Contract Management. Two words that can still strike fear in even the most experienced buyer.
In the past contract management was often overlooked in the procurement regime, with organisations failing to implement good robust processes and procedures.
Don’t get me wrong, the public sector has come a very long way from the days when different departments had their own contracts and there was no collaboration internally in some organisations, never mind with external organisations.
So, times have changed and many organisations have embraced the benefits that contract management can deliver, however there is still a distance to go for many.
The Procurement Bill 2022, currently proceeding through Parliamentary scrutiny, will, however, require everyone to up their game.
The extent of the Transparency requirements will mean that even more information will need to be gathered in respect of contracts and contractors.
From procurement pipelines to indicative KPIs, the need for structured contract management is no longer something for the wish-list, rather it will be an essential requirement once the new legislation is implemented.
Procurement Pipelines
From 1st April 2023, every contracting authority with an annual spend in excess of £100million will be required to publish their annual procurement pipelines.
Currently the Bill suggests that this will apply to all contracts above £2m, however it is likely this will be increased to £5m when the legislation is enacted.
Any organisation which does not have a proper view on its current contracts and expenditure will struggle to create a pipeline of forthcoming tenders.
The days of suddenly realising a contract is coming to an end are over – the need is for a proactive approach to future procurement.
Modifying a Procurement
The Procurement Bill allows, in certain circumstances, that a modification may be made to a procurement.
In the Open Procedure, prior to the tender deadline and in the Competitive Flexible Procedure prior to the deadline for requests to participate, or if that stage was not enacted, prior to the tender deadline.
Modifying a Public Contract
As with the current Public Contracts Regulations 2015, the Procurement Bill clearly identifies the circumstances around which a public contract can be modified.
There are no substantive changes to the existing rules, a clear audit trail and justification for the action taken will be required.
Contract Change Notice
Before modifying a public contract, the authority will be required to publish a Contract Change Notice to notify the market that they intend to modify the contract along with any other information that is, as yet, to be specified by regulation, unless an exemption exists.
Publication of Modifications
Once a modification has taken place, a contracting authority will be required, within 90 days, to publish either, the modified contract or the modification itself.
Currently the suggestion is this will apply to contracts above £2m, however this threshold may change prior to the Act becoming law.
Key Performance Indicators
There is a requirement within the Bill (Section 49) that contracting authorities must set and publish at least three Key Performance indictors (KPIs) before entering into a contract, unless an exemption exists.
Thereafter, at least once every 12 months during the contract and again upon expiry, the authority is required to assess the contractor’s performance (Section 66) against the KPIs and publish information that is, as yet, to be specified by regulation.
If the contractor is not performing the contract satisfactorily and despite having been given the opportunity to improve their performance have failed to do so, then the authority will be able to terminate the contract, seek damages or come to a settlement agreement with the contractor.
Termination of Contracts
As with the Public Contracts Regulations 2015, the ability to terminate a contract is confirmed as an implied term of every public contract and an authority may terminate a contract if they believe the contract was awarded or modified in breach of the Procurement Act or the supplier or a subcontractor of the supplier has become an excluded or excludable supplier.
Contract management sits front and centre of all of these parts of the Procurement Bill, but this is by no means an exhaustive list, there are other issues good robust contract management will be required to ensure that authorities have clear and concise information and a robust audit trail, to evidence that an issue exists and take corrective action.
Justification for all these actions and more will require to be supported by clear auditable information to support the decisions taken.
Contract Management has moved from the side-lines to the forefront of procurement.
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While all information provided is given in good faith, the contents of these articles are not to be construed as legal advice or a substitute for such advice, which you should obtain from your legal advisors if required. We are not and shall not be held responsible for anything done or not done by you as a result of the information provided.
