Presented by Ms. Galaletsang Matseliso Workshop on Contract Management Presented by Ms. Galaletsang Matseliso OCPO: National Treasury | 20 July 2017

CONTENTS Contract Management Definition Purpose and benefits Types of contract management Contract Management Framework (CMF) CM cycle Contracts/ Agreements Creation Types 4. Questions from FSPT 5. Discussions Modernise People Culture Value for money Service delivery 2

Contract Management: Definition The management of the contracting process from-; Service Identification (market/product analysis); (procuring) Tender process; Negotiation and Appointment; Service Management; and Contract Termination. Modernise People Culture Value for money Service delivery 3

Contract Management: Definition Contract Management v Project Management 3 key persons within the contract management SCM practitioners are not involved in the management of services but in the contract administration. (see slide 13) Contract Administrator Project Manager Legal Services Modernise People Culture Value for money Service delivery 4

Contract Management: Purpose and Benefit To enable an institution to have effective system for recording contracts and the proper management thereof. Benefits Curbs fruitless and wasteful expenditure; Curbs irregular expenditure; Mitigation of risk and litigation; Institutional data integrity on contracts; and Value for money. Modernise People Culture Value for money Service delivery 5

Contract Management: Types Manual the manual documentation of the process Manual contract register (includes excel) Electronic Oracle Procurement Contract Puridion Many More Modernise People Culture Value for money Service delivery 6

CMF: General Principles The Public Procurement Management Bill will makes contract management mandatory in Chapter 3. Application- The Framework will be applicable to all state organs as described in section 239 of the Constitution. Requirements Develop/update policies, procedures, systems within the scope of this Framework for compliance. Modernise People Culture Value for money Service delivery 7

CMF: Contract Management life cycle Contract negotiation; (At what stage) Contract development and signing; (party obligations v conditions of services) Contract registering; Contract amendments/ or variation; Contract termination Modernise People Culture Value for money Service delivery 8

CMF: Contract Management life cycle Initiation Phase procurement Contract negotiation and signing Contract Administration and Review Contract Close out Modernise People Culture Value for money Service delivery 9

CMF: Life Cycle Initiation Phase The Contract Administrator + Project Managers (end user) must-; Conduct needs and market analysis to determine -; the correct specifications that are in line with the needs of the Institution; the correct cost implications (estimations) (to enable the Institution to identify competitive pricing); identity any potential risk and its mitigation; Modernise People Culture Value for money Service delivery 10

CMF: Life Cycle Appointment the Contract Administrator shall ensure that the proper procurement process that is in line with the PFMA and its subordinate legislations is followed in the procurement of services or commodities that are in line with the specifications developed. Letter of Appointment Modernise People Culture Value for money Service delivery 11

CMF: Life Cycle Contract Negotiations and Signing The Contract administrator + Legal Services + Project Manager Negotiation (When should they take place) No introduction of new services or conditions in relation to the service Ensure that there is no contradiction between Contract (service level agreement) and the specifications, bid proposal, letter of appointment and SBD 7.2. (Contract form) Modernise People Culture Value for money Service delivery 12

CMF: Life Cycle Project Manager Contract Administrator Legal Services Feasibility study & Spec development Market analysis Costing N/A Procurement May be part of Procurement Contract negotiation Facilitates signing Facilitates relevant approvals Contract registration Advise on contract extensions/variations and records same Draft contract Addendums Prepares close out report Files report with contract Modernise People Culture Value for money Service delivery 13

CMF: Life Cycle Contract must be signed in duplicate; Signed by person with relevant authority to sign; Must be dated; 2 witnesses per signatory; Initial each page; and Registration on Contract Register. Modernise People Culture Value for money Service delivery 14

Contract Register 15 CONTRACT REGISTER Contract number – each Contract should be provided with a unique number for filing purposes. Tender/order number- This is to ensure that there is clear reference to appointment process followed. Duration of Contract – Full details relating to the commencement and expiry of the Contract. There should be a column that records extension or early termination (reasons for early termination or extension should be recorded). Contract Value– Full contract price should be recorded. All adjustments should also be recorded. (reasons for any price adjustment must be recorded) Payment milestones and Penalties – All payments that are linked to a milestone should be recorded and reasons be provided for any payment that is not linked to a milestone. If there are any penalties that are linked to a service level then the penalties should be recorded. Service Provider – The full details of the Service Provider must be recorded. Services- Clear description of services or commodity should be recorded. Modernise People Culture Value for money Service delivery 15

Contract Register CONTRACT REGISTER Hard copy contracts must be filed in line with filing policy. MAY electronically file copies of contracts. MUST file and lock up original copy in central depository. Continuous Contract Register update to ensure integrity of information on register and that it is an effective assessment tool for the contract management of the Institution. Each contract to be managed throughout its life cycle. NB: If information integrity is compromised then its as good as not having the register. Modernise People Culture Value for money Service delivery 16

Contracts Types of Contracts MOU SLA Addendums Purchase and Sale Agreement Professional Service Agreements Maintenance and support Agreements Modernise People Culture Value for money Service delivery 17

Creation of Contract Tender process Invitation to submit proposal- The tender invitation Offer- The bidders tender proposal Acceptance – Acceptance letter issued by the Department Modernise People Culture Value for money Service delivery 18

NB Clauses in a contract Must have clauses in a contract (clauses must be drafted in such a way that it does not lead to double interpretation. Clauses must be definite) commencement and duration of Contract; Full description of Services (Service Levels); Fees and payment (milestones attached to payment); Delays or unsatisfactory performance; Breach of Contract; Termination clause; Amendments and variations; Warrantees and indemnity; Dispute Resolution; Intellectual Property rights; General clause (e.g waiver, cession or assignment, governing law, entire agreement, survival, indulgence); and Notices and domicilium. Modernise People Culture Value for money Service delivery 19

Example of clauses Purchase and sale (As and when required) Services description clause and payment clause Service description clause – “The seller shall provide the purchaser with the services as detailed in Annexure as and when requested by the purchaser in writing”. The seller acknowledges that there is not limited number or orders to be places as the order by the purchaser shall be dependent of the purchasers operational requirements.” Modernise People Culture Value for money Service delivery 20

Example Professional Services (NB: each deliverable must be unpacked to enable institution to measure performance) Full Service description Phases Time frame costing Deliverable Performance indicator Development of Framework Consultation and data collection Report 2 weeks Rxxxx Draft the first draft Draft Framework 1 week Stakeholder engagement Rxxx 2nd draft 2nd draft of Framework Draft Final Draft Framework 1 Week Modernise People Culture Value for money Service delivery 21

Cost clause Costs (Fees) Must be definite. There must be a total contract price and not open. Price escalations – The method of calculating price escalations must be definite. CPI RoE (volatile market – Try to curb the uncertainty and limited to Service Providers that directly incur this cost) Annually based on an occurrence of an event (annual Psira rate increase for security services). A particular percentage Modernise People Culture Value for money Service delivery 22

THANK YOU We have an amazing opportunity to influence and direct the national capacity building strategy to address the challenges experienced in finance, risk management and internal audit. This is an opportunity to be innovative and to present our ideas. I dream of an effective, efficient, high-performance orientated public service that is flexible, responsive and progressive in their systems, policies and practice. What needs to be done?