Managing contracts
This good practice advice will help your buying staff simplify contract management and remain fully informed about your school’s position.
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- Starting the contract
- Day-to-day administration
- Managing performance
- Reviewing the contract
- Ending the contract
- More information
Starting the contract
Prepare a contract summary
A contract summary should be prepared for higher value contracts when a contract begins.
Contract documents can be lengthy and difficult to interpret. The contract summary will serve as an easily accessible source of information about the contract for your school's buying staff and users of the contract.
The summary should cover details about the:
- relationship between your school and supplier
- service to be delivered by the supplier
- financial arrangement that is in place.
The contract summary should be kept up to date whenever any changes to the contract are made.
Contacts
Remember to record the:
- name and contact details of your school's and supplier’s key contacts
- responsibilities of your school's and supplier’s key contacts
- dates and location of scheduled meetings and standard points to cover in them
- process for agreeing to and implementing changes (a variation) to the contract.
Process
Remember to record the:
- timeline of all key actions, deliverables, milestones and payments
- people who are authorised to request services under the contract and what that process is
- process to be carried out by your school to check the supplier’s performance.
Payment
Remember to record the:
- payment procedures to be followed and frequency of payment.
Contract registers
Staying on top of crucial contract information is easier if you use a contract register.
Day-to-day administration
You will need to take regular action to administer the contract for its duration.
Payment
- Check invoices for accuracy.
- Pay invoices promptly.
Keep records
- Keep copies of all invoices and the dates that payments are made.
- Keep copies of all correspondence with suppliers. These may be useful for resolving a dispute if one occurs.
Variations to the contract
- Manage all variations in accordance with the process stated in the contract.
- Communicate clearly with the supplier about the variation and acquire their signature.
- File variations with the contract.
Managing performance
Monitoring a supplier’s performance is essential. It helps to identify and address underperformance.
You can monitor performance by asking for regular reports from the supplier and getting feedback from the people who use the goods or services.
Ask yourself:
- is the supplier meeting their contracted requirements?
- are there any changes that should be made to the contract?
It is important that you provide suppliers with feedback on their services. If suppliers are performing well, let them know. If suppliers are underperforming, address the issue.
How to manage poor performance
If a supplier is performing poorly, communicate with them and find a solution quickly. Poor performance should not continue over an extended period.
When you raise concerns, it may prompt suppliers to improve their performance.
- It is good practice to communicate with suppliers in writing so that the conversation can be referred to later.
- If communication is verbal, make sure you send a follow up email to the supplier. It is important to keep a written record of the details that were discussed verbally.
If the supplier continues to perform at an unacceptable level under the terms of the contract, follow the contract’s dispute process or issue the supplier with a notice of breach.
Contact school.buying@education.govt.nz for advice on issues with supplier performance.
Reviewing the contract
Formal reviews should take place at assigned times during the course of the contract.
- When the contract is awarded, review the buying process that took place. Look to identify areas to improve on in future purchases.
- During the contract (at least once a year), review the supplier’s performance and seek to make continuous improvements.
- At the end of the contract, complete a thorough review to decide if the contract should be renewed (if a right of renewal exists).
If you are not renewing the contract, establish what the contract lacked that you will seek in a new contract.
How to conduct a review
Both key contacts should be present and prepared to contribute and receive constructive feedback.
When conducting a review, refer to information from sources including:
- your school’s business case/statement of requirements
- the opinions of those using the goods or services about the supplier
- reports from previous reviews.
Reviews should inform recommendations for future changes to the contract and what you will look for from a new contract.
Ending the contract
Based on the contract’s final review, decide if your school will be renewing the contract or going to market again.
Market conditions should also influence this decision. The market may have changed since the current contract was signed and a better deal may be available.
If going out to market again, plan early. Request a final report from the supplier and ensure that all invoices are paid.
Terminating early
Contracts can typically be terminated early by either party by giving notice to the other party (referred to as termination for convenience) as per the termination provisions in the contract.
In this situation, the terminating party provides the other party with the period of notice stated in the contract.
In some cases, early termination may result in your school being required to pay an early termination fee. The value of the early termination fee must be considered before making a decision to terminate. It may be economical to complete the full contract term rather than terminating early.
If you are terminating the contract because of a dispute or breach of contract, seek legal advice.
Contact school.buying@education.govt.nz for advice on contract termination.
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