THE ART OF

SUCCESSFUL CONTRACT
MANAGEMENT
  W EwB INAR SERIES
[Link]
 Table of Contents

1 Introduction ................................................................................................3
1.1 Overview ............................................................................................................ 3
1.2 Learning outcomes ............................................................................................ 3
1.3 Who should attend? .......................................................................................... 3
2 Refresher: sourcing & contract management process ...................................4
2.1 Contract management as part of the Procurement Cycle ................................ 4
2.2 What contract management entails.................................................................. 7
3 Contract management basics .......................................................................8
3.1 The Disappointment Gap................................................................................... 8
3.2 Why is your contract not achieving as much value as it could? ........................ 9
3.3 The ongoing contracting problem ..................................................................... 9
3.4 Bridging the Disappointment Gap ................................................................... 10
3.5 Objectives of contract management ............................................................... 12
3.6 Critical drivers of good contract management ................................................ 12
3.7 Contract management at different levels ....................................................... 12
3.8 The characteristics of good practice................................................................ 13
3.9 Contract Law .................................................................................................... 14
3.10 Written v oral contracts................................................................................... 14
3.11 Privity ............................................................................................................... 14
3.12 Estoppel ........................................................................................................... 15
3.13 Document precedence .................................................................................... 16
4 Contract implementation ........................................................................... 19
4.1 What is a Contract Management Plan? ........................................................... 19
4.2 Key objectives in the implementation process ............................................... 19
4.3 Key steps in contract implementation ............................................................ 19
4.4 Implementation timeframes ........................................................................... 20
4.5 Managing transition ........................................................................................ 21
4.6 Managing stakeholders ................................................................................... 21
4.7 Transition issues .............................................................................................. 23
5 Creating win/win relationships .................................................................. 24
5.1 Typical relationships ........................................................................................ 24
5.2 From Foe to Friend - creating win/win relationships ...................................... 26
6 Communication management .................................................................... 30
6.1 Influencers on effective communication ......................................................... 30
6.2 Communication planning ................................................................................ 30
6.3 Email versus dialogue ...................................................................................... 31
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7 Performance management ........................................................................ 33
7.1 Why measure performance? ........................................................................... 33
7.2 Performance management concepts .............................................................. 33
7.3 Incentive regimes (rewards) ............................................................................ 34
7.4 Balanced Scorecard ......................................................................................... 34
7.5 Gainshare / Painshare ..................................................................................... 34
7.6 Payment for deliverables................................................................................. 35
7.7 Performance levels .......................................................................................... 36
7.8 KPIs must be ‘SMART’ ...................................................................................... 36
7.9 Measuring performance .................................................................................. 36
8 Managing risk ............................................................................................ 38
8.1 What is risk? .................................................................................................... 38
8.2 Managing risks ................................................................................................. 38
8.3 Contract risk management .............................................................................. 39
8.4 Prioritising the effort ....................................................................................... 40
8.5 Exercise: Typical risk associated with contract management ......................... 41
8.6 Exercise - thinking about risk ........................................................................... 42
9 Contract variations .................................................................................... 44
9.1 What is a variation? ......................................................................................... 44
9.2 What do you need to do? ................................................................................ 44
9.3 Initiation of a variation .................................................................................... 44
9.4 How to reduce variations ................................................................................ 45
10 Resolving disputes ..................................................................................... 46
10.1 Stop – and take a deep breath ........................................................................ 46
10.2 Resolving minor issues .................................................................................... 46
10.3 Resolving major issues..................................................................................... 47
11 Contract renewal and close-out ................................................................. 49
11.1 How to make a decision to extend / close-out? .............................................. 49
12 Conclusion, reflection and commitment to action ...................................... 50
12.1 Supportive behaviours..................................................................................... 50
12.2 Restrictive behaviours ..................................................................................... 50
12.3 Ten Golden Rules ............................................................................................. 50

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1 Introduction

1.1 Overview
Often, contract management is something that gets thrown at you. Without much
explanation of what is required. No training in how you monitor the supplier’s
performance. No understanding of how to avoid the biggest traps. But you just don’t
know what you don’t know!

That stops today.

You have signed up to our series of seven webinars which will cover everything you
need to know to make your contract management more successful.

This course book expands on what we have covered in the webinar series and will
give you in-depth explanations for every step of the contract management process.

1.2 Learning outcomes

This course will equip attendees with the skills and knowledge to:
 drive real value for your organisation through effective end to end contract
management
 learn what tools, techniques and methods are appropriate to manage
supplier performance, relationships and navigate the tricky bits
 unlock the potential of your contract through the power of performance
management, supplier relationship management and continuous
improvement.

1.3 Who should attend?

 functional and operational managers who are new to managing external
suppliers
 contract managers who are fed up with fighting fires and fixing stuff-ups
 general managers who need to get better performance out of suppliers
 motivated procurement managers wanting to setup more successful
contracts.

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2 Refresher: sourcing & contract management process

2.1 Contract management as part of the Procurement Cycle

Below outlines the whole of lifecycle approach to procurement. While the
foundations for successful contract management are laid during the sourcing
process, the management phase typically covers a much longer time horizon (years
vs months).

2.1.1 The stages of the sourcing process

• business needs assessment
• market assessment
• risk assessment

Plan

• tender conditions
Decide on • draft contract
Go to
close-out /
market • SOR/SOW/specification
extension
• pricing structure
• contract management /
reporting / performance
Sourcing process framework
• tender response forms
• duration 6 to 9 months
• evaluation plan
• facilitated by Procurement
Services • tender briefings
Review • goal: a signed contract Award • respond to tender
questions
• tender lodgements

• compliance
Manage Implement • technical evaluation
• financial evaluation
• referee checks

2.1.2 Contract management process: Contract Implementation

Contract management is the stage of the procurement cycle during which the goods
and services are delivered in a manner that satisfies the requirement stated in the
Request for Tender (RFT) or agreed Statement of Work (SoW).

During contract implementation, the foundations for a successful contract

management are laid as this includes contract management planning.

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 Plan

Decide on
Go to
close-out /
market
extension

Contract Implementation Contract Management

process

• (operational) transition • duration: several years

plan for transition in & out • led by the business (you!)
• contract management plan Review • goal: a successful contract Award
• contract hand-over from
sourcing lead
• classify contract using VRA
• confirm roles
• set-up information
management
• kick-off meeting with Manage Implement
supplier
• change management

2.1.3 Contract management process: Manage the contract

Managing the contract starts at the commencement date and ends with the last day
of the contract term. The Contract Manager (CM) is responsible for these processes
to ensure value for money is realised.

