Contract Management Sub-Regional Caribbean Public Procurement Conference The Importance of Contract Management Port of Spain, Trinidad June 22, 2014 Sabine Engelhard

Segment I: Contract Definition and Purpose Segment II: What is Contract Management? Segment III: Contract Management and Achieving Results Importance of Contract Management 2 Topics Overview

Segment I Contract Definition

4 A voluntary, deliberate, and legally binding agreement between two or more parties, usually in writingvoluntarylegally binding agreement A contractual relationship is evidenced bycontractual relationship (1) an offer,offer (2) acceptance,acceptance (3) competent parties, and (4) a valid consideration. Each party has rights and duties.competent parties validrightsduties Segment I: Contract Definition

5 Purpose Contract = Management Tool Ultimate Goal: Maximized Performance-Minimize Risk Benefits Confirms the parties agreement (predictability, stability, transparency) Confirms the object of agreement Confirms the terms & conditions of the agreement (rights & obligations) Confirms the considerations

Where does the Contract fit in the Procurement Process? 6 Segment I: Contract Definition Need Identification/Recognition Procurement Preparation Starting Bidding Process Bids/Proposals submission Bids/Proposals Evaluation Internal Clearances, Negotiation and Award of Contract Signature of Contract by the parties CONTRACT MANAGEMENT starts formally (Procurement planning) (Check availability of funds, Sourcing, preparation of bidding documents/solicitation documents) (Publication of Notices, Issuance of Solicitation Documents) (Bids/Proposals received) (evaluation by a team) (notice of award to the Contractor) (Client & Contractor) PERFORMANCE STARTS.

Segment II What is Contract Management?

8 What does Contract Management Imply ? Segment II What is Contract Management?

Terms of Reference/Stat ement of Works Contract -Background information. -Description of the physical or functional characteristics. -Nature of a supply, service, or construction item. -Requirements to be satisfied by a product, material, or process. -Procedure to determine whether requirements are satisfied/Reporting. Source: National Institute of Government Purchasing (NIGP) Dictionary of Purchasing Terms). Segment II What is Contract Management?

Characteristics Terms of Reference/ Statement of Works Written by someone who understands the topic (Procurement function: help articulate the needs) Invest time specifying what you want & how you want it Be sure that what you write is what you want Because what you write is what you will get Segment II What is Contract Management?

11 Segment II What is Contract Management? Negotiation between Client & successful Contractor/Vendor Award is finalized Signature of contract Post-Award - Kick-Off Conference When does Contract Management Start formally?

 Know your contract (what does it contain?);  Understand your contract (what are these provisions?);  Use your contract (When is it appropriate to use what/timely action);  Know your risks & understand how to mitigate them;  Supervise your contract technically (performance & quality);  Escalate to obtain help/guidance. Segment II What is Contract Management?

13 Planning & Timing Monitoring Execution Performanc e Time Budget Contractor Communication & Meetings Documentatio n Resolutions of Issues Escalate, if necessary Acceptance Documentatio n Segment II What is Contract Management? Contract Management

14 Order for Payments Executed work Modifications Scope/Amend ment Closeout Contract Evaluation Contractor’s Performance Segment II What is Contract Management? Contract Management

15 Segment II What is Contract Management? 15 Contract Criteria Total Value: $500,00 Performance of Services, and Multi-year contract (at least three (3) years) Candidate for Pilot Program Key Performance Indicators Service Level Agreement Key Supplier Management Program (IDB example)

16 Segment II What is Contract Management? IDB Corporate Contracts Management Tool Kit (Summary of Topics)  Scope of Contract Management;  Key Contractor Management Program;  Importance of Financial Reporting and Contractor’s Internal Controls;  Focus of Contract Management  Terms of Reference, Statement of Work  Nature & Extent of Contract Management  Contractor’s Performance

17 Segment II What is Contract Management? IDB Corporate Contracts Management Tool Kit (Performance Support Tools)  Template for TOR & SOW  Contract Management Diagram  Contract Kick-off Mtg. Checklist  Contract Management Checklist  Contractor’s Performance and Contract Progress Report Form  Contract Closeout Checklist  Contractor’s Final Performance Evaluation Form

Contract Specialist Letter to to PM confirming role & responsibilities. Conduct Contract Kick-off Mtg. Validate contractor’s processes & systems for compliance. Maintain contract files and monitor documentation. Coordinate performance reviews. Resolve issues & disputes. Document actions. Issue amendments. Evaluate. Negotiate. Modify scope & price. Maintain documentation. Complete Contract Closeout Checklist. Complete contract files. Archive file. Project Manager Acknowledge PM communication. Read contract Participate in Contract Kick-Off Mtg. Prepare Surveillance Plan. Complete project Mgr. Contract Mgt. Checklist. Implement Surveillance Plan. Monitor & documents contractor’s performance (Contract Progress Report if SLA). Document acceptance of deliverables. Notify Contract Specialist of issues & disputes. Identify & evaluate changes. Notify Contract Specialist. Document changes. Assist in negotiations. Finalize acceptance. Authorize payment. Complete Contract Closeout Checklist Provide all relevant documentation Complete Contractor Final Performance Report. Segment II What is Contract Management?

Segment III Good Contract Management-Achieving Results

20 Segment II Good Contract Management-Achieving Results 5 Risks Avoided by Good Contract Management 1. Throwing away money -Not enforcing negotiated terms on suppliers/Contractors. 2. Leaving money on the table-Not delivering value to your customers. 3. Time wasted-Looking for contracts, schedules, file notes and data. 4. Money wasted-Errors, double handling, disparate and ad-hoc processes. 5. Being re-active instead of pro-active. Prevention is better than cure. Importance of Contract Management Achieving Results

21 Segment III: Good Contract Management-Achieving Results Good Contract Management -Achieving Results  Good specifications (TORs or SOWs);  Planning of selection process & execution of assignment;  Sufficient technical knowledge;  Sufficient & timely performance; supervision/measurement;  Good understanding of when changes to scope needed. Technical Capacity Critical:

22 Segment III: Good Contract Management-Achieving Results Good Contract Management - Achieving Results Administrative Capacity is Critical:  Properly Defined Responsibilities and Rules;  Capacity to prepare standardized documentation;  Capacity to evaluate and negotiate;  Clear Procedures (i.e. acceptance of deliverables, payments, amendments, extensions, termination…);  Dispute resolution mechanism (appropriate use).

23 Segment III: Good Contract Management-Achieving Results How do we contribute to Achieving Results for the Organization?  Good Contract Management-Strategic function and important pillar.  Empowering organization.  Good contracts outcomes.  Contribution to organization’s Goals.

Questions? 24