract intended to reduce the risk of time or cost overruns and poor performance of completed projects. To ensure these objectives are achieved contract management procedures must be dynamic and in the spirit of the contract. 9.6 Another key principle of Achieving Excellence is the establishment of roles. The documented project management procedures used by Departments must identify the client roles of Investment Decision Maker, Project Owner (or Senior 5 Forms of contract other than NEC3 should only be used for construction works or services if they demonstrably add value in comparison to NEC3 and only following approval by the Head of the relevant CoPE. DF1/15/853800 Page 15 of 43

Responsible Owner) and Project Sponsor. The procedures must also draw a clear distinction between the client roles and the provider roles. The latter roles are those of the Project Manager, the design team and the works contractors. 9.7 Whereas the client roles can be undertaken by lay-persons with appropriate training, the Project Manager must have technical expertise in construction. The Project Manager is the person appointed by the Project Sponsor to be responsible for managing the project on a day-to-day basis. He or she must ensure that the Department's agreed systems and procedures are adhered to and that the consultant or contractor complies with the requirements of the contract. The Project Manager reports progress to the Project Sponsor at agreed intervals. 9.8 The Construction Industry Forum for Northern Ireland (CIFNI) Procurement Task Group actions and NEC3 contract management procedures combine to require the Project Manager to ensure that:- subcontracts are only accepted where the payment terms are no less favourable that those in the main contract; the programme is reviewed regularly with the contractor; costs are monitored and early warnings and compensation events are processed within defined timescales; a robust process is in place to monitor design quality and conformity with the specification and works information (for works contracts) and the scope (for professional service contracts); risks are identified, reviewed and managed throughout the process; the ten Government Construction Client Group headline KPIs are completed and recorded on the Achieving Excellence for NI (AENI) database for performance measurement and benchmarking purposes; and the agendas for monthly project meetings include a review of: (i) Health and Safety; (ii) Subcontractor payments (in line with the Fair Payment Charter); and (iii) Progress on sustainability requirements. DF1/15/853800 Page 16 of 43

9.9 The Project Manager shall be responsible for the day-to-day management of the contract, (or the Project Sponsor in the case of a consultant). Where a contractor or a consultant fails to comply with any requirements under the contract, or fails to provide progress reports required during the contract, and the issue cannot be resolved by the Project Manager/Project Sponsor within a reasonable time, the issue should be escalated, through line-management, to ensure resolution. 9.10 Changes that would significantly affect the scope of a contract must not be allowed. These could be viewed as a single tender action which, under the Public Contracts Regulations 2015 and The Utilities Contracts Regulations 2006, could result in the contract being declared ineffective. Managing the change control regime will help ensure continued compliance with the original scope and ensure no new contract is formed. (This is also the case for supplies and services contracts). Further guidance on single tender action can be obtained in Procurement Guidance Note 03/11. 9.11 Public procurement policy dictates that all contracts should be awarded on the basis of the Most Economically Advantageous Tender (MEAT) 6. Contract management procedures must therefore ensure that contractors deliver the contract requirements in accordance with the quality commitments stated in the tender submission. 9.12 The project manager may find the sample letters contained in Annex E, Appendices 1-3 useful in the management of construction contracts. However, these sample letters will not necessarily suit all contracts, and the Terms and Conditions of Contract should always be considered first to see what they provide for in the event of a disagreement or dispute. Any action taken by a Department should be in line with the provisions of the Terms and Conditions of Contract, or the Department could find itself liable for breach of contract. 6 Exceptions should be approved by the Head of Procurement of the relevant CoPE DF1/15/853800 Page 17 of 43

9.13 Routine monitoring must occur throughout the period of each contract ensure satisfactory performance of the contract and to highlight a contractor s poor or unsatisfactory performance. Supplies and Services Contracts 9.14 In relation to the management of supplies and services contracts some CoPEs will be responsible for all aspects of contract management on behalf of Departments. However, in other cases it will be the Department which will be responsible for day-to-day management and supervision. In these cases the CoPE will still offer support and advice post contract award and may only become involved: at agreed review dates; or when there are problems of a contractual or commercial nature that endanger the delivery of the supplies or services to the quality, standard or timelines contracted for; or where there are problems of persistent poor performance, including failure to deliver sustainability requirements or commitments given in tender documents. 9.15 The organisation with the responsibility for day to day management of supplies and services contracts may find the sample assessment forms and letters contained in Annexes D1 - D2 and Annex E, Appendices 1-3 useful in the management of such contracts. However, the sample letters will not necessarily suit all contracts, and the Terms and Conditions of Contract should always be considered first to see what they provide for in the event of a disagreement or dispute. Any action taken by a Department should be in line with the provisions of the Terms and Conditions of Contract or the Department could find itself liable for breach of contract. 9.16 The sample assessment forms set out in Annexes D1 and D2 can be used for assessing contractors of goods and services respectively in relation to DF1/15/853800 Page 18 of 43

