Maximising value in contract management

After the procurement process is complete, suppliers are settled in and service delivery is ticking along nicely, it can be easy to take your mind off it. Existing contracts can often be overlooked but this is a place where you can add real procurement value and drive future savings. CPL Group explains how

Written by CPL Group

Effective contract management starts with a contract register. You can create a register by adding details of all of the contracts your institution has in place into a spreadsheet or if you have an e-tendering provider they may offer a contract register and management module. Having this register and appropriate policies can help ensure that only Executive or SMT can sign anything and ensures effective dates of contracts are logged, relevant contract values are logged and monitored, contract issues are recorded and KPIs are robust. Make sure that this and the original contracts are stored electronically and centrally so staff always know where documentation is kept in case of a query on a contract. Having a contract register in place brings a number of benefits to your institution such as helping staff to plan resources for procurement, helping to ensure that contracts are in place for key spend areas, that legislative obligations are met and that commercial opportunities are maximised. Registers also keep track of contract end dates, therefore giving you sufficient time for the procurement process. They help increase competition to drive down costs and they also reduce the risk of being tied in to rolling contracts.

Benchmark, benchmark, benchmark

Almost as critical as the location, location, location of a new home is the position of your contract within the wider marketplace. Benchmarking is a critical exercise that should be done regularly for all high-to-medium-value contacts. Understand what your contemporaries are paying, share best practice between organisations and be aware of changes within the industry.

Ensure you stay aware of how the market is performing and how this could affect you. Are commodity costs going down? There could be price reductions to take advantage of. Equally, is there a supply shortage somewhere along the supply chain or a pending change in law that may threaten to drive up prices? Forewarned is, as the saying goes, forearmed.

We often spend more time designing key performance indicators and SLAs than we do checking they are achieved

Make use of specialist industry framework agreements (deals). Choose specifications designed especially for the education sector with market-leading rates. These contracts can provide an easy-access source of what best practice in your spend category looks like.

Tap the market. Most suppliers are happy to provide pricing data for benchmarking, so long as they feel there is real value in it for them. An example would be to offer suppliers some brief feedback on their competitive proposal as part of the exercise as this can be as useful to them as their cost information is for you.

Use your suppliers

You have contracted this supplier to deliver a specific service or range of goods because they offer the best commercial proposition and are the expert in that field. You can leverage this expertise to your advantage through contract review meetings. Ask suppliers how they think you can improve your service, could you be using different products to reduce expenditure or improve your environmental footprint? Could the service be delivered slightly differently to drive efficiency? Any supplier who is looking to build a solid partnership with your organisation should be more than happy to help you review how things are done. Also, demand continuous improvement. Put the onus on the suppliers to improve their service delivery and reduce cost as part of their contract performance.

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Keep an eye on KPIs

Are you confident that suppliers are delivering on their promises? We often spend more time designing the key performance indicators and service level agreements than we do checking that these levels are being achieved and this is essential for maximising contract value.

Ask suppliers for contract performance data and use it! You can request this even if you did not build the provision for management information into your original contract. Suppliers who are managing your contract effectively should keep data on usage levels, service visit times and resources used etc. Use this to assess performance against criteria and identify areas where internal efficiencies could be made.

Get suppliers to self-report on performance. A good supplier will be willing and able to give a short report or presentation on performance levels as part of your regular contract review meetings. This can help reduce the resources you use internally to collate data whilst ensuring you are working collaboratively with your supplier to maximise good performance.

Ensure you’re aware of how the market is performing and how this could affect you. Are commodity costs going down? There could be reductions to take advantage of

Plan ahead

One of the cornerstones of good contract management is having regular meetings with suppliers. However, with so many contracts to manage (and so little time), it can be difficult to keep on top of when review meetings are due. Put a reminder system in place to book supplier meetings and with our newfound expertise in using Teams and Zoom, these should be easier to set up. Don’t forget to ask for management data or negotiate contract renewals. This will help ensure proactive and regular contract management, plus avoid key deadlines being missed.

Include key stakeholders

Your internal service users are often the people who are closest to the contracts. Do you spend enough time getting their feedback on what is going well and where improvements could be made? Identify key internal contacts and ensure their views are incorporated into the contract management process as this is critical for success. We recommend planning to engage regularly with key stakeholders and certainly in advance of your contract review meetings to gain feedback on supplier and service performance. Organise your contract data by keeping a log of the issues raised by end users and stakeholders. Helping you to easily identify key recurring problems, tackle them more quickly and build mitigation into future procurements. There are many other ways to embed best practice contract management, these are just a few ways to start. Improving contract management can ensure optimum performance, from risk ownership to long-term goal setting and detailed value/benefits analyses.

CPL Group

CPC and Tenet Education Services are not-for-profit organisations which are part of CPL Group, an education owned charity that gives back to the sector through funding and support. CPL Group’s latest opportunity is a CPD approved Introduction to Procurement e-learning course designed for school and academy business managers. CPC provides deals designed for education covering a variety of products and services, 12 deals are recommended by the DfE. CPC membership is free of charge to all institutions. Tenet provides procurement consultancy support.

FUTHER INFORMATION:

https://cpl.group www.thecpc.ac.uk www.tenetservices.com