Plan

Decide on
Go to
close-out /
market
extension

Manage the contract

• manage compliance
• stakeholder engagement
• communication
• risk management
• dealing with variations Review Award
• resolving issues and
disputes
• continuous improvement
• managing knowledge (eg
operations manual)
• contract administration and
payments Manage Implement
• manage handover to other
CM is required

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2.1.4 Contract Management process: Review the contract
Reviewing the provider’s performance and how the contract is performing against
the benefits that were promised during the sourcing process is a critical part in the
contract management process.

Plan

Decide on
Go to
close-out /
market
extension

Review the contract Contract Management

process
• provider reports • duration: several years
• provider meetings • led by the business (you!)
• performance monitoring Review • goal: a successful contract Award
• performance management
• contract health checks
• audits

Manage Implement

2.1.5 Contract management process: Decide on extension or close-out

Most contracts and Standing Offer Agreements (SOA) have an expiry date. Planning
well in advance if the contract is to be extended or renewed leaves sufficient time to
re-procure the services.

Plan

Decide on
Go to
close-out /
market
extension

Decide on contract Contract Management

extension and close-out process

• duration: several years

• decision to extend/renew • led by the business (you!)
based on performance, • goal: a successful contract
Review Award
market and demand
analysis
• final performance review
• lessons learned
• managing transition
• separating day-to-day and
transition work
• finalising close-out Manage Implement

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2.2 What contract management entails
The below is a summary of the outcomes generated by good contract management.

Can your contract evidence all of these outcomes? Who is responsible for achieving
them?

Sourcing  subject matter knowledge available to sourcing project

 up-to-date plan exists describing how the contract is managed

Implement
 appropriate resources have been assigned to manage the contract
 appropriate transition arrangements are agreed

 service provider responsibilities are tracked

Manage  delivery of goods and services is monitored
 budget is tracked and payments are approved
 appropriate records are kept

 performance of the service provider is monitored and recorded

 performance of the service provider is managed appropriately
Review  relationship is healthy and communication is effective
 variations are dealt with and managed appropriately
 processes are in place to raise and resolve issues
 risks are identified and appropriately managed

Decide on
close-out /  robust and informed decision to extend the contract is made
extension  timing of the decision does not preclude the option re-procure

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3 Contract management basics

3.1 The Disappointment Gap

In undertaking a tender, clients commit considerable resources to ensuring;
 their exact service needs are well specified, often representing significant
intellectual property
 the necessary information is provided to tenderers
 they have an excellent understanding of what constitutes the ideal service
provider
 all relevant risks are managed.

Typically, sourcing departments and their customers have a future vision of

continuous improvement over the course of the contract. This vision is often given
effect by innovation-related KPIs and/or formal gainshare arrangements. These
expectations are built into contracts in the knowledge that the market’s capability
will continue to improve through such things as technology and productivity
improvements.

When RFT documents are released to the market, the evaluation teams’
expectations of the market’s ability to both respond insightfully and then deliver the
contract, are high. Tender responses are developed by business developers whose
role it is to win contracts, not deliver them. Many evaluators report their
disappointment with the gap between the expectations set in the RFT and the
responses received.

Further disappointment is frequently reported after contract commencement, as the

client’s CMs come to realise the promised performance of the service provider is not
reflected in the actual delivery. Their experience can be further exacerbated by
failure of both parties to achieve mutually beneficial management relationships.

The difference between the idealised future vision and the eroded actual
performance is the Disappointment Gap:

Performance
HIGH Commencement

Expected effort
and capabilities
Perform
Performance
Management
Framework Disappointment
RFT Response gap
(Sales related)
Actual
Eroded
Relationship
LOW Management

Acquiring the provider Managing the

contract

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3.2 Why is your contract not achieving as much value as it
could?
Write down three reasons why you think your contract does not achieve as much
value as it could:

3.3 The ongoing contracting problem

There is a constant mismatch of outcomes between a client and a provider.

ORGANISATION SERVICE PROVIDER

Manages down costs VS Seeks to build revenues
Seeks improved services VS Aims to reduce costs
Documents and transfers Intellectual VS Learns and leverages IP
Property (IP)
Manages risk (in part) regularly seeks VS Aims to extend length of contract
reassurance by contract term
Welcomes competitive market tension VS Seeks market dominance
Desires strategic collaboration VS Is (micro) managed on operational
performance
Aims for contract mobility VS Aims for client “stickiness”

Over time, the client desires that costs go down while service goes up. Conversely,
the provider wants its revenue to increase without the need to add in extra
resources towards delivering services.

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 $ Service
Client Client

Provider Provider

Time

The real achievement of congruence and, therefore, the real achievement of a

strong relationship, is when both parties realise the conflict between their individual
goals and seek to overcome these and work towards common goals.

3.4 Bridging the Disappointment Gap

There are three steps to bridging the gap. They must be done sequentially, each of
them takes time and they are increasingly difficult to achieve.

3.4.1 Step 1 Behaviour Management

There is a widely held view that a good contract (relationship) is one where the
contract can be left in the bottom drawer. There are many reasons why this opinion
is flawed. Here are two: the first is the need to establish trust. Contract users
(business units, customers etc) must be able to trust that the tasks and associated
service levels specified in the contract will be delivered as the provider’s proposal
originally promised they would be.

Until such time as the contract users trust the provider with their business as usual
needs, the prospects of their allowing the provider to innovate and improve, are
effectively nil.

The second is the loss of intellectual property. It occurs as the client loses those in
house staff who had the original knowledge and experience of the service. It also
arises from the random drift of intellectual property away from documented to tacit.
Too often when CMs from either side move on, incoming staff are told that (the
contract) is ‘not the way we do it anymore’.

Behaviour Management is about achieving compliance with the contract ie the

service provider making good on its promises. A good contract management plan,
predicated on compliance with the contract, should be the oft-used tool to support
this endeavour.

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 Performance

HIGH
Commencement

Step 3 Convergent Behaviour

(collaborating to meet drivers of
both organisations)

Expected effort and

capabilities
Step 2 Dynamic Management
(leveraging best practice)

Step 1 Behaviour Management

(compliance)
Actual

LOW Relationship
Leadership

3.4.2 Step 2 Dynamic Management

This second step recognises the challenge of maintaining the leadership position
established when the contract was initially exposed to the competitive market forces
of tendering. A simple example of this can be found in the provision of share registry
services where electronic communication with shareholders is rapidly replacing hard
copy forms and documents. Historically, in situations such as this, the provider’s cost
base has fallen without any resulting benefits accruing to the client.

Both parties benefit in having a solid assurance through the life of the contract and
certainly by the intended expiry date; that the arrangement is being delivered at the
equivalent of current market practice. For example, if it was clear there was very
little additional value for money to be extracted from re-tendering and there was
considerable relationship capital between the parties; the resources and costs
associated with retendering could be used elsewhere. As organisations recognise
this possibility, redeployment of staff from intensive and repetitive contract
acquisition into contract management becomes possible.

