Contract Management under the Procurement Act 2023

The work on procurement doesn't end once a contract is awarded. Part four of the Act outlines the necessary steps for contract management, covering key areas of procurement practice. This includes rules to ensure that suppliers are paid on time and new requirements to assess and publish information about suppliers' performance. These requirements represent a significant change to ongoing contract performance management and could potentially impact suppliers' participation in future opportunities.

Let's summarise the changes mandated by the Act and how contracting authorities can adapt their contract management strategies for success.

Enhanced performance management

The new Act empowers contracting authorities to enhance performance management and monitoring. Contracts must now include a minimum of three Key Performance Indicators (KPIs), unless the contract value is less than £5 million (some exclusions apply). Once KPIs are set and published, they must be assessed and reported publicly. Engaging with suppliers and proactively monitoring contracts against these KPIs is critical to comply with the contractual agreement. Non-performance and non-compliance with the KPIs could lead to suppliers being excluded for poor performance, so it is important to get it right.

Transparency of payment and performance

The Act establishes specific obligations for contracting authorities to publish notices detailing payment compliance (payment within 30 days of invoices under section 69) and information about any single large payment over £30,000, as defined by section 70, made in the previous quarter. In addition, contracting authorities must publish information about agreed KPIs and report on them at least annually. Requirements set in section 71 (5) also mandate the publication of information about a supplier’s breach of contracts that may lead to termination, damages, or an agreement settlement and may result in the supplier’s exclusion.

Other powers and obligations are assigned to contracting authorities under the Act, Part four, 'Management of public contracts', including subcontracting arrangements, payment terms, and contract modification and termination.

Our recommendation to contracting authorities is to start now, embracing the requirements of the Act and implementing simple but effective contract management practices:

1. Strong supplier relationships - Early engagement, clear communication, regular meetings, and performance updates strengthen supplier relationships for contracting authorities.
2. Centralised contract repository - Develop a centralised contract or document management database to keep records of contractual documents, communication, supplier performance data, and evidence of non-performance or disputes.
3. Efficient contract management - Implement automated workflows for tasks like key dates for supplier performance reviews, reminders for publication of requested notices, contract renewal, and termination dates.
4. Regular reviews and audits - Schedule regular reviews to assess supplier performance and identify areas for improvement.
5. Resources, skills, and capabilities - Contracting authorities need to assess their existing resources and identify any gaps in roles and functions impacted by the Act. Consider providing training programmes tailored to enhance skills and capabilities in contract management, performance management, data management, reporting, and risk assessment for current staff.

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