Welcome to PSPPCM007 - Manage Contracts. This unit focuses on equipping public sector employees with the necessary skills and knowledge to effectively manage contracts. As a student of this unit, you will learn how to undertake preparations for contracts, establish and maintain contract management arrangements, monitor and maintain contract performance, as well as complete and review contracts.
The skills and knowledge you acquire will be applied within the legal, regulatory and policy environment in which public sector employees operate. You will need to adhere to organisational policies and procedures while managing contracts.
Before delving into the details of how to manage contracts effectively, it is important to understand the broader context in which contract management operates. In particular, there are several key areas that we will discuss before we begin exploring the specifics of contract management.
- Firstly, we will examine the relevant legislation, policies, practices, and guidelines that apply to contract management in the Commonwealth, state or territory, and local government contexts. This will include environmental purchasing and corporate social responsibility guidance, which are becoming increasingly important considerations in modern contract management.
- Next, we will explore the principles and practices of contract performance management. This is a crucial aspect of contract management, as it involves ensuring that contracts are being delivered to the required standard and that performance is being monitored and evaluated appropriately
- We will also examine privacy and confidentiality issues, which are particularly relevant in contexts where sensitive data may be exchanged between parties.
- In addition, we will consider probity principles and issues, which relate to ensuring that contracts are awarded and managed in a fair, transparent, and ethical manner.
- Finally, we will discuss financial and accounting issues that are relevant to contract management, such as budgeting, invoicing, and payment processes. Understanding these issues is critical for ensuring that contracts are managed effectively and efficiently.
By exploring these key areas, we will lay the foundation for effective contract management and equip you with the knowledge and skills necessary to manage contracts to a high standard.
Commonwealth Legislation, Policies, Practices, and Guidelines
These guidelines provide the framework for procurement in the Australian Government. They outline the principles and rules that must be followed by all government entities when purchasing goods and services. For more information, you can access the following link: Commonwealth Procurement Rules | Department of Finance
This guide provides best practice guidance for managing contracts in a procurement context. It covers topics such as contract planning, risk management, performance monitoring, and dispute resolution. For more information, you can access the following link: Contract Management Guide | Department of Finance
The CCS is a set of standardised contract templates that can be used by government entities for procurement contracts. These templates are designed to simplify the procurement process and reduce the time and cost associated with developing contracts. For more information, you can access the following link: Commonwealth Contracting Suite (CCS) | Department of Finance
This standard provides guidance on how to integrate sustainability principles into procurement activities. It covers areas such as environmental management, social responsibility, and economic sustainability. For more information, you can access the following link:Sustainable Procurement | Department of Finance
These guidelines provide guidance on how to incorporate environmental considerations into procurement activities. They outline the principles of environmentally sustainable procurement and provide tools and resources to help government entities implement them. For more information, you can access the following link:Sustainable Procurement - DCCEEW
This policy requires government entities to consider the social and ethical implications of their procurement activities. It provides guidance on how to incorporate CSR principles into procurement activities and promotes the use of suppliers that demonstrate good CSR practices. For more information, you can access the following link: Social Procurement Framework (buyingfor.vic.gov.au)
This policy aims to increase the participation of Indigenous businesses in government procurement activities. It requires government entities to set targets for Indigenous procurement and provides support and incentives for Indigenous businesses to participate. For more information, you can access the following link: Indigenous Procurement Policy (IPP Guide) December 2020 (niaa.gov.au)
State and Territory Legislation, Policies, Practices, and Guidelines
This framework sets out the NSW government's policies and principles for procurement. It provides guidance on how to manage procurement activities, including contract management, and promotes sustainable procurement practices, such as environmental purchasing and corporate social responsibility. For more information, you can access the following link: NSW Government Procurement Policy Framework
The VGPB provides guidance on how to manage procurement activities, including contract management, for Victorian government entities. It also promotes sustainable procurement practices, such as environmental purchasing and social procurement, which include promoting the inclusion of disadvantaged groups in procurement activities. For more information, you can access the following link:
This policy provides guidance on how to manage procurement activities, including contract management, for Queensland government entities. It promotes sustainable procurement practices, such as environmental purchasing and social procurement, and requires government entities to consider the economic, social, and environmental impacts of their procurement activities. For more information, you can access the following link: QLD Procurement Policy 2023 (forgov.qld.gov.au)
