Applicants looking for ways to explain their contract management skills or skills transferable to a contract management role, may find help in the Department of Finance’s guide titled Australian Government Contract Management Guide, April 2019, Version 1.0. This guide takes you through the stages of managing commercial contracts for procurements, with links to key documents and helpful tips to avoid traps.
A strong caveat is provided early in the guide: “This guide provides practical process guidance to support effective contract management at a practitioner level for Commonwealth entities. The information contained in this guide provides general advice only, does not form Commonwealth policy, is not a substitute for legal advice and should be read in conjunction with your entity-specific policy or guidance on contract management.”
Just so a reader is clear, the guide explains what a contract is. “A contract is a legally enforceable agreement between two or more parties that details each party’s rights and obligations in performance of that contract.” … “At its most basic, a contract requires an offer, acceptance of that offer and consideration:
- the parties to the contract must have both intended to be legally bound
- the terms of the contract must be certain and
- each party must have the capacity to enter into the contract.”
Contract management is also defined. “Contract management refers to all the activities undertaken by an entity, after the contract has been signed or commenced, to manage the performance of the contract (including any corrective action) and to achieve the agreed outcomes.”
The guide points out that each contract will be different, depending in part on whether it’s simple procurement or a more complex or strategic contract.
Who should use this guide?
A useful insight is the wide scope of people who should understand contract management. Anyone involved in any part of managing a contract will benefit from reading this guide, whether it’s paying invoices, providing technical advice, liaising with suppliers, obtaining quotes or managing contracts.
What do you need to know about contract management?
For applicants needing to articulate their suitability for a procurement role, or trying to identify their transferable knowledge, the guide’s coverage of relevant knowledge is worth examining. The guide points out that contract management operates within a complex environment of legislation and policy and provides an overview of the main elements. These are:
- Resource Management Framework
- Procurement Policy Framework
- Other legal requirements, such as contract law, privacy, work health and safety, confidentiality, taxes and other duties, security, and records management.
- Australian Public Service (APS) conduct requirements
Most role descriptions use the word ‘complex’ in relation to some aspect of the work, such as relationships, policy issues, challenges, or contracts. Understanding the level of contract complexity enables you to determine the appropriate level of contract management required. In making a case for a role involving managing complex contracts, it is essential to understand both the level of complexity of both your experience and what the new role involves, so you can select appropriate examples.
The guide categorises contracts into four categories of complexity:
The greater the value of a contract, and the higher the risk, the more the contract tends to move towards ‘complex’ and ‘strategic’. Table 1 in the guide sets out the qualities that provide indicators of what category a contract might fall into. These qualities are:
- Key defining factors (about the goods or services)
- Risk profile
- Performance monitoring
- Contracting vehicle
- Organisational impact.
The relationship between value and risk is not straightforward. Examples are given to illustrate how indicators need to be weighed.
- “Catering for a meeting or workshop would generally be transactional, however, catering for a large public event may be complex.
- Labour hire would generally be routine, however, if you have complicated security and access requirements then this may increase the level of categorisation.
- A contract for office furniture would generally be routine, however, if this is part of an office fit-out then it may be complex.
- The customisation and integration of a software system would generally be a complex contract, however, if the contract is for the development and implementation of large entity specific software applications then this may be strategic.”
The scope of contract management
The guide sets out three main phases of contract management (plus a planning phase), and warns that, “planning for contract management should happen before the contract is signed.” The level of contract management, and which activities within each phase apply, will depend on the type of contract being managed. Applicants can demonstrate sound judgement in how they assess the needs of their procurement task, taking into account the complexity and risk profile of the particular contract.
The phases of contract management are:
- Phase 0: Contract management planning
- Phase 1: Contract start up
- Phase 2: Contract performance
- Phase 3: Contract closure.
The guide takes you through each phase and details required actions according to the four levels of complexity.
Since ability to assess risk is a skill common to many roles it is worth examining the section of this guide on assessing and managing risk. Applicants need to show they understand the nature of risk, how to assess risks and manage them.
The guide defines risk as “the effect of uncertainty on objectives.” An effect is “a deviation from the expected outcome — positive or negative. Risk is often expressed as a combination of the consequences of an event and the associated likelihood of occurrence.” Risk management refers to the activities undertaken to manage and control a contract’s risks.
“Risks may specifically relate to the goods or services you are receiving (for example, Work Health & Safety risks in a cleaning contract or using unqualified trainers to deliver training programs), or they may relate to the contract management process itself (for example loss of key staff, staff having insufficient expertise in contract management or failure to adequately check deliverables or pay invoices on time).”
The guide explains how to develop a risk management plan, noting that: “While transactional and routine contracts may not require a formal written risk management plan, you should still consider and document any risks.”
The guide provides a list of sources of risks with illustrative examples. An applicant seeking to demonstrate their understanding of risks would benefit from reading this material. The risks cover not only those related to the contract, but also contract management, stakeholder relationships, changes in circumstances, transition arrangements, and ICT issues.
Other plans to consider
The guide lists other plans that may be needed:
- Transition plans
- Communications or stakeholder engagement plan
- Probity plan
- Fraud control plan
- Security plan
- Supply chain risks plan
- Disposal plan.
The guide gives useful material on managing communications. This process includes establishing contact details, preferred channels of communication, agreed response times, and how to escalate issues. Useful distinctions are drawn between different types of relevant meetings: progress, technical, long-term reviews, and issue-specific.
Applicants should think about ethical issues they have handled as well as how they have anticipated potential ethical issues. The guide lists these ethical considerations for contract management:
- “the need to uphold the APS Values and Code of Conduct
- the need to achieve the contract outcomes
- the need to maintain a positive working relationship with the supplier
- whether an actual or potential conflict of interest exists
- whether you need to put in place reasonable and cost-effective mitigation arrangements to address actual or potential conflicts of interest.”
Information is provided on types of conflict of interest and how to deal with performance issues. A section on negotiation distinguishes between:
Applying the Contract Management Guide to applications
When applying for a procurement role, the guide will help with:
- Identifying relevant technical knowledge about procurement frameworks, associated rules, policies and guidance.
- Explaining how to research, investigate and analyse issues, interpret and apply legislation, policies and procedures.
- Explaining how to conduct end to end open tender procurement processes.
- Describing advice and assurance provided on procurement and contracts processes, procurement methods.
- Describing assistance given with contract development and management.
- Explaining advice provided on a range of procurement activity.
- Identifying what to look for when facilitating the delivery of procurement awareness and training programs.