3.4.3 Step 3 Convergent Behaviours

While it is often written as the ideal relationship objective, collaborating to meet the
drivers of both organisations is rarely achieved. The underlying need is for clients
and providers to work together to manage their highly dynamic environments with a
largely static service level agreement.

Typically services contracts have 3-5 year terms. As organisations regularly vary their
strategic agenda, the tactical and operational responses of their organisations must
vary accordingly. Consequently contract objectives, critical success factors and key
performance indicators must vary.

Developing convergent behaviours requires of both parties a range of attributes, not

the least of which are continued relationship leadership by the client and a genuine
desire by both parties.

The constituent document set comprising the contract should be structured in such
a way as to reflect appropriately the fixed and variable needs of the organisation. A

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 fixed, rules-based governance document combined with a variable schedule and a
variable operations manual which details for example policy specifics, maximises the
prospects of eliminating the Disappointment Gap.

A Strategic Performance Framework which has as its core objective organisational

satisfaction, lifts the relationship out of the operational-level focus of the typical “fit-
for-purpose” service levels.

3.5 Objectives of contract management

The implementation of contract management typically has the following objectives:
 ensuring accountability and responsibility of stakeholders
 best value for money is achieved (ie the best possible service at the most
reasonable cost)
 ensuring service boundaries are managed (ie in and out of scope aspects)
 innovative service delivery is achieved
 operational and financial risks are managed or transferred (but note that
even risks which have been transferred must still be managed)
 effective relationships with service providers are developed and maintained.

3.6 Critical drivers of good contract management

The following lists critical success factors for a contract:
 a good contract, including the quality of the specification, a contract and
performance management model and the pricing model
 the right service / product delivery model
 the right provider selected through a transparent and fair process
 change management skills to ensure acceptance of new arrangements within
the buying organisation
 contract management skills and competencies
 ongoing review and dynamic management of the contract and deliverables
 following good procurement practice.

3.7 Contract management at different levels

Contract management is a team effort and performed at different levels of
governance. Typically, functional managers are concerned with the day-to-day
management and transactions at the operational level (we sometimes call them the
users of the contract). This is typically where most issues are resolved. Contract
Managers and their counterpart at the provider meet regularly, eg on a monthly
basis and discusses contract administration issues and performance metrics.

Some contracts include a relationship management group of which the contract

owner is a member. It meets less frequently, possibly on a quarterly or annual basis
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 to assess the health of the relationship. Contract extensions and bigger issues are
often discussed at this level based on the information fed up from other levels of
contract governance.

Strategy

Budget
accountability
Relationship Strategic level
Management
Group Health of
the relationship

Manage bigger issues

Manage contract
incl performance, compliance and
commercials Contract
“bridge” to business
Contract management
Manager
Administer contract level
incl information mmgt, cost control,
“bridge” to procurement

Operational day to day management Operational

Functional and transactions
Managers “getting things done” level

3.8 The characteristics of good practice

For contract management to be successful, we typically find:
 presence of a structure appropriate to the requirement
 communication arrangements including meetings between the parties at
appropriate regularity
 a reporting framework that provides useful and regular information
 planning around the management of the contract and delivery of the
requirements
 a performance management framework that allows you to check the
progress of the provider’s performance
 incentives to encourage the provider to achieve greater excellence
 appropriate sanctions for poor performance.

Other issues to consider include the process of tasking the provider to undertake
work, the development and maintenance of operational manuals and ownership of
intellectual property and the implementation or transition process used to set the
contract up.

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3.9 Contract Law
Contracts in Australia are based on the common law inherited from the United
Kingdom combined with Australia’s own legal precedents and legislation that has
been enacted by the Australian and State parliaments.

A contract can be defined as: “A legally binding agreement between two or more
parties.” Basically, contracts have the following main attributes:

Agreement: there must be an offer to do something and acceptance of that offer

by the other party. In addition, subject to a limited number of
exceptions, there must also be consideration for the promise (there
must be sufficient payment or other exchange of value)

Promise: both parties promise to do something

Intention: the parties must intend that their promises create legally
enforceable obligations

Enforcement: governed by law or legal precedent

Reliance: each party trusts the other party

Exchange: if you do this, I will pay this

3.10 Written v oral contracts

A contract may be wholly in writing, wholly oral or, partly in writing and partly oral.
In some instances, a contract can even be formed by conduct. It is important you
exercise caution when dealing with provider to avoid entering into an unauthorized
contract or varying a contract by conduct. This is particularly important if a contract
is of special importance, involves a large sum of money or if there is a likelihood that
a dispute may arise in the future.

A written contract will assist to clarify the contractual arrangement if there is a

dispute. This is because it is easier to prove the scope of works to be performed and
the intention of the parties. In the absence of a written contract, if there is a dispute
which ends up in court, the court will need to rely on each party's word to determine
what the parties had actually agreed to do under the contract.

3.11 Privity
Privity is an important concept as it applies to contract management. It essentially
means that only the parties of a contract can enforce the contract. In the real world,
this means that if you engage subcontractors via a head contractor, there is no
contractual relationship between you and the subcontractors.

3.11.1 Case study: Privity

Try to answer the questions to the following case studies:

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 1) A subcontractor has been engaged to put new light switches into your office.
While they work in your office, you ask the subbie to also change a light bulb. Should
the subbie do what you tell them and why?

2) Subcontractor A approaches you and demands payment of an invoice as the head

contractor has not paid the last invoice that the subbie submitted. Will you pay them
and why?

3.12 Estoppel
It is important to recognise that if the contract is incomplete, vague or is varied by
conduct, the provider and not the principal may be more persuasive because of the
presumed bargaining position of the parties. So ensure specifications are clearly
written.
 estoppel can occur if contract conduct differs from the “contract”
 it is also known as “variation by conduct”
 actual behaviour of the parties changes contract
 almost certain it is occurring in most contracts (you know it happens if you
hear someone say “that’s not the way we do it anymore”)
 the facts of the dealings contribute to the legal agreement
 one of the most significant issues in contract management.

3.12.1 Case Study: Estoppel

You have tasked a contractor to build a brick fence. The contractor goes ahead and
builds a (cheaper) paling fence.

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 Contract Actual

You inspect the construction site and the breach of contract becomes apparent.
However, you do not send out a letter to the contractor notifying them of the breach
of contract. The case ends up in court. What do you think the court will decide?

3.13 Document precedence

It is fundamental to the appropriate delivery and operation of a contract to have a
clear understanding of the levels of precedence of various documents comprising
the contract proper.

