Contract Management: Five Quick Ways to Maximise Value
Are you ahead with proactive contract management, or stumbling behind somewhere just trying to keep up?Once that lengthy OJEU process is completed, suppliers are settled in, and service delivery is ticking along nicely, it can be easy to take your foot off the gas and focus on the next big challenge coming your way. When procurement professionals are called upon to make savings, it is often the new areas of spend that we look to tackle first. Existing contracts can be overlooked.
So, with that in mind, are you getting the most out of your existing contracts?
In December 2016, the National Audit Office published their guide on Good Practice Contract Management. Almost one year on, how many of us have taken advantage of the techniques and strategies detailed here for driving value, innovation, and savings through our active contracts?
Tenet Services recognise that best practice contract management is a key way to add real procurement value and drive savings. Here are five key ways that you can do this today, even with limited time and resources:
1. Benchmark, Benchmark, Benchmark
Almost as critical as the location, location, location of a new home is the position of your contract within the wider marketplace.
From understanding what your contemporaries are paying, to sharing best practice between organisations and being aware of changes within the industry, benchmarking is a critical exercise that should be done regularly for all high-to-medium-value contacts.
- Tip: Be aware of what the market is doing, and how this could affect you. Are commodity costs going down? If so, there could be price reductions to take advantage of. Equally, is there a supply shortage somewhere along the chain, or a pending change in law that might threaten to drive up prices? Forewarned is, as the saying goes, forearmed.
- Tip: Make use of specialist industry framework agreements, such as those offered by the Crescent Purchasing Consortium. With market-leading rates and specifications designed especially for the education sector, CPC contracts can provide an easy-access source of what best practice in your spend category looks like.
- Tip: Tap the market. Most suppliers are happy to provide pricing data for benchmarking, so long as they feel there is real value in it for them. For example, offering suppliers some brief feedback on their competitive offering as part of a benchmark exercise can be as useful to them as their cost information is for you.
2. Use Your Suppliers
You have contracted this supplier to deliver a specific service or range of goods because they are the expert in that field. Leverage this expertise to your advantage.
- Tip: Plan contract review meetings to ask suppliers how they think you can improve your service Could you be using different products to reduce expenditure or improve environmental footprint? Could the service be delivered slightly differently to drive efficiency? Any supplier who is looking to build a solid partnership with your organisation should be more than happy to help you review how things are done.
- Tip: Demand Continuous Improvement. Put the onus on the suppliers to improve their service delivery and reduce cost as part of their contract performance.
3. Keep an Eye on KPIs
Are you confident that suppliers are delivering on their promises? Often, we spend more time designing the key performance indicators and service level agreements than we do checking that these service levels are being achieved, which is essential for maximising contract value.
- Tip: Ask suppliers for contract performance data; and use it! Even if you did not build the provision for management information into your original contract. Suppliers who are managing your contract effectively should keep data on usage levels, service visit times, resources used, etc. You can use this to assess performance against criteria, and also identify areas where internal efficiencies could be made.
- Tip: Get suppliers to self-report on performance. Again, a good supplier will be willing and able to give a short report or presentation on performance levels as part of your regular contract review meeting. This can reduce the resources you use internally to collate data, whilst ensuring you are working collaboratively with your supplier to maximise good performance.
4. Plan Ahead
Having regular meetings with suppliers is one of the cornerstones of good contract management. However, with so many contracts to manage (and so little time), it can be difficult to keep on top of when review meetings are due.
- Tip: Put a simple reminder system in place to book in supplier meetings, ask for management data, or negotiate contract renewals. This will help ensure proactive and regular contract management, plus avoid any key deadlines being missed.
5. Include Key Stakeholders
Your internal service users are often the people who are closest to the contracts. Do you spend enough time getting their feedback on what is going well, and where improvements could be made? Identifying key internal contacts and ensuring their views are incorporated into the contract management process is critical for success.
- Tip: Plan to engage regularly with key stakeholders, and certainly in advance of your contract review meetings, to obtain feedback on supplier and service performance.
- Tip: Organise your contract data – keep a log of the issues raised by end users and stakeholders, so you can easily identify key recurring problems, tackle them more quickly, and build mitigation into future procurements.
Of course, there are many other ways to embed best practice contract management – these are just the start. From risk ownership to long-term goal setting and detailed value/benefits analyses, there are many ways that improved contract management can ensure optimum performance.
To find out how Tenet Services can help your organisation to take control of its contracts and get the most for its money download details of our Contract Management Services or give us a call today for a free no-obligation quote: 01376 511 411.