The National Audit Office (NAO) commercial lifecycle good practice guide, published in February 2025, highlighted a need for further improvement in contract management across public sector organizations.
Both the public and private sectors face similar challenges and opportunities in this area. Effective post-contract management drives value creation, prevents value erosion, and ensures proportionate responses to risk. However, specialist resources are limited, requirements can feel overwhelming, and it is increasingly important to focus effort where returns are highest.
1. Set clear requirements for performance reporting during the contracting stage
Clearly define not only the Key Performance Indicators (KPIs) but also the format, frequency, and channels for performance reporting. Reports should be concise and focused on providing meaningful data aligned with the KPIs. Overly detailed or poorly structured reports, with key data buried under tangential or outdated information, can obscure critical insights. Contract managers’ time is better spent driving performance improvements rather than untangling incoherent reports.
2. Thoroughly understand the contract
It is a development that all procurement functions have to come to terms with. Regulated procurement teams more than most. In the short term, there is a prospect of receiving identical, AI-created, bids. The same requirements processed by the same software, more or less, will create the same answers, making it harder to differentiate between bids and creating a bunching effect.
3. Manage your own obligations
Contracts impose obligations on both parties. Beyond paying invoices, the buying organization may have agreed to perform tasks such as providing planning information or phased adoption of new working practices. These commitments often fall to functional stakeholders, who must be made aware of and aligned with the contract’s requirements. Failure to fulfil these obligations risks straining supplier relationships and undermining expectations for improved supplier performance.
4. Audit how services are being delivered
Establish a rolling program of audits and assurance activities that reflect the contract’s value and criticality. A completely hands-off approach, even with a full outsourcing arrangement, exposes the organization to risks such as inadequate staffing or unethical labor practices. Requiring suppliers to maintain audit information and accommodate spot-checks can influence their behavior positively, ensuring that the way that services are being delivered aligns with expectations