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You are on step 4 of 10 steps.

Click for slide: Planning for negotiations Click for slide: Managing the Supply Chain Click for slide: Other agreements Click for slide: Ensure the right contract is in place Click for slide: Agree service levels Click for slide: Prepare for change Click for slide: Ensure that there is a clause addressing dispute resolution Click for slide: Selecting a preferred bidder Click for slide: Produce evaluation plan Click for slide: Agree draft contract
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What you need to do

A good contract should set out the obligations of the parties in a way that is:

  • clear
  • complete
  • concise
  • unambiguous

The contract also forms the foundation for a productive relationship built on communication and trust.

The foundations for contract management are laid in the stages before contract award, including the procurement process.

These formal contract aspects form the framework around which a good relationship can grow. If the contract was poorly constructed, it will be much more difficult to make the relationship a success.

For IT enabled business change projects see the Risk Allocation Model for guidance on deal shapes and key areas to address in the contract clauses.

 

Points to consider

The contract should include as appropriate:

  • a definition of what is to be provided and requirements to be met
  • an agreed level of service and mechanism for payment reduction if it is not met
  • means to measure performance
  • pricing mechanisms including where appropriate milestone payments, incentivisation/rewards, retentions, and if the contract is for more then 2 years, price variation mechanisms. (see Government Accounting for policy on advance and interim payments)
  • plan to cover implementation/transition/rollout
  • acceptance strategy/test plan
  • ownership of assets and intellectual property;
  • escalation and alternative dispute resolution (ADR) procedures
  • change control procedures
  • invoicing arrangements
  • communication routes, typically at three levels
    - operational (end users/technical support staff),
    - business (contract manager and relationship manager on both sides)
    - strategic (senior management/board of directors)
  • contract management arrangements (see contract management)
  • agreed exit strategy and agreed break options.
  • Premises (where the goods/services will be delivered)
  • Sub-contractor details
  • Authorities responsibilities

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