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

2. 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
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3. 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.
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4. 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
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5. 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.
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6. Contract Management: Types
Manual
the manual documentation of the process
Manual contract register (includes excel)
Electronic
Oracle Procurement Contract
Puridion
Many More
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7. 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.
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8. 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
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9. CMF: Contract Management life cycle
Initiation Phase
procurement
Contract negotiation and signing
Contract Administration and Review
Contract Close out
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10. 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;
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11. 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
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12. 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 (Contract form)
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13. 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
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14. 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.
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15. 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.
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16. 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.
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17. Contracts Types of Contracts MOU SLA Addendums
Purchase and Sale Agreement
Professional Service Agreements
Maintenance and support Agreements
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18. Creation of Contract Tender process
Invitation to submit proposal- The tender invitation
Offer- The bidders tender proposal
Acceptance – Acceptance letter issued by the Department
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19. 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.
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20. 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.”
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21. 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
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22. 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
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23. 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?