This policy promotes local industry participation in government procurement activities in SA. It requires government entities to consider local suppliers when procuring goods and services and encourages the use of sustainable procurement practices, such as environmental purchasing and corporate social responsibility. For more information, you can access the following link: Microsoft Word - Att 2 Updated SAIPP (track changes) (industryadvocate.sa.gov.au)
This policy provides guidance on how to manage procurement activities, including contract management, for WA government entities. It promotes sustainable procurement practices, such as environmental purchasing and social procurement, and requires government entities to consider the economic, social, and environmental impacts of their procurement activities. For more information, you can access the following link: Procurement Rules and other Government policies (www.wa.gov.au)
This policy provides guidance on how to manage procurement activities, including contract management, for ACT government entities. It promotes sustainable procurement practices, such as environmental purchasing and social procurement, and requires government entities to consider the economic, social, and environmental impacts of their procurement activities. For more information, you can access the following link: Policies and factsheets - Procurement ACT
This policy provides guidance on how to manage procurement activities, including contract management, for NT government entities. It promotes sustainable procurement practices, such as environmental purchasing and social procurement, and requires government entities to consider the economic, social, and environmental impacts of their procurement activities. For more information, you can access the following link: Procurement framework | NT.GOV.AU
Local Government Legislation, Policies, Practices, and Guidelines
This act provides the legislative framework for local government in NSW. It includes provisions related to procurement and contract management for local government entities. For more information, you can access the following link: LOCAL GOVERNMENT ACT 1993 - As at 14 July 2023 - Act 30 of 1993 (austlii.edu.au)
This policy provides guidance on how to manage procurement activities, including contract management, for local government entities in Queensland. It promotes sustainable procurement practices, such as environmental purchasing and social procurement, and requires government entities to consider the economic, social, and environmental impacts of their procurement activities. For more information, you can access the following link: Procurement guidance | For government | Queensland Government
This policy provides guidance on how to manage procurement activities, including contract management, for local government entities in Victoria. It promotes sustainable procurement practices, such as environmental purchasing and social procurement, and requires government entities to consider the economic, social, and environmental impacts of their procurement activities. For more information, you can access the following link: Procurement (localgovernment.vic.gov.au)
This policy provides guidance on how to manage procurement activities, including contract management, for local government entities in Western Australia. It promotes sustainable procurement practices, such as environmental purchasing and social procurement, and requires government entities to consider the economic, social, and environmental impacts of their procurement activities. For more information, you can access the following link: Procurement Rules and other Government policies (www.wa.gov.au)
This policy outlines the City of Sydney's commitment to sustainable procurement practices, including environmental purchasing and social procurement. It requires contractors to comply with the city's sustainability requirements and to report on their sustainability performance. For more information, you can access the following link: Sustainable Sydney 2030–2050 Continuing the Vision - City of Sydney (nsw.gov.au)
This policy outlines the City of Melbourne's commitment to sustainable procurement practices, including environmental purchasing and social procurement. It requires contractors to comply with the city's sustainability requirements and to report on their sustainability performance. For more information, you can access the following link: Procurement Policy (melbourne.vic.gov.au)
Contract performance management is the process of monitoring and evaluating a contractor's compliance with the terms and conditions of a contract, as well as their overall performance in delivering goods or services. The aim is to ensure that the contractor is meeting the agreed-upon standards and expectations and to identify and address any issues or concerns that may arise during the contract period.
Contract performance management typically involves a range of activities, such as:
This involves regularly tracking and measuring the contractor's performance against the key performance indicators (KPIs) specified in the contract. KPIs may include quality of work, timeliness, and adherence to safety standards.
The contractor may be required to submit regular reports on their progress and performance, which can be used to monitor their compliance with the contract.
The client may conduct site visits and inspections to assess the contractor's performance and identify any issues or concerns that need to be addressed.
Regular meetings may be held between the client and the contractor to discuss performance and identify any areas for improvement.
If the contractor fails to meet the agreed-upon standards, the client may take remedial actions, such as imposing penalties or terminating the contract if outlined in the contract.
Examples of contract performance management in various contexts include:
In a construction project, the client may monitor the contractor's performance in terms of project schedule, quality of work, safety standards, and compliance with building codes and regulations.
In an IT outsourcing contract, the client may monitor the contractor's performance in terms of system uptime, responsiveness to support requests, and adherence to security protocols.