Good contracts clearly state what happens if one part of the contract contradicts
another and which part will take precedence. Quite often, the terms and conditions
of the contract take precedence over any clauses in the schedules, the attachments,
any documents incorporated by explicit reference or in invoices.

3.13.1 Exercise: Case Study – Document precedence

Part 1 - A major public company undertakes an annual audit of contract payments
for the provision of complex document management and printing services. The
pricing model contains a number of fixed price elements supported by a schedule of
rates for services where the monthly volumes vary considerably. This results in many
line items showing up in the monthly invoices and little comparability from month to
month.

As the audit progresses it is clear that various apparently new services have been
included in the invoicing.

On checking you find that the new services are not covered in the tendered price
schedule and the provider’s invoices clearly state that: in the event that amounts
invoiced for new services aren’t rejected within 30 days of receipt by the client, they
form part of the contract.

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 Exercise – as the new manager of this contract discuss your intended actions and
response to the findings of this audit.

Part 2 - There has been a strong reaction by the provider to your discussions with
their client account manager. In your determination to achieve the best outcome for
your company you review the service level agreement, pricing schedules, terms and
conditions of the contract and the tenderer’s original tender response. You note that
the precedence clause in the contract states:

Precedence

1.1 If there is an inconsistency between:

(a) the terms of the Contract and any Schedule, the Contract term prevails;

(b) the provisions of the Request for Tender and the Contract, the Contract
prevails; or

(c) the provisions of any delivery docket, invoice, account or other document of
the Service Provider, the Contract prevails.

Document your expectations now and discuss your approach to the negotiations:

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4 Contract implementation

4.1 What is a Contract Management Plan?

The Contract Management Plan (CMP) expands on the actual contract document
and is more than a mere summary of that document. It highlights how the contract
will be managed on a day to day basis, how performance is monitored, who the
people are who manage the contract and includes all critical contract dates.

The CMP typically includes information on:

 detailed knowledge of the goods/services purchased under the contract
 objectives of both parties
 issues raised by the provider that were negotiated as part of the contract
 performance measures and governance frameworks developed and agreed
with the provider
 any risks that were identified (relating to either the goods/services purchased
or the provider) that need to be managed under the contract
 any savings or benefits that are expected to be achieved under the contract
that need to be monitored and managed.

4.2 Key objectives in the implementation process

Managing the implementation of a contract should have the following objectives:
 establish a fair but firm working relationship with the provider
 ensure services are delivered in accordance with the specification
 ensure compliance with the contract
 the tendered price is paid
 variations can be identified and agreed
 services are continually reviewed
 budgets are managed and controlled
 difficulties (client / provider / user) are satisfactorily resolved.

4.3 Key steps in contract implementation

In achieving the objectives of implementation, the following aspects are key:
 the first three months are critical to how the rest of the contract operates

relationships are established

contract management is implemented

 manage compliance to the

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 specification
contract

 performance and reporting

determine how you will identify that you pay the tendered price
determine that you get the product or service you pay for

 contract administration

variations can be identified and agreed on through a transparent process

dispute resolution / issues management framework is agreed and
operates in a professional way

 regular review

continuous reviews of the contract occurs.

4.4 Implementation timeframes

In the transition period, services are typically delivered by two providers: the
incumbent and the new service provider. A gradual phasing occurs between the
providers as the incoming provider takes on more and more tasks from the
incumbent.

The incoming provider’s resourcing allocated to implementing a contract is

incremental and involves more people, systems and money as the start date
approaches.

Transition is typically managed as a separate project with a separate budget.

Transition-in
Activities

Transition-out
Current New
provider provider

BAU

0 1 Months 2 3

Transition period
where fees may
overlap
Transition Full services
Commencement Commencement
(contract signing) (hand-over)

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4.5 Managing transition
In order to effectively manage transition, consideration needs to be given to the
following:
 there needs to be an analysis of stakeholders so that the correct engagement
and communication can occur:

- incoming provider’s executive, board, personnel, recruitment providers,

subproviders and providers
- outgoing provider’s executive, board, personnel, subproviders and
providers
- client organisation’s executive, board, personnel, related providers,
secondary providers, customers and community organisations (on
occasion)

 transition deliverables need to be agreed and appropriate testing of

deliverables occurs to ensure that the contract will work
 transition monitoring and management processes and systems need to be
identified.

4.6 Managing stakeholders

When introducing a new contract or instituting a variation to an existing contract,
you will need to ensure that stakeholders understand and accept the changes that
result.

Who is a stakeholder? Any individual, team, group or organisation who has a vested
interest in the work you are doing.

There are some critical steps that should be taken to align stakeholders to the
change:
 undertake stakeholder identification and analysis
 for the stakeholder, identify
 the current level of commitment
 the desired level of commitment
 identify actions to obtain desired level of commitment
 set out communication strategies to achieve this
 identify any risks and mitigation strategies apparent.

It can be useful to get a group together to brainstorm issues related to key

stakeholders: what is their role and why are they important; who are key
stakeholders (names, organisations).

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 Your objective should be to identify all stakeholders and agree an action plan to take
stakeholder analysis to the next stage. Then you need to identify what stage your
selected stakeholder is at and where you would like them to be; these can be the
same.

Focus on those stakeholders in the key players and keep informed category (ie, the
important ones), identify those that you need to move to obtain and maintain the
desired level of commitment.

High

Keep satisfied Key players

Lower level of interest High interest, high

but very influential influence
Power to influence

Face to face contact Should be focus of

communications

Keep informed
Minimal effort High level of interest
Require minimal but low power to
information influence

No undue time & resources Updates &

developments

Low High
Level of interest

The above groupings can be defined as follows:

Key players: This group has a high level of interest and high power to influence. This
group should be the focus of communications activities, the majority of which should
be face-to-face.

Keep satisfied: This group has a lower level of interest in the program of work, but is
very influential. It is essential to maintain close contact with this group, using face-
to-face communication where possible.

Keep informed: This group has a high level of interest but relatively low power to
influence your group’s project / activity. Regular updates should be given to this
group, keeping them apprised of developments.

Minimal effort: The stakeholders in this group require minimal information on the
project. Undue time and resources should not be expended on these stakeholders –
email updates will be adequate.

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4.7 Transition issues
Transition issues will be many and varied based on the nature of the service.

At its broadest level, the following list provides an indication of the types of issues
that should be addressed and an action plan developed on how to manage them.
 records
 work in Progress
 new projects
 tasking
 performance management
 stakeholders
 assets and registers
 procedures / Manuals
 policies
 systems
 contacts
 security
 induction.