routine contracts. The forms use a scale of satisfaction marking (0 to 10) and should be completed by a competent person and countersigned. It is recommended that assessors use the comments box for including any appropriate comments to substantiate their marks. Routine monitoring must occur throughout the period of each contract. The forms can be used at any time (for example spot checks) and to highlight a contractor s poor or unsatisfactory performance. All assessment forms (including those showing acceptable performance) should be shared with the contractor. 9.17 Minor slips in performance, indicated by a mark of 3 or 4 on the form can be dealt with verbally. However where performance is poor, indicated by a mark of 0, 1 or 2 on the form, the contractor should be advised of this immediately in writing and given a specified time to remedy the poor performance. This procedure must be specified in the Terms and Conditions of Contract. 9.18 Dealing with Unsatisfactory Performance 9.19 Annex E contains a protocol for dealing with unsatisfactory contractor performance. The first instance of unsatisfactory performance, which has not been satisfactorily dealt with in the normal course of the contract management process, should be formally notified to the contractor using sample letter 1 (Annex E, Appendix 1). Copies must be kept along with all related papers and copied to the relevant CoPE in all cases. 9.20 This letter is intended to clearly inform the contractor of the improvement(s) required and the timescale for completion, and that if their performance does not improve to satisfactory levels within the set timescales the matter will be escalated to senior management in the CoPE for further action. It will also inform them that if the matter is escalated to senior management and their performance does not improve to satisfactory levels within a specified period, this may be regarded as an act of grave professional misconduct 7 and they 7 Article 57 4(c) 2014/24/EU and Regulation 57 (8)(c) of the Public Contracts Regulations 2015. DF1/15/853800 Page 19 of 43

may be issued with a Certificate of Unsatisfactory Performance (Annex E, Appendix 4) and the contract may be terminated. It will also inform them that the issue of a Certificate of Unsatisfactory Performance will result in the contractor being excluded from all procurement competitions being undertaken by Centres of Procurement Expertise on behalf of bodies covered by the Northern Ireland Public Procurement Policy on the grounds of grave misconduct in the course of the business or profession of the contractor for a period of twelve months from the date of issue of the certificate. If, following this action, the contractor is now meeting the key requirements of the contract, sample letter 2 (Annex E, Appendix 2) should be issued. 9.21 Escalation of Poor Performance to Senior Management in a CoPE 9.22 If the contractor continues to fail to meet key contract requirements, then the matter should be escalated to senior management within the CoPE. In this case sample letter 3 (Annex E, Appendix 3) should issue advising the contractor that in light of their continued poor performance they are being referred to senior management within the CoPE for further action. The letter will once again warn the contractor that if performance does not improve to satisfactory levels within the period specified by senior management, it may be regarded as grave professional misconduct and may result in the contractor being issued with a Certificate of Unsatisfactory Performance. This will exclude the contractor from any procurement competitions being undertaken by CoPEs on behalf of bodies covered by the Northern Ireland Public Procurement Policy for a period of twelve months from the date of issue of the certificate on the grounds of grave misconduct in the course of the business or profession of the contractor. 9.23 The above procedures are detailed in the flowchart at Annex C and in the Protocol for Managing Poor Contractor Performance (Annex E). If a major problem arises legal advice should be sought immediately and it may be necessary to bypass some of the stages described above. The Terms and Conditions of Contract should contain provisions that deal with this. DF1/15/853800 Page 20 of 43

