Contract Monitoring

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Contract Monitoring

• Joanne Severn, CPPB
• 18th Annual Lone Star Purchasing Conference
• San Antonio

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Class Objective

• This class will provide tools and techniques for
  monitoring and managing contracts.
• Topics we will discuss
• Define Contract Monitoring
• Identify and Define Roles and Responsibilities
• Contract Change Management
• Contract File Requirements
• Contract Close Out

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The Contract Has Been Signed!What next?
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Contract Monitoring

• The principal objective of contract
  management/monitoring for both the buyer and
  seller is to ensure fulfillment of contractual
  obligations by all parties to the contract.

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Roles and Responsibilities

• You must identify who will monitor the contract
• It should be a person who will be using the
  service and will be named the Contract Manager
• But who else is involved?

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Purchasing Role

• Purchasing has a wealth of information from
  involvement in the bid development, evaluations
  and final selection of supplier
• They will be a relationship resource between
  internal customer and supplier

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Contract Administrator Role

• Who retains all original contracts in your
  company?
• Many companies have a Contract Administrator for
  this role
• Retains all original contracts
• Tracks key contract data (i.e. renewals, funding,
  etc.)
• Issues notice to proceed letters
• Ensures suppliers compliance of insurance or
  bonding requirements
• Issues termination letters

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Contract Manager Role

• Very important role!! The person assigned should
  do the following
• Read the final contract
• Monitor work performance
• Ensure deliverables are received
• Manage change requests
• Review the suppliers invoices
• Conduct contract close-out

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Suppliers Role

• Fulfill contractual obligations
• Deliverables
• Communicate progress
• Identify and communicate problems
• Invoice accurately

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Joint Responsibilities

• Meet and discuss the contract requirements
• Communicate
• Monitor progress, document issues and resolutions
• Manage changes
• Close out the contract upon completion

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Risk Management

• Risk Identification
• Developed while developing an RFP or contract
• The process of identifying the specifics on what
  should be done, when it should be accomplished,
  who is responsible, and associated cost

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Risk Management, cont

• Risk Management
• Process that tracks, monitors, documents and
  evaluates performance and risk throughout the
  contract
• This will be the contract managers role to inform
  affected parties of any potential risks and
  action required to minimize risk

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Contract Monitoring

• Read the entire Contract and Statement of Work
• Identify each deliverable and milestone in the
  contract and set up a checklist
• Review suppliers invoice for accuracy
• Review budget to ensure funding
• Manage contract change order or amendment

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Contract Example

• Purchase of Scanner
• Deliverables
• 1. Delivery of Scanner
• 2. Installation
• 3. Training for 4 people
• 4. 90 day warranty
• 5. Maintenance for 12 months

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Contract Example cont

• 6. Maintenance to include on-site service Monday
  Saturday 8-5
• 7. Supplies are included
• 8. Cost Scanner - 12,500
• Installation 1,000
• Training 500
• Maintenance 1,785 / yr

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Contract Example cont

• 9. After hours labor rate 78/hr
• 10. 1 hour response time call back
• 11. 4 hour response time to be on-site
• 12. Authorized technicians only
• 13. Current Certificate of insurance

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Contract Example cont

• Invoice arrives
•  Computer Product, Inc. Invoice239        
• Customer  Name Totally Cool
• Date June 2, 2007   
• Description Scanner services
• Total cost 12,500 scanner
• Delivery charges 125
• Installation training 1500
• Maintenance 1,785 (6/1/07 5/31/08)          
        

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Change Management

• Remember change orders or amendments should be
  allowed if within the scope of work. Be aware of
  scope creep
• Obtain proper approvals who has the authority
  to authorize changes?
• Have you discussed with supplier the change and
  will they be able to comply?
• Detail additional costs, if any

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Change Management

• Some examples
• Extend service end date
• Force majeure events
• Updating allowable pricing for inflation
• How many changes or amendments have been
  requested?
• Is it time for a new contract?

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Invoice and Payment

• INVOICES
• Invoices must be reviewed in accordance with the
  guidelines set in the contract.
• Do the invoices have the required level of
  detail?
• Do the billable hours exceed contract limits?
• Are they billing properly monthly/quarterly

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Contract Remedies

• Address non-compliant performance
• Document the Plan of Action for resolution
• Inform interested parties your management,
  legal office, contract administrator
• Know your legal remedies
• Is there a breach of contract? Can it be
  resolved?
• Terminate contract if necessary but what is
  your back up plan?

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Contract File Requirements

• Copy of current contract, amendment, changes,
  drawings, exhibits
• All correspondence (e-mails, letters)
• Invoices
• Bid/proposal
• Certificate of insurance or bonds, if applicable
• Non-disclosure/confidentiality, code of conduct
  statements

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Contract Closeout

• All services completed and products delivered as
  per the contract
• Change orders complete
• Contract close out check list
• Acceptance and final payment

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Contract Closeout Checklist
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Contract Monitoring Tools

• Signed Contract / Deliverables
• Contract Monitoring Checklist/abstract
• Payment Application (construction)
• Database tool

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Database tool

• There are several contract management software
  packages available
• Many of these provide the following
• - Record of each contract
• - Captures key dates
• - Track deliverables
• - E-mail notification of renewals
• - Track contract total cost and payments

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Database Tools

• - Robust reporting
• - Capture supplier name, address, point of
  contact, HUB status
• - Contract development tool
• - RFP development tool
• - Software pricing range from 5,000 to 100,000
  and more depending on users and types of users
  (inquiry only, edit) implementation

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Questions?

• Thank you and have a great conference!!
• Enjoy San Antonio!!
• Joanne Severn, CPPB
• Joanne.severn_at_tgslc.org