Within NI Water, good contract management is crucial to delivering goods and services at the cost and terms stipulated in the contract in order to obtain best value for the company. Poor or ineffective contract management can result in waste and inefficiency through changes in scope, poor quality, higher prices and suppliers under-performing.
Need for Focus on Contract Management
Requirement of our Operating Licence, Condition F1 that good contract management is employed
Essential to delivering the significant opex savings under Price Control :
- on contract costs
- on management of contracts
Identified as a priority project in delivering Achieving Customer Excellence programme as part of the Commercial Excellence portfolio
Part of our Operational Strategy
- Broadly based on CPD Guidelines
- Broadly based on CPD Guidelines
- Tender tracking
- Rationalisation of operations contracts
- Procurement options
- Contract type
- Contract bundles
- Service delivery models
- Benefits Tracking
Benefits of Contract Management Centre
- Ensures standardised contract management approach
- Offers best scope for implementation of best practice
- Improves contract control and reporting mechanisms
- Improved contractor performance
- Reduced contractor supervision
- Reduced contract overheads / administration
- Core knowledge base and expertise
- Delivers improved service and reduced costs
- Accountability for delivery of savings and benefits
- Instil improved relationship management
- Cost reductions through continuous improvement and innovation
Contract Model
Contract Lifecycle Model
- Contract development - defines
- Procurement - awards
- Implementation – service commences
- Administration – contract termination
Contract Types – based on business critically and value
- Strategic - >£10m
- Key Operational - £1-£10m
- Support - £0.1 – £1m
- Tactical - <£0.1m
Internal polices and Procedures
FR009 – Financial & Procurement Delegations
- Approval at appropriate level acceptance/award
- Changes are approved at appropriate level
FR038 – Procurement of Goods & Services
CD001 – Contract Management Policy
CD008 – Contract Management Procedures
Principal Roles
Contract Owner - is accountable for
- ensuring the contract delivers the anticipated business benefits and that NI Water is able to meet its contractual obligations
- assigning a Contract Manager who has the required skills, experience & knowledge
Contract Manager - is responsible for
- administration of contract procedures and processes for both parties to discharge their obligations
- managing the contract and the output (performance and compliance) of the contractor on a day to day basis.
- ensuring corrective action is taken where a Contract or Contractor is failing to deliver against its deliverables / material obligations
Contract User avails of the service and/or orders the goods/services in accordance with the contract, may manage contractor day to day
The Role of the Contract Manager
- Administer The Contract – ‘Retain Control’
- Manage Performance & Compliance - ‘Deliver the Value’
- Remedy Non Compliance/ Performance - ‘Regain the Value’
Administer
Understand the rights and obligations of both parties
- Identify the internal ‘Users’ of the NIW Rights
- Identify the internal ‘Suppliers’ of the NIW obligations
Implement effective communication channels between NIW and the Contractor
Implement effective NIW internal administrative processes and procedures to ensure NIW’s
- obligations are met and
- rights are maximised
Manage
- Implement and operate measurement processes to determine Contractor Performance /Under Performance of contracted services
- Implement and operate measurement processes to determine Contractor Compliance.
- Implement and operate measurement processes to determine NIW Compliance
Remedy
Determine any deterioration or material non performance / non compliance by the Parties
Implement a plan to remedy
- including escalation
- engaging appropriate technical, commercial and legal support to determine strategy, tactics and delivery as necessary
Deliver the plan
Supplementary Guidance for our Contract Managers
- RACI matrix
- Checklist of activities
- Sample implementation plan
- Guidance on assessing contract change
- Template for business review
- Templates for meeting agendas and minutes
- Guidance on the application of CDM Regs for Operational contracts
Contract Manager Duties
Responsibility for managing the contract
Ensure most appropriate contract is used
Checks on valuations
Performance management
- Quality
- Response times
- Management Information
- Customer experience
Tracking of benefits
Contractor Duties
- Receive WO’s / Instruction
- Carries out work to the required timescale/standard
- Liaises with and provide feedback to contract users
- Seeks approval for all additional work
- Issues accurate and timely measurements in the agreed format including timesheets, list of materials, itemised work items etc. as required
- Issues monthly invoices after agreement with contract users
- Provides asset condition reports as required in accordance with the contract
- Provides Management Information including financial reports as required in accordance with the contract
Expectations
Full understanding of the contract requirements
Contract delivers for both parties :-
- Value to retain
- Balance of risk remains
- Sustainability
Professional working relationships
CM acts with impartiality, integrity, fairness and consistency with both parties
Contractor undertakes the work in a safe manner
Services are delivered as specified on time ,to standard and to specified rates and prices
Experienced and knowledgeable contract managers who:-
- Understand functional systems/processes
- Have prepared specifications /preambles / pricing schedules
- Understand pricing mechanisms and how to value work
- Understand building of unit costs
CM will measure compliance/performance and take appropriate action
CM tracks improvement as required from both parties
Contractor undertakes all notifications and obtains approvals as specified
Contractor submits accurate measurements in required format in timely manner
Users agree measurements promptly
Contractor invoices as agreed measure and is paid within specified time periods
Risk / Issue log is maintained
Issues escalated promptly
Timely dispute resolution – minimise impact
Promote / encourage continuous improvement/innovation
Consistency in the application of the contract :-
- Ts & Cs, specification,
- contract changes.
- Challenge with multiple users
Reduce costs with improved levels of service