10.0 MANAGEMENT OF LONG TERM SERVICE CONTRACTS (OVER 5 YEARS) 10.1 A good practice framework for contract management was developed by the then Office of Government Commerce (now the Efficiency and Reform Group of the Cabinet Office) in parallel with the National Audit Office following the report on Central government s management of service contracts. Although it is a good practice guide for managing a broad range of contracts it is particularly relevant where services are delivered over a long period of time (5 years plus), especially those covering information and communications technology, facilities management and business processes, where service levels and value have to be maintained and improved over longer contract periods. The framework comprises:- Section 1 which outlines the activities that organisations should consider when planning and delivering contract management; Section 2 which discusses how to evaluate the risk and value opportunities inherent in contracts; and Section 3 which illustrates how the activities from Section 1 and the evaluation from Section 2 can be brought together to develop contract management plans and priorities. 10.2 The framework can be found at: http://www.nao.org.uk/publications/0809/central_governments_managemen.a spx 10.3 Additionally, for ICT contracts specifically, OCG (now part of the Efficiency and Reform Group within the Cabinet Office) developed ICT Model Agreements and Schedules with embedded guidance. The Guidance covers Governance, Exit Management, Change Control etc and can be found at: http://webarchive.nationalarchives.gov.uk/20110316110311/http:/www.ogc.gov.u k/policy_and_standards_framework_model_ict_contract.asp DF1/15/853800 Page 21 of 43

11.0 PFI CONTRACTS 11.1 Although OGC s good practice framework for contract management is particularly relevant for contracts where services are delivered over a long period of time (five years plus) it does not cover all the issues which may arise in relation to PFI contracts. These contracts involve an added degree of complexity, for example in their arrangements for refinancing, managing contract variations, risk allocation and contract termination. Further guidance for managers of PFI contracts is available at https://www.gov.uk/government/publications/pfippp-finance-guidance 12.0 RECORDS 12.1 Records must be kept in accordance with Departmental and audit requirements and to help guard against fraud. In addition bodies which are utilities must retain records in accordance with regulation 37 of The Utilities Contracts Regulations 2006. 12.2 Management information is essential to help ensure that work is carried out to the required standards and that sufficient controls are in place and documented to give assurances in regard to quality and cost; i.e. that details are correct in terms of volumes, times, skills, rates, any variations, overall cost, and that total expenditure is within budget. This also helps provide historical data and trend analysis for future requirements. 13.0 FURTHER INFORMATION 13.1 Any queries on this Procurement Guidance Note should be addressed to: Central Procurement Directorate Procurement Policy Branch 2 nd Floor East Clare House DF1/15/853800 Page 22 of 43

303 Airport Road West BELFAST BT3 9ED Phone: 028 9081 6518 e-mail: procure.policy@dfpni.gov.uk All Procurement Guidance Notes can be found at: https://www.dfpni.gov.uk/articles/procurement-guidance-notes-pgns DF1/15/853800 Page 23 of 43

THE COMMITTEE ON STANDARDS IN PUBLIC LIFE THE SEVEN PRINCIPLES OF PUBLIC LIFE Annex A SELFLESSNESS Holders of public office should act solely in terms of the public interest. They should not do so in order to gain financial or other material benefits for themselves, their family, or their friends. INTEGRITY Holders of public office should not place themselves under any financial or other obligation to outside individuals or organisations that might seek to influence them in the performance of their official duties. OBJECTIVITY In carrying out public business, including making public appointments, awarding contracts, or recommending individuals for rewards and benefits, holders of public office should make choices on merit. ACCOUNTABILITY Holders of public office are accountable for their decisions and actions to the public and must submit themselves to whatever scrutiny is appropriate to their office. OPENNESS Holders of public office should be as open as possible about all the decisions and actions that they take. They should give reasons for their decisions and restrict information only when the wider public interest clearly demands. HONESTY Holders of public office have a duty to declare any private interests relating to their public duties and to take steps to resolve any conflicts arising in a way that protects the public interest. LEADERSHIP Holders of public office should promote and support these principles by leadership and example. These principles apply to all aspects of public life. DF1/15/853800 Page 24 of 43

