Contract Management
The post-award process of managing supplier delivery against contractual obligations including KPIs, change requests, and dispute resolution.
Definition
Contract management is the post-award process of managing supplier delivery against contractual obligations. Activities include monitoring KPI performance, conducting service reviews, processing change requests, managing disputes, applying contract remedies (service credits, performance improvement plans), and (at contract close) handling exit and transition to the next provider. Strong contract management is the difference between contracts that deliver expected value and contracts that drift into expensive remediation. Under the Procurement Act 2023 contract performance data feeds the public supplier conduct record.
How it works in practice
Contract management cadence typically runs monthly for operational reviews and quarterly for strategic reviews. The monthly cadence covers KPI performance, incident review, change requests, and operational risks. The quarterly cadence covers commercial performance, social value delivery, lessons learned, and strategic alignment. Both sides bring their version of the truth: the supplier reports against KPIs, the buyer's contract manager validates or contests the reports, and the two reconcile through the formal contract management forum. Disputes are handled through the contract's dispute resolution mechanism (typically escalation to senior management, mediation, then litigation as a last resort). Change requests cover everything from minor scope adjustments to major contract variations; the contract's change control mechanism specifies who can approve what level of change and under what financial terms. Service credits are the primary mechanism for KPI underperformance (typically a percentage discount on the next invoice tied to specific KPI misses); they are usually capped to avoid disproportionate exposure. Sustained underperformance triggers a performance improvement plan with defined milestones and ultimately can lead to termination. Under PA 2023 the supplier conduct record adds an external layer to contract management: significant performance issues are published, building a public record across the supplier's portfolio. Strong contract management requires investment in contract management capability on both sides; under-resourced contract management is a frequent cause of contract drift.
Common questions
How often should contract reviews happen?
Monthly for operational reviews (KPI performance, incidents, change requests) and quarterly for strategic reviews (commercial performance, social value, lessons learned). High-stakes contracts may run weekly operational stand-ups during mobilisation and early delivery, easing to monthly as the relationship stabilises.
What is a service credit regime?
A contract mechanism that ties specific financial credits (discounts on the next invoice) to specific KPI misses. The regime defines which KPIs trigger credits, the credit value per breach, and any cap on total credits. Service credits are intended as a remediation mechanism, not a profit centre for the buyer; well-designed regimes incentivise performance improvement rather than punishing the supplier into financial distress.
When should the contract management forum escalate to dispute?
When the parties cannot reconcile their respective views of performance or contract interpretation through the routine contract management cadence. Escalation should follow the contract's dispute resolution mechanism: typically formal notice, escalation to senior management, mediation, then (only as a last resort) litigation. Early formal escalation often resolves issues before they become entrenched.