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5 Creating win/win relationships

5.1 Typical relationships

The type of relationship that will characterise a contract is established early in the
process of sourcing the contract. The RFT documentation and the nature of the
interaction with bidders during the tender period and selection will already have
established the likely relationship.

Care should be taken to reconcile the constituent documents so that they

consistently reflect the actual desired relationship. Frequently there is contradiction
between the language of the specification and that embedded in the draft contract.

The following figure demonstrates differences between vendor, supplier and

partner/provider:

Ability to
meet
drivers

Vendor Supplier Partner

Traditional Partnering
• low complexity • adding value • may be highly complex
• low value add • reducing costs • time criticality possible
• no loyalty • specification may be complex • innovation highly desirable
• little product differentiation • requires expertise • benefit / risk sharing
• skinny margins • profit protection • eg construction contracts
• eg power supplies • eg call centre services

Typical relationships are:

 adversarial, arms-length, contractual
 cooperative, team oriented
 value added, integrated team
 synergistic, strategic partnership.

The table on the following page further details those relationships.

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 ADVERSARIAL, COOPERATIVE, VALUE ADDED, SYNERGISTIC,
ARMS-LENGTH, CONTRACTUAL TEAM-ORIENTED INTEGRATED TEAM STRATEGIC PARTNERSHIP

COMPETITION COOPERATION COLLABORATION CONGRUENCE

each party has clearly established each party knows and commits to the goals one integrated team consisting of client and elements of shared risk defined
responsibilities of the contract and to each other’s goals contract personnel is created joint sharing of liabilities for failure
client “monitors and inspects” provider requires a degree of trust the team has one set of goals joint sharing of gains from success
little or no trust required team often creates a separate organisational both sides share their goals and cost
entity for the life of the contract
requires extremely high levels of trust
requires a high degree of trust

often adversarial significant energy in communications and accountability is collective among the curve on benefits is logarithmic – based on

often creates disputes and sometimes “win-win” conflict resolution integrated team meeting and then exceeding goals

litigation occurs disputes typically resolved in some degree of both client and provider provider senior level essence of the relationship is to increase the
compromise and harmony sponsors to remove barriers to support the mutual profitability of both parties
contract objectives neither at the expense of the other

both aimed at creating new synergistic solutions

both sides plagued by cost overruns established for early positive intervention typically includes some incentive for requires extensive communication,

tasks often accomplished on schedule and exceeding goals collaboration, organisational commitment and

within budgets sponsorship

creates the opportunity for major breakthrough

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5.2 From Foe to Friend - creating win/win relationships
5.2.1 Language Choice
The language you choose to routinely refer to the organisations that provide you with
goods and services establishes, very quickly in the minds of all, the nature of the
relationship. It sets the agenda for all contact and communication.
 master/servant - we are the master and you are here to serve us; ie this is a
one way relationship
 vendor vs service provider – we see you as someone who just sells (ie vends)
stuff to us rather than provide services which we value
 “the golden rule” – we have the gold and we make the rules, ie we care little for
your individual or organisational issues, that’s your problem just make sure it
doesn’t get in the way of ours.

Another vital consideration which often confounds the establishment of excellent

relationships with service providers is the notion that the parties should commence
the relationship with an implicit level of trust.

Trust can be regarded as the quantified belief by a trustor regarding the trustee’s:
 competence
 honesty
 security
 dependability.

That is to say that trust is confidence in the ability and intention of an agent to provide
correct information or perform promised actions, in other words it is a belief that is
built over time.

5.2.2 Stages of trust

The following list contains a few characteristics of trust:
 is intangible
 develops over time
 requires hard work
 must be earned by both partners
 requires transparency and full information
 at the beginning is typically based on the reputation of both partners
 consistency allows to predict the partner’s activities
 competence is based on goal congruence as one partner can act instead of the
other with same value to both parties.

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 The following graph shows how trust can develop over time from early experimental
or learning stages to implicit trust.

Implicit
trust
Competence

Consistency Experiential
Observations

trust

Transactions
Experimental
trust

Capable Reliable Predictable

Behaviours

The time period over which trust develops varies due to a number of variables. These
variables include the level of risk, the opportunity to display trusted behaviour and the
level of cooperation evident between the parties.

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5.2.3 Drivers of trusting relationships
There are a number of drivers that will promote the achievement of trust in a
relationship.

Cooperative
interaction for
improvement
Cooperation, Cooperative
trust and preparedness
interaction for
to understand other’s problem solving
aspirations and goals

Cooperation and
Cooperative
commitment to
interaction for
achieve shared
dispute resolution
goals

Cooperation and Cooperative

forgiveness for making interaction for
genuine mistakes coordination
Cooperative
interaction for effective
communication

Source: Walker and Hampson

The identification of how you can influence and develop these drivers to achieve
better results will promote trust in the relationship.

Trust is built up over time and is enhanced when you do what you say you will.
Conversely, trust is diminished if you do not do what you say you will or you act
against your previous commitment.

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5.2.4 The Dynamics of trusting
The following diagram shows how a virtual loyalty bank operates to add or detract to
the relationship.

Yes
but…
Partners A & B
Partners A & B
trust each other
Builds committed to
each other

Builds Continue
relationship?
relationship
TEST OF LOYALTY A needs B’s support

No
Gets it Doesn’t get it

Trust & Trust &

commitment commitment
is reinforced is diminished

Adds Loyalty
Bank Detracts

The above has been compared to personal relationships and similar rules would apply.

There are behaviours that you should practice and expect to see displayed in a
successful contract:
 understand that the culture of the contract is often founded prior to contract
signature, based on the manner in which the requirement is contracted and act
accordingly
 be clear before entering into the relationship in the contract what the
intentions of the other party are and the level of commitment required by their
executive and organisation
 receive training on how to develop and manage an effective provider
relationship
 participate actively in all relationship building activities and behaviours
 work within a jointly agreed framework of acceptable behaviours and values
 focus on the achievement of successful service delivery outcomes

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6 Communication management

6.1 Influencers on effective communication

Influencers on effective communication in a relationship are as follows:
 the frequency of communication between the two parties and within each
organisation
 the ease by which information can be communicated
 the level of openness and honesty of the content of the communication
 frequent and easily understood
 relevant to the individual or group receiving the communication
 open and honest in content
 timely
 pitched to the right level.

6.2 Communication planning

We have seen above how to analyse your stakeholders and identify the most effective
approach to communicating with them at all levels. What should be done next is the
development of a communication plan (or communication strategy) to deliver on the
required outcomes.

The communications plan should determine how communication will occur

 by what means will you deliver the message, eg, presentation, briefing, email,
letter
 what should be the frequency of communication
 are the other opportunities within the corporation of which you should take
advantage, eg, seminar sessions, staff meetings.