Annex B NORTHERN IRELAND CIVIL SERVICE CODE OF ETHICS 1.0 Civil Service values 1.1 The Civil Service supports Ministers in developing and implementing their policies, and in delivering public services. Civil servants are accountable to Ministers. 1.2 As a civil servant, you are appointed on merit on the basis of fair and open competition and are expected to carry out your role with dedication and a commitment to the Civil Service and its core values: integrity, honesty, objectivity and impartiality. In this Code: integrity is putting the obligations of public service above your own personal interests; honesty is being truthful and open; objectivity is basing your advice and decisions on rigorous analysis of the evidence; and impartiality is acting solely according to the merits of the case and serving equally well Ministers of different political persuasions. 1.3 These core values support good government and ensure the achievement of the highest possible standards in all that the Civil Service does. This in turn helps the Civil Service to gain and retain the respect of Ministers, the Assembly, the public and its customers. 1.4 This Code sets out the standards of behaviour expected of you and all other civil servants. These are based on the core values. Individual departments may also have their own separate mission and values statements based on the core values, including the standards of behaviour expected of you when you deal with your colleagues. DF1/15/853800 Page 25 of 43

2.0 Standards of behaviour 2.1 Integrity 2.2 You must: fulfil your duties and obligations responsibly; always act in a way that is professional and that deserves and retains the confidence of all those with whom you have dealings; make sure public money and other resources are used properly and efficiently; deal with the public and their affairs fairly, efficiently, promptly, effectively and sensitively, to the best of your ability; handle information as openly as possible within the legal framework; and comply with the law and uphold the administration of justice. 2.3 You must not: misuse your official position, for example by using information acquired in the course of your official duties to further your private interests or those of others; accept gifts or hospitality or receive other benefits from anyone which might reasonably be seen to compromise your personal judgment or integrity; or disclose official information without authority. This duty continues to apply after you leave the Civil Service. 2.4 Honesty 2.5 You must: set out the facts and relevant issues truthfully, and correct any errors as soon as possible; and use resources only for the authorised public purposes for which they are provided. DF1/15/853800 Page 26 of 43

2.6 You must not: deceive or knowingly mislead Ministers, the Assembly, or others; or be influenced by improper pressures from others or the prospect of personal gain. 2.7 Objectivity 2.8 You must: provide information and advice, including advice to Ministers, on the basis of the evidence, and accurately present the options and facts; take decisions on the merits of the case; and take due account of expert and professional advice. 2.9 You must not: ignore inconvenient facts or relevant considerations when providing advice or making decisions; or frustrate the implementation of policies once decisions are taken by declining to take, or abstaining from, action which flows from those decisions. 2.10 Impartiality 2.11 You must: carry out your responsibilities in a way that is fair, just and equitable and reflects the Civil Service commitment to equality and diversity and the obligations of your department or agency under Section 75 of the Northern Ireland Act 1998. 2.12 You must not: act in a way that unjustifiably favours or discriminates against particular individuals or interests. DF1/15/853800 Page 27 of 43

2.13 Political Impartiality 2.14 You must: serve Ministers, whatever their political persuasion, to the best of your ability in a way which maintains political impartiality and is in line with the requirements of this Code, no matter what your own political beliefs are; act in a way which deserves and retains the confidence of Ministers, while at the same time ensuring that you will be able to establish the same relationship with those whom you may be required to serve in the future; and comply with any restrictions that have been laid down on your political activities. 2.15 You must not: act in a way that is determined by party political considerations, or use official resources for party political purposes; or allow your personal political views to determine any advice you give or your actions. 2.16 Rights and responsibilities 2.17 Your department or agency has a duty to make you aware of this Code and its values. If you believe that you are being required to act in a way which conflicts with this Code, your department or agency must consider your concern, and make sure that you are not penalised for raising it. 2.18 If you have a concern, you should start by talking to your line manager or someone else in your line management chain. If for any reason you would find this difficult, you should raise the matter with your DF1/15/853800 Page 28 of 43

department s nominated officers who have been appointed to advise staff on the Code. 2.19 If you become aware of actions by others which you believe conflict with this Code you should report this to your line manager or someone else in your line management chain; alternatively you may wish to seek advice from your nominated officer. You should report evidence of criminal or unlawful activity to the police or other appropriate authorities. 2.20 If you have raised a matter covered in paragraphs 15 to 17, in accordance with the relevant procedures, and do not receive what you consider to be a reasonable response from your department or agency, you may report the matter to the Civil Service Commissioners for Northern Ireland. The Commissioners will also consider taking a complaint direct. Their address is: Office of the Civil Service Commissioners for Northern Ireland Room 105 Stormont House Stormont Estate Belfast BT4 3SH Email: info@nicscommissioners.org If the matter cannot be resolved using the procedures set out above, and you feel you cannot carry out the instructions you have been given, you will have to resign from the Civil Service. 2.21 This Code is part of the contractual relationship between you and your employer. It sets out the high standards of behaviour expected of you which follow from your position in public and national life as a civil servant. You can take pride in living up to these values. DF1/15/853800 Page 29 of 43

