• Novice
  • Aware
  • Competent

Contract Supervision

The objectives are to:

  • Effectively and efficiently supervise and administer the contracts and the workforce involved in the "works program"
  • Use quality assurance processes
  • Evaluate the performance of contractors cost effectively
  • Use benchmarking to supplement the evaluation, especially in the core purchaser roles as opposed to the "contestable elements".

Direct cost gains may be made through contracting or outsourcing however, unless the contractor supervision and administration costs are efficient, then the overall costs may be adversely affected.

The key ingredients to success in this area are:

Detailed work needs to be undertaken in each area to ensure that the final contractor administration process is effective and cost efficient.

Of course, the complexity varies significantly when the contract is long-term and involves life-cycle and renewal issues, as opposed to short-term maintenance and operational contracts.

Clear Contract Documentation

It is critical for the contract documentation to clearly outline the responsibilities and expectations of both parties.

Confusion or misunderstandings about responsibilities, particularly given that the contracting group will be focused on achieving the agreed outcomes in the most efficient way, can lead to conflict that is typically detrimental to the performance of both parties.

Simple Performance Assessment or Monitoring Techniques

It is tempting to develop performance measurements that are very detailed.

One of the risks associated with performance measurement schemes is that they may lead to undesirable behaviors as contractors take short cuts to meet the targets.

It is often useful to have a balanced measurement system that takes into account both quantitative and qualitative aspects of contractor performance.

For example, it is important to measure both the speed and the quality of the contractor's performance, as focusing on just one of these will naturally be detrimental to the other.

Simplicity in monitoring techniques is also very important, as the simpler these are, the less time it takes to accumulate and assess the findings and develop appropriate responses to fine-tune the contractual performance.

However, "you get what you measure", so the measures require careful consideration.

Monitoring techniques involve:

  • Measuring the performance of the contractor against agreed targets
  • Analyzing and assessing the findings
  • Feeding back the findings to the contractor.

Simple Payment Schedules

Complex payment schedules lead to complex systems required to accomplish the payments and require higher levels of contract management.

In order to keep the contractual management as simple and cost effective as possible, it is generally in the best interests of both parties to keep the payment schedules simple.

One option often included is a portion of the payment based upon a performance measure, for example, the profitability of the plant/organization. This helps to focus the contractor on accomplishing their daily tasks, as well as working for the general performance of the plant/organization.

Communications

It is vital to maintain open, clear and succinct communications between the organization and the contractor.

This can help identify any issues early, and also aid in the feedback of useful information to the organization.

Communications may be managed through formal meetings and feedback sessions, or through more informal 'get-togethers', dependent upon the situation and the relationships that exist between the organization and the contractor.

Relationship and Culture

The manner in which the relationship with a contractor is managed can have a significant impact on the performance and ongoing success of the arrangement.

In general, a highly prescriptive "master-slave" agreement means the contractor focuses on doing the least possible to satisfy the organisation, to the point at which they get paid.

A relationship based upon performance measures that link the contractors' returns to the returns of the work that they do can generate:

  • A higher level of involvement and problem solving
  • Improved feedback and identification of business improvement opportunities.

Managing the Contractor

Having selected a contractor, it is important that the organization appreciates that even though it has transferred responsibility for the management of certain assets, it is still responsible for managing the contract.

Poor contract performance occurs when the owner's involvement is limited to merely signing the invoices each month.

Better contracting results when the owner is involved at an appropriate level and can demonstrate a real commitment to giving the contractor an opportunity to perform and thus make the contract succeed.

This involvement should be regular and organized in a formal manner so that if informal communication methods break down, there is another avenue for the parties to let each other know about any problems. Formal communications include:

  • Corrective Action Requests
  • Performance Measurement Reports
  • Contract Performance Meetings
  • Invoice Sign-Off Meetings.

These mechanisms allow contract performance to be closely monitored and appropriate remedial action to be taken if necessary.


previous home next
Contractor Assessment and Selection   Contract Support Systems