In a service contract, the client may monitor the contractor's performance in terms of service quality, responsiveness to customer complaints, and compliance with service-level agreements.
In summary, contract performance management is a critical aspect of contract management that helps ensure that the contractor is meeting the agreed-upon standards and expectations and helps identify and address any issues or concerns that may arise during the contract period.
Watch
Watch the two (2) videos below from Procurious HQ to find out more about Contract and Performance Management.
Steps for conducting contract performance management
1. Establish performance metrics
Before monitoring and evaluating the contractor's performance, you need to establish clear performance metrics that will be used to measure their performance. These metrics should be based on the terms and conditions of the contract and should be measurable and achievable.
For a construction contract, performance metrics may include the number of days the project is delayed, the number of change orders issued, and the number of safety incidents that occur.
2. Collect performance data
Once performance metrics have been established, you need to collect data on the contractor's performance. This can be done through various methods, such as site visits, inspections, progress reports, and customer feedback.
In a service contract, you may collect data on the contractor's performance by tracking customer complaints, conducting customer surveys, and monitoring service quality.
3. Analyse performance data
After collecting performance data, you need to analyse it to assess the contractor's performance. This involves comparing their performance against the established metrics, identifying any trends or patterns, and identifying areas where they may be falling short.
If a construction contractor is consistently missing their project deadlines, you may need to investigate why this is happening and identify any factors that are contributing to the delays.
4. Provide feedback
Once you have analysed the performance data, you need to provide feedback to the contractor on their performance. This can include both positive feedback for areas where they are performing well and constructive feedback for areas where they need to improve.
If a service contractor is receiving high customer satisfaction ratings, you may provide positive feedback on their service quality but also provide constructive feedback on areas where they can improve, such as responsiveness to customer requests.
5. Take corrective action
If the contractor is not meeting the performance metrics or failing to deliver the agreed-upon goods or services, you need to take corrective action. This can include imposing penalties, issuing warnings, or terminating the contract if necessary, as outlined in the contract.
If a contractor is not meeting their project deadlines and is causing delays to the overall project timeline, you may need to issue a warning or impose penalties for missed deadlines as outlined in the contract. If the contractor continues to miss their deadlines despite these actions, you may need to consider terminating the contract and finding a new contractor to complete the project.
Tools and techniques that can be used to conduct contract performance management
There are various tools and techniques that can be used to conduct contract performance management. Some of these include:
A performance dashboard is a tool that provides a visual representation of performance data, such as graphs and charts. This can help make it easier to analyse performance data and identify areas where the contractor may be falling short.
Contract management software can help automate many aspects of contract performance management, such as collecting and analysing performance data, tracking contract milestones, and sending performance reports.
Scorecards are a tool that can be used to track performance against established metrics. They typically involve assigning scores to different aspects of the contractor's performance and can help make it easier to track progress and identify areas for improvement.
Customer feedback surveys can be used to gather feedback on the contractor's performance from customers or end-users. This can provide valuable insights into areas where the contractor may be falling short and help identify areas for improvement.
Site inspections can be used to physically inspect the work being done by the contractor and identify any issues or concerns that need to be addressed. Note: In order to ensure a smooth process and maintain clear guidelines, it is essential that the contract explicitly outlines the provision for conducting site inspections. Merely showing up at the site without prior arrangements would not be permissible.
Regular performance reviews can be conducted with the contractor to discuss their performance, identify areas for improvement, and set goals for the future.
In the context of contract management, privacy and confidentiality issues can arise in relation to the handling of sensitive information and data during the contract management process. Here are some examples of privacy and confidentiality issues in contract management, along with explanations:
1. Disclosure of confidential information
One of the most significant privacy and confidentiality issues in contract management is the disclosure of confidential information. This could include sensitive information about the parties to the contract, as well as proprietary information about the goods or services being provided.
A contractor discloses confidential information about a client's financial information to a third party without authorisation.
2. Inadequate security measures
Inadequate security measures in contract management can lead to unauthorised access or theft of sensitive information. This could include failing to secure documents containing sensitive information or using weak passwords, or insufficient encryption measures.
A contractor fails to secure documents containing confidential information about a client, resulting in unauthorised access and theft of the information.
3. Misuse of confidential information
Misuse of confidential information can occur when sensitive information is used inappropriately or for personal gain. This could include using confidential information to solicit business from a client or sharing confidential information with a competitor.