Annex C CONTRACT MONITORING PROCEDURES INCLUDING PROCESS FOR DEALING WITH UNSATISFACTORY PERFORMANCE FLOWCHART* Use Assessment Form (Annex D1, D2) for Routine Monitoring NOTE Contract Managers should hold a contract management initiation meeting at the commencement of this process to ensure a clear understanding of contract requirements. Is Performance Yes Satisfactory?** No Issue Letter1 Formal Written Warning (Annex E, Appendix 1) to contractor specifying what needs improved and timescale for improvement in accordance with the Terms and Conditions of Contract. (Letter should specify which clauses). Continue to monitor contractor s performance throughout the specified timescale for improvement. At end of the time specified does performance meet requirements? No Yes Issue Letter2 Improved Performance (Annex E, Appendix 2) to contractor advising performance has improved and of the need to maintain standard. Issue Letter3 Performance is Again Unsatisfactory (Annex E, Appendix 3) advising the contractor that in light of their continued poor performance the matter is being escalated to senior management within the CoPE for further action. Senior management in the COPE should arrange a meeting with the contractor to discuss the way forward. The contractor should be given a further period to improve performance and told that failure to do so could result in the issue of a Certificate of Unsatisfactory Performance or ultimately termination of the contract. At end of the time specified does performance meet requirement? No Yes Issue Letter 2 (Annex E, Appendix 2) The contractor should be invited to a further meeting with senior management within the CoPE. At that meeting the contractor will be formally advised that they have failed to achieve a satisfactory level and may be issued with a Certificate of Unsatisfactory Performance (Annex E, Appendix 4) by the CoPE. If the contract still has a significant period to run, or if performance is so poor that it cannot be allowed to continue, then termination may be considered otherwise the contractor s performance should continue to be very closely monitored for the remaining period of the contract. *These procedures are subject to what the Terms and Conditions of Contract may provide for and the provisions of the Terms and Conditions of Contract should take precedence.**a minor lapse in performance can be dealt with by a telephone call by the Department to the contractor, giving a timescale for remedying the poor performance. A record of the call must be kept. If a major problem arises legal advice should be sought immediately and it may be necessary to bypass some of these stages. DF1/15/853800 Page 30 of 43

Annex D1 SAMPLE CONTRACTOR ASSESSMENT FORM (SUPPLIES CONTRACTS) Scale of Satisfaction Supplies 9 or 10 = outstanding contractor 7 or 8 = more than satisfactory to good (minor mistakes but not serious) 5 or 6 = acceptable (some problems may need resolved) 3 or 4 = poor (needs increased monitoring) (Contractor informed verbally) must keep record of the verbal warning to date, time etc. (SUPPLIES) 0, 1 or 2 = unsatisfactory (Contractor informed in writing) Contract Ref Contractor... COMMENTS as appropriate Score CONTRACTOR S PERFORMANCE ASSESSMENT Contract title Monitoring Period (3/9/12/18/24/30 months).... Ref. CATEGORY Weighting Scale of Weighted Satisfaction AVAILABILITY and DELIVERY (Please Note: All comments could become discoverable under FOI and for legal discovery therefore care and due consideration is needed when commenting) 1 Availability of Goods 10 2 Prompt Delivery/Adherence to Delivery Times 10 3 Complete and Accurate Deliveries 10 4 Ease of Contact / Resolution of Queries 10 QUALITY 5 Transportation and Unloading of Goods 10 6 Packing/Protection of Goods/and Environmental aspects 10 7 Quality on Receipt & Prompt Replacement of Damaged Items 10 8 Quality in Service / Suitability for Purpose 10 FINANCE and ADMINISTRATION 9 Accuracy of Invoices / Standard of Supporting Documentation 10 10 Invoices Submitted Promptly 10 Total Score out of 1000 Name of Person Completing Assessment... Signature... Date... Countersigned by (Name) Signature. Date. Date of previous poor performance marking (if applicable)... A competent representative of the customer should complete the assessment DF1/15/853800 Page 31 of 43