Contract management is the responsibility of a buyer for the duration of the contract to ensure that the seller fulfills all his obligations.
Purchasing and Supply with Nyasha Chizu
The procurement specialist must therefore lead a contract negotiation process if an organisation is serious about eliminating maverick contract management.
Many institutions subordinate contract management to project management.
Project management is responsible for the management of the interrelated activities of an organisation that are stated and agreed in the contract.
A contract results from a procurement process that the buyer leads. Good contracts come from SMART (specific, measurable, attainable, realistic and time bound) requirements.
The requirements must be clear and the procurement process must eliminate bias and willful restrictions on participants. There must be a balance of the desire to eliminate fly-by-nights and over-specification of the qualification criteria of potential suppliers.
The selection process of the best option involves setting up of effective tender committees.
Most contracts are difficult to manage are a result of the evaluation committee accepting glaring non-complaint bids. Tenders ordinarily, are awarded to the lowest complaint bidder. Some evaluation processes overlook the fundamentals by design or by ignorance.
Overlooking evaluation criteria by ignorance arise when the team constituted does not have the necessary skills required to carry out the process. Many organisations do not value the need for tender committees to attend training on tender management and as such, the blind will lead the blind.
Overlooking the evaluation criteria by design normally exists when the tender committee is dominated by technical staff with corrupt tendencies. The technical person could be one but of a dominant character. Such characters use threats that the product that the evaluation team is leading to selecting would not work.
In most cases, non-technical staff gives in just for the avoidance of backlash, when that same person rejects the purchased equipment for technical reasons is difficult to challenge.
The procurement specialist must ensure that standard clauses are incorporated in contracts. Surprisingly, some contracts are concluded omitting critical issues such as performance guarantee, penalty clauses, dispute resolution mechanisms and clear obligations of parties.
The procurement specialist must be assigned the responsibility of ensuring that a contract is complete and clear on all the expectations.
After a contract has been agreed on and concluded, the role of the procurement specialist is to manage that contract.
Measures such as liquidated damages, calling of performance bond and other guarantees are included to ensure pressure is put on a supplier to service the contract. However, it must be noted that the buyer’s organisation may also fail to meet their obligation in the contract. In such mishaps, the contracts should provide for application of interests on overdue accounts, suspension of works, application for extension of time and payment of downtime.
The contract manager’s role is therefore to limit the exposure to the organisation, liaising with the project manager and the finance manager to ensure smooth operation of the project.
The major challenges of a procurement specialist pushing for schedule payments are that many view them as corrupt. Although there are some with corrupt motives, the parallel activities of the contract and project manager provides some checks and balances for effective project implementation.