An employee of a contractor uses confidential information about a client to solicit business from a competitor.
4. Breach of confidentiality obligations
Contract management agreements often contain confidentiality clauses that require the parties to keep certain information confidential. A breach of these obligations can result in significant legal and financial consequences or early termination of the contract.
A contractor breaches a confidentiality clause in a contract by sharing sensitive information with a third party.
5. Failure to comply with privacy regulations
Contract management processes may also be subject to privacy regulations, such as data protection laws or industry-specific regulations. Failure to comply with these regulations can result in significant legal and financial consequences.
A contractor fails to comply with data protection regulations by failing to obtain proper consent before collecting or using personal data.
It is important for organisations to be aware of these issues and take steps to protect sensitive information and comply with relevant privacy and data protection regulations.
In contract management, probity principles and issues refer to the ethical standards and guidelines that must be followed in order to ensure that the procurement process is fair, transparent, and equitable.
Probity principles and issues in contract management
1. Conflict of interest
Conflict of interest occurs when an individual or organisation has a personal or financial interest that could influence their decision-making. In the context of contract management, this could include individuals or organisations involved in the procurement process who have a financial interest in the outcome.
A procurement officer who has a financial interest in a company being awarded a contract.
2. Bias and discrimination
Bias and discrimination occur when individuals or organisations are treated unfairly based on their race, gender, ethnicity, or other personal characteristics. In the context of contract management, this could include biased or discriminatory evaluation criteria or selection processes.
A company is excluded from consideration for a contract based on its owner's race or ethnicity.
3. Transparency and disclosure
Transparency and disclosure refer to the obligation to be open and honest about the procurement process and the factors that influence decision-making. This includes disclosing conflicts of interest and providing clear and understandable information about the evaluation criteria and selection process.
All potential suppliers are given equal access to information and opportunities to submit proposals.
4. Fairness and equity
Fairness and equity refer to the obligation to ensure that all parties involved in the procurement process are treated fairly and equitably. This includes providing equal opportunities to all potential suppliers and evaluating proposals based on objective criteria.
All potential suppliers are given equal access to information and opportunities to submit proposals.
5. Confidentiality and security
Confidentiality and security refer to the obligation to protect sensitive information and data throughout the procurement process. This includes ensuring that all information and data are stored and transmitted securely and only accessible to authorised individuals.
Sensitive information, such as pricing or proprietary information, is only accessible to authorised individuals involved in the procurement process.
Further Reading
Access the links below to find out more about the Australian Public Service Values and Code of Conduct in practice: APS Values and Code of Conduct in practice | Australian Public Service Commission (apsc.gov.au)
There are several financial and accounting issues that can arise in the context of a contract.
Examples of financial and accounting issues and potential ways to resolve them
1. Payment terms
Payment terms are a common financial issue in contracts, particularly if the payment terms are complex or unclear. This can lead to disputes between parties and delays in payments.
Resolution
To avoid disputes, it's important to ensure that payment terms are clearly specified in the contract. This should include the payment amount, payment schedule, and any penalties for late payment.
2. Accounting standards
Accounting standards can vary between organisations, and this can cause issues if the standards used by each party are not aligned.
Resolution
It's important to ensure that accounting standards are agreed upon before the contract is signed. This will ensure that both parties are using the same standards, which will help to avoid confusion and disputes. It's important to agree on whether GST is included or excluded from the payment amount, and ensure this is captured in the contract.
3. Budgeting
Budgeting can be an issue if the budget for the contract is not clearly defined or if unexpected costs arise.
Resolution
It's important to establish a clear budget for the contract and to factor in any potential additional costs. If unexpected costs do arise, it's important to communicate this to the other party as soon as possible and work together to find a solution.
4. Auditing
Auditing is important to ensure that both parties are complying with the terms of the contract and that financial transactions are being accurately recorded.
Resolution
It's important to include an auditing clause in the contract, which specifies when and how audits will be conducted. This will ensure that both parties are aware of the auditing requirements and that the audits are conducted in a timely and efficient manner.
5. Currency fluctuations
If the contract involves payments in multiple currencies, currency fluctuations can cause issues.
Resolution
It's important to factor in potential currency fluctuations when budgeting for the contract. Additionally, including a currency conversion clause in the contract can help to mitigate the impact of currency fluctuations.
Further Reading
Follow the links below to find out more about contract management:
Quiz
