The importance of robust contract management is coming to the forefront with the Regulator of Social Housing (RSH) highlighting concerns around the management of third party suppliers within its regulatory judgements and the Procurement Act 2023 (PA23) introducing new statutory contract management obligations.  

Here, we explain what contract management is, why it is important, and guide you through our six recommended contract management steps.   

What is contract management, and why is it important?  

Contract management is about understanding and implementing your contract to ensure your suppliers comply with the terms of the agreement and you get what you pay for.  

Good contract management should identify and mitigate risks in relation to the services you are purchasing and empower you to respond to issues before they get out of hand. This is important both commercially and, for registered providers, (RPs) to meet the RSH’s economic and consumer standards. Recent regulatory judgements relating to the consumer standard, for example have highlighted concerns about poor contract management, such as failure to obtain evidence of services carried out by third parties. 

The bottom line is that appointing a third party to carry out services on your behalf does not mean you are relieved from responsibility for those services. You need to check that services are provided and they are provided to standard, and contract management is your tool to achieve this.   

Step 1 – Planning your contract management 

The first step is identifying your requirements and how you will ensure these are met by your supplier. Some initial key questions to ask are: 

• What does the service look like? 
• What is important to us?  
• What do we need to track and record about the service? 
• What are the risks if something goes wrong? 
• What is most likely to impact our residents if it goes wrong? 
• What information do we need to identify problems as early as possible?  
• What have we learnt from previous contracts? 

Make sure that the operational team is involved in this planning stage. They will need to implement the contract management, so it is important that they help to design it.  

Talking to suppliers about your proposals will also help identify what is viable in the market. Check-in with your procurement team before carrying out any supplier engagement, as in most cases, you will need to publish a notice under the PA23 before this is carried out.  

Step 2 – Including contract management in your contract documents 

Having planned your requirements, these need to be captured within your contract. Key documents you may want to include are: 

• Specification – a description of the services to be provided and your requirements. Disputes with suppliers often arise if the supplier is not meeting your expectations, but this can be difficult to resolve if your expectations were not clearly set out. The specification should be detailed and clearly say what you want the supplier to do, referring to timescales and any policies and procedures to be followed.  
• Contract management schedule – a schedule including areas such as key contacts, meeting arrangements, monitoring information you require, and the service levels to be met by your supplier (see below) can be beneficial for both parties when dealing with the day-to-day delivery and management of the contract.  
• Service Levels – service levels or key performance indicators (KPIs) are tools to measure whether the supplier is meeting your requirements. They should flow-down from your specification. For example, if the specification says repairs must be carried out within 24 hours, your KPI might look at how often this is met each month. Discuss these with your procurement team as under PA23 some higher value contracts must include a minimum of three KPIs.  
• Monitoring information – details of what information, reports or evidence (such as photos showing a completed repair) you need from the supplier so you can check service delivery.   
• Performance improvement process – a process for agreeing and implementing a plan to resolve any delivery issues. 
• Sanctions – sanctions if the supplier is not meeting your requirements, such as suspension, termination, step-in rights and/or service credits.   

Step 3 – Early contract steps 

Once you have entered into the contract you should store a copy and keep a record of the key information in a spreadsheet or contract register. Key dates should be diary noted, such as expiry dates or windows for extension.  

Make sure the parties take any steps required following contract commencement, such as providing suppliers with your policies and procedures and agreeing on an exit plan.  

For contract managers, it can be beneficial to put together a contract management pack, so they don’t have to wade through the contract to find this. Start by extracting the specification and the contract management schedule, along with key dates to watch for.   

Step 4 – Delivery of the contract 

With the supplier delivering the service, it’s easy to overlook your role in contract management, but don’t let this fall to the wayside or problems may go undetected.  

Use your contract management tools,in particular: 

• Ensure suppliers are providing you with the required monitoring information (reports, data and evidence of delivery). 
• Don’t just file this monitoring information, scrutinise it! This will give you early warning of potential issues and avoid things escalating.  
• Communicate with your supplier – meet with them regularly and discuss any issues. Look at the service levels together and, if any are not being met, talk through why this is and what can be done by both parties to resolve any problems.  
• Keep a record of any issues and how you have agreed to resolve them.  

Step 5 – What to do if it goes wrong 

Carrying out contact management during the delivery of the contract should make things easier to resolve if they do go wrong. By establishing good communication with your supplier you will have an early understanding of problems and their root cause, so you can work together to resolve these.  

Through your contract management you will also have an audit trail of any issues and steps taken to resolve them (such as meeting records and KPI reporting).  Without this it can be difficult to take further action if needed.  We often hear that suppliers “have been performing poorly for ages” but no evidence to support this.   

If things are not improving, make sure you use the tools you have built into your contract. This does not necessarily mean going straight to termination (which is unlikely to be in anyone’s interests) but do not be afraid to use the other tools. For example, applying service credits may incentivise improvement or address the financial impact of poor performance. Implementing your performance improvement process will also formalise attempts to remedy problems by agreeing on an action plan and timescales to get things back on track. 

Keep in mind that where your contract is governed by PA23 you may need to publish information about poor supplier performance. Ensure your procurement team is aware of performance issues and the steps you are taking, especially if there is a risk that you may need to terminate and/or re-procure.   

Stage 6 – Use what you’ve learned 

As you near the end of a contract you will go full circle back into the planning stage for your next contract.  

It’s easy to pick up the previous contract here and go again, but ideally this is an opportunity to discuss what you’ve learned and use this for the next contract. Some helpful discussion points might be: 

• Was the specification clear enough? 
• Were the KPIs achievable? 
• Did the monitoring information help us? 
• Did any unexpected issues arise? 
• How could these issues have been avoided or addressed more quickly? 
• What customer feedback did we get? 

How Capsticks can help  

With extensive knowledge of contract, procurement law and social housing governance our specialist team is always on hand to support you with all aspects of the procurement process and contract management. Please contact Katrina Day or Darren Hooker to find out more about how Capsticks can help.