Remember that for each stakeholder group, a different audience approach is required.

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 Steps in strategic communication planning

Step 1 Identify and analyse stakeholders

Step 2 Develop communication strategy and detailed tactics / actions

Step 3 Implement communication tactics / actions, including coaching,

guidance and progress reports

Step 4 Conduct Post-Implementation review

Typical steps in communication planning include the following

Step 1: Stakeholder identification and analysis as discussed in the previous section. The
outcome would be the stakeholder analysis and action chart

Step 2: Developing the communication strategy and detailed tactics and actions. The
outcome would be the communications pan identifying who is responsible for each
tactic and the date or period when these actions should occur.

Step 3: Implement communication tactics and actions, including coaching, guidance

and progress reports. This is important if you have responsibility for delivering a tactic
and relying on others’ actions.

Step 4: Conduct a post-implementation review identifying the effectiveness of the

execution of the communication plan and ensure that lessons learned are fed back into
future planning activity.

6.3 Email versus dialogue

The email game exercise demonstrates how ineffective email communication can be in
delivering the required message.

Email is a tool for delivering text and setting down in writing the logic of a particular
issue. It is particularly useful for reaching out to multiple stakeholders (or at least to
their Inbox) and for confirming prior discussions.

An email will stimulate an interpretation from the reader and elicit a response, even if
that response is not to respond to the email. The down side is that you have no control
over this interpretation and the written word, particularly any email shorthand or
jargon, can easily be misinterpreted.

Dialogue between individuals either by phone, interview or meeting allows for those
intangible but critical characteristics of sound, feeling and tone to be conveyed to the
other party. This means that face to face communication is more ideal as it provides

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 for images, gesture and posture to form part of message delivery that can never be
achieved in writing.

Dialogue stimulates thinking on the part of the other party and results in feedback
(positive and negative) to which you as the messenger can respond. The result is
communication.

It is worth noting that research has been undertaken over the past 40-50 years into
communication and, while the analyses have different results, they have all
consistently demonstrated that between 70% & 90% of effective communication is
achieved by non-verbal signals.

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7 Performance management

7.1 Why measure performance?

Performance is measured and reported on:
 to understand what is good / bad performance
 to identify where poor performance exists
 to identify opportunities to improve performance
 to monitor progress in improving performance.

It allows the CM to identify that the services being paid for are in fact being received.
Performance measurement outcomes can also assist CMs in marketing the benefits of
a contract to internal stakeholders and customers.

7.2 Performance management concepts

Performance management is an important component of contract and relationship
management. The relationship commences from the first contact between the client
and the provider. Commencing the relationship as you wish to continue is important.
The protocols and procedures established in the early stages of a contract will dictate
the type of relationship that you will have with the provider.

Similarly, the approach you take to performance management will affect the
relationship. A clearly defined performance management framework with roles,
responsibilities, performance measures, governance structures and schedules detailed
will assist the CM and the provider.

There are several widely used approaches to managing the performance of a contract.
These are as follows:
 transparency / open book is where both parties operate in an environment of
openness and the financial accounts related to the services are made available
to the other party
 balanced scorecard is an approach developed by Robert Kaplan and David
Norton from Harvard Business School; it measures achievement along four or
five categories that usually include financial, customer, process and
developmental lines
 alliancing / partnering involves both parties operating in a collaborative way to
achieve shared objectives; the term is widely (and often erroneously) used
 competitive tension is where two or more providers are given a catchment
area (physical or functional) and performance information is shared in an
attempt to encourage excellence
 gainshare / painshare is where the provider is given the opportunity to share in
savings (“gain”) arising from the contract and share in losses (“pain”) for failure
(see below)

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  contractual sanctions or abatement regimes can be used to recover an amount
from the provider for a breach, with a differential amount for major and minor
breaches

7.3 Incentive regimes (rewards)

Contemporary contracts usually aim to include an incentive for the provider to aim for
excellence. This can be done in a number of ways:
 growth in scope of contract is an effective incentive and does not cost the
contracting company any additional money
 profit motive where opportunities are identified to increase the provider’s
profit (without simply paying them more money!)
 longevity of contract means that the provider is encouraged to look at the long
term of the contractual relationship
 preferred short listing for additional opportunities can be useful in the private
sector but is contrary to probity standards in the public sector.

7.4 Balanced Scorecard

Result

KPI 1 X
Target or
KPI 2 minimum
performance X
KPI 3 standard ?

Total

Link to profit or
length of
contract

The above diagram depicts how the balanced scorecard works.

By achieving the target or minimum performance standard set out in the contract, the
performance is calculated as a score. If the total of all key performance indicators
reaches an agreed threshold, then the provider is entitled to an incentive.

7.5 Gainshare / Painshare

Gainshare / painshare is where the provider is given the opportunity to share in
savings (“gain”) arising from the contract and share in losses (“pain”) for failure.

When the provider is able to demonstrate that savings have been achieved, an agreed
formula is used to calculate the share of savings to which it is entitled. Examples

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 include 20% of the savings achieved or even 100% of savings generated in the first year
with the savings for subsequent years reverting to the contracting authority.

Painshare works effectively in reverse and results in the provider having to pay a share,
or on occasion the full amount, of the additional cost or reimbursing for the savings
that were expected but not realised.

This model can work exceptionally well and requires a strong commitment from both
parties to make it work. The CM needs to be conscious of the effect that consistent
rejection of ideas for savings has on the incentive – it can cause quite opposite
behaviour.

Many gainshare / painshare models don’t work because they are poorly designed and
managed. Both parties need to allow for the ongoing adjustment of the baseline to
ensure that variations in the influencing attributes (eg, number of customers) are
addressed.

Gainshare / painshare requires that each initiative is measured. Initiatives and savings
calculations should be agreed in advance. The process is administratively effort
intensive. External independent only way to guarantee success and both parties should
abide by the umpire’s decision.

7.6 Payment for deliverables

This approach identifies an element of the provider’s fee that is placed “At Risk”
subject to the achievement of certain deliverables. It is most effective in the first year
of a contract where particular requirements need to occur.

Examples:
 100% completion of certain tasks
 completion of operational plans / procedures
 delivery plan submitted and accepted
 MIS and reporting development.

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7.7 Performance levels
The key to setting appropriate and useful performance levels is to first understand
objectives of having the contract. Identify what it is that is trying to be achieved in the
broadest terms, eg

achievement of the organisation’s IT strategy to upgrade all desktops to current

standard

versus

delivery and installation of new desktop software

Then look at how you can measure achievement of this:

 operationally what do you want to measure as a KPI?
 how do you get a sense of performance at the detailed level?
 fitness for purpose
 compliance.

7.8 KPIs must be ‘SMART’

When defining KPIs make sure they are:
 Specific
 Measurable
 Attainable
 Results – oriented
 Time based.

7.9 Measuring performance

Measuring the performance of the provider can be done either by:
 relative / comparative analysis
 benchmarking the service outcomes with comparable services or organisations

external benchmarking
internal comparisons between contracts
ensuring ‘like for like’ comparisons
need to find comparable services / goods / organisations

 trend

change of measures against the previous period

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 achievement of specific organisational strategies / targets.

Those attributes that should be measured are generally along the following lines:
 cost
 operational performance
 risk
 achievement of strategy.

Recent developments have extended these to include:

 stakeholder accountability
 alignment with organisational strategy.

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8 Managing risk

8.1 What is risk?

“Risk is the exposure to the possibility of such things as economic or financial loss or
gain, physical damage, injury or delay, as a consequence of pursuing or not pursuing a
particular course of action.

The concept of risk has three elements:

1. the perception that something could happen

2. the likelihood of something happening and
3. the consequences if it happens.

Standards Australia Handbook 240:2000 Guidelines for managing risk in outsourcing

8.2 Managing risks

It is important to determine the risk management approach through the following
activities:
 identify and develop risk treatment plans
 monitor and review outsourcing process
 undertake communications and consultation with all parties
 conduct a rigorous implementation program
 ensure the organisational infrastructure is in place
 manage your obligations to manage risks
 ensure that the provider meets its obligations
 monitor and review the contract
 keep risk treatment plans up to date.

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8.3 Contract risk management
All too often CMs find themselves with a considerable number of contracts to manage
and numerous issues all of which can result in too little time or incorrectly focused
activities. With an understanding of the above risk protocol it is possible to take a
contract risk assessment process to determine the necessary priorities.

The following model contemplates the scale and complexity of the contract as the
basis for this determination.

High

CONTRACT
SCALE

Low

High
CONTRACT COMPLEXITY

Service contracts can vary in complexity and scale, for example, a waste management
contract is high risk due to their large scale and high level of complexity, whereas
graffiti removal would be low risk due its low level of complexity.

In assessing contract scale consideration could be given to such things as:

 how widely across the organisation the contract operates
 the number of relationships involved
 the contract value
 number of full time equivalents (FTEs) “touched” by the contract
 focus of the contract eg strategic/tactical.

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 In assessing contract complexity, consideration could be given to such things as:
 number of process operations involved
 the range of disciplines required to deliver
 the types of stakeholders
 the visibility of the deliverables
 the nature of the applicable regulations.

8.4 Prioritising the effort

After identifying the risk, remain conscious of what can be achieved within the
constraints of your resources.

Impact on Operations
LOWER HIGHER

EASY
Ease of Measurement

3 1

4 2

HARD

Assessing the extent of the impact on you only serves to identify the priority of
developing measurement tools and contract management strategies.

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8.5 Exercise: Typical risk associated with contract management
As an example, service contracts can have a number of associated risks, including:

1. failure to have sufficiently skilled and experienced resources to effectively

manage the contract(s)
2. failure to act on provider under-performance
3. failure to provide contract deliverables on time, to agreed quality standards
4. exceed agreed budget limits
5. breach contract provisions
6. fraudulent/ unethical conduct by the provider
7. failure to register contract amendments as contract variations
8. provider does not agree to contract variations to accommodate changes
9. key stakeholders not consulted or notified about contract performance or
disputes.

Pick one of the risks from above which is most applicable to your contract. Come up
with three DO NOTs that you want to steer away from to minimise the resulting risk
for your contract:

DO NOT…

DO NOT…

DO NOT…

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8.6 Exercise - thinking about risk
A man and a woman both well rested, experienced drivers set off in a late model Volvo
early one morning to drive non-stop from Brisbane to Perth. Think about what could
happen (as in what could go wrong).

Part 1: Write down in the spaces below what could happen (the risk event) and then
what the result of that risk event happening could be (consequence).

WHAT COULD HAPPEN AS A RESULT

(RISK EVENT) (CONSEQUENCE)

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 Part 2: A family of 5 with 3 young children set off to drive non-stop to Perth. Only the
father drives and he worked late the previous evening.

WHAT COULD HAPPEN AS A RESULT

(RISK EVENT) (CONSEQUENCE)

Part 3: Write down the things that you know that people SHOULD NOT DO if they want
to minimise the chance of these happening.

DO NOT…

DO NOT…

DO NOT…

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9 Contract variations

9.1 What is a variation?

A variation describes any adjustment to the works or services covered by the contract.
Such a variation alters the scope, the delivery personnel and/or the pricing.

There are some legitimate reasons for varying the contract, including changes in
technology, regulation or demand fluctuations.

How to vary the contract is described in the contract terms & conditions.

It is important to keep in mind that each variation affects the contract’s value for
money assessment.

9.2 What do you need to do?

When dealing with variations, the CM has the following responsibilities:
 pick up when a variation is happening – the requested ones are easy. Variations
often creep in through variations by conduct, such as oral agreements or
estoppel. Ensure that if there are any changes to the contract to capture them
as a variation
 make sure the provider only delivers against the new scope after variation is
final
 a CM must ensure that correct procedures for directing variations are followed
so as to prevent unauthorised expenditure
 variations must be approved at the appropriate delegation level
 a CM must check the provider’s claims to ensure that no ‘extras’ are included in
a variation
 if the provider seeks to modify the specification, check the reason for the
original provisions with the technical adviser/designer since there may be good
technical reasons not to change
 keep good documentation and everyone on board.

9.3 Initiation of a variation

Mostly, the variation can come from either party but only the contract authority can
approve a variation. At a high level, if the request came from an internal stakeholder,
the client may seek to obtain value for money through an RFQ process.

If the provider initiated the variation, it is important to ensure that the variation is
valid (ie not already included as part of the current contract scope) and no ‘extras’ are
included so that the variation is kept to the bare minimum.

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9.4 How to reduce variations
Activities to reduce variation claims include the following:
 good RFT documentation
 schedule of rates
 effective pre-award negotiations
 referee checks / past experience with provider
 clear directions for variations
 avoidance of interference to provider’s work
 critical and researched evaluation of provider claims
 back-charging the provider when they are at fault
 risk management.

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10 Resolving disputes

10.1 Stop – and take a deep breath

Dispute resolution is daunting. It involves a lot of legal work and will take a long time.
At the same time, you are responsible that the provider delivers business as usual.

As you might have guessed, dispute resolution processes are the very last resort. Most
issues are minor issues and are picked up and resolved through:
 performance management
 escalation through governance structure
 documentation
 communication / relationship management.

10.2 Resolving minor issues

In the main, those issues that attract the most attention are actually minor issues.
Clear processes need to be set out and agreed to identify and manage these minor
issues before they become major.

Minor issues that are recurring frequently can become major and are an indicator
(perhaps) of a systemic failure on the provider or client side. A simple and quick
procedure is required to manage minor issues. A more formal issues resolution
procedure required for major problems.

At all times both parties should act cooperatively and certainly not hinder resolution of
the issue. You and your counterpart should maintain the shared objective identified in
the contract.

If you have hit a brick wall, escalating the issue through the governance structure of
your contract works really well:
 use issues escalation to preserve your relationship with your counterpart
 often just saying that you’ll “take it up with my boss” will resolve issue
 important that each level of governance talks to their counterpart in the
provider’s organisation (ie my boss talks to your boss).

To resolve minor issues, it is useful to:

 during kick-off inform contract users to raise all complaints to you, ideally in
writing
 inform users as to types of problems they may regard as minor
 arrange for an issues management register to:

record the nature of issue, date reported and date resolved

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 monitor provider’s performance in service delivery
monitor provider’s record of failures
monitor recurrent minor issues that may be dealt with as major issues
provide information to contract authority’s representative

 user representative to liaise with contract authority’s representative in those

minor problems which recur or do not get resolved
 deal with minor, day to day problems, face to face
 if minor issues ‘referred’ upwards, send them back.

10.3 Resolving major issues

10.3.1 Process
Major issues often have legal implications. Keeping to formal processes and a good
document trail is therefore crucial. It is also important to be clear about the actual
meaning of contract terms and conditions and the goods/services specifications. Often
it is best to get help and advice very early on.

How to deal with disputes:

 user representative reports major issues to contract authority’s representative

only when they have been unable to resolve directly with provider
use formal system (ie in writing) to report major issues

 standard reporting format for major issues to be designed to:

ensure consistency of information

record all major issues
keep track of provider’s performance

 major, urgent issues should be dealt with immediately by contract authority’s

representative
 non-urgent major issues until next periodic review meeting.

10.3.2 Relief from contractual obligations

The law provides precedent for relief from contractual obligations that allow a party
relief from the requirement to fulfil its obligations.

One party may seek relief from the contract due to any or the following
 misrepresentation by the other party (eg, “we have the licence to install SAP
technology” when the other party does not have this)

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  misleading and deceptive conduct (eg, “all our staff are fully qualified to
Certificate IV level” when none or only some have this)
 mistake (eg, a genuine mistake has been made)
 unconscionable conduct (eg, it is proven that the other party has been bribing
officers to win contracts)
 frustration (eg, a secondary provider has been unable to meet its obligations
and the provider cannot deliver the goods or services; note that any loss is
worn by the party that incurs the loss).

The likely outcome if relief is granted is that the contract is cancelled.

10.3.3 Remedy for breach of contract

The law allows for one party to seek “remedy” to recover damages for breach of
contract. Some of these are included in the contract while others are decided by a
Court of Law. Note that penalties can only be awarded by a Court; contracts may
include certain sanctions against a party which equate to financial loss by that party for
non-compliance with the contract. The remedies available are as follows:
 termination, usually included as a contract term
 damages or other remedy awarded by a Court
 liquidated damages, ie, the precise fixed sum identified in the contract (or a
formula by which it will be calculated) that one party must pay the other for
breach of contract
 penalty, ie, an amount determined by a Court that one party should pay to the
other
 specific performance, ie, the one party seeks property or money to be returned
by the other party.

In Australia, the most important legislation governing contract law is the Trade
Practices Act 1974 (Cth). Every state and territory parliament has passed fair trading
legislation that mirrors the Trade Practices Act.

Disputes and issues will always occur throughout the contract period. The real
challenge is to manage these effectively and professionally while still maintaining a
business relationship with the provider.

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11 Contract renewal and close-out

11.1 How to make a decision to extend / close-out?

Of course is it easier to just extend an existing contract, but is it also best value for
money and does it effectively address your organisation’s risk exposure?

The following considerations should be addressed when making this decision:

 service provider’s performance over life of contract
 changes to your demand profile (more, less, different?)
 changes in the market (new providers, new products, better prices?)
 changes in business needs (through consultations)
 past extensions
 risk/value profile of contract.

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12 Conclusion, reflection and commitment to action

12.1 Supportive behaviours

 actively listen to each other and maintain open, honest and timely
communication by regularly sharing strategic and operational information using
formal and ad hoc meeting forums
 provide positive feedback regularly and negative feedback in a constructive,
problem solving way
 establish an environment of trust in systems and processes by consistently
delivering outcomes when we say we are going to deliver and by informing
each other about problems in plenty of time, so that there are no surprises
 treat each other as if we were in the same company by collaborating on tasks
and initiatives, by sharing resources, by developing and agreeing joint
objectives and by presenting a united front to defend the partnership against
criticism
 establish an environment of trust in people by empowering them to make
decisions and take actions, by recognising and rewarding them and their
achievements and by tolerating and learning from our mistakes
 understand each other’s operating styles, embrace differences and share each
other’s skills, knowledge and experience to come up with creative solutions to
problems.

12.2 Restrictive behaviours

 blame each other for ‘screw-ups’ and not taking ownership of problems or
seeking solutions (“blamestorming”)
 not promoting our successes to clients and other stakeholders
 overpromising, setting unrealistic timeframes then not delivering
 not seeing ourselves as one team – ie having an ‘us and them’ attitude
 working to different agendas or vested interests and having different priorities
 not involving the other party in key decisions, even if peripheral to the services
 not defending the other party to internal criticism, even if it seems justified.

12.3 Ten Golden Rules

The following is a list of “Ten Golden Rules” for better contract management:

1. be proactive – don’t allow minor issues to become major ones

2. communicate regularly and effectively (across stream, upstream and
downstream)

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 3. establish your role and the joint roles and responsibilities and remember them
in every interaction – be clear on what you expect from your counterpart and
what they can expect from you
4. understand your contractual obligations and ensure the other party fulfils theirs
5. behave ethically and honestly at all times and require the same standards of
the other party
6. regularly review the suitability of the deliverables and performance outcomes
7. identify particular risks faced by the contract and monitor events to limit their
effect; escalate issues before they become too difficult for you to handle
8. seek professional contracting/legal advice when warranted; keep the
appropriate people informed of developing issues as they may be able to assist
9. be reasonable and fair when dealing with the other party but enforce the
contractual terms when appropriate
10. establish the basis of the working relationship and the rules and behaviours
expected as soon as possible

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DR STEFAN GASSNER

t (02) 8274 9200

m 0406 263 419
e stefangassner@[Link]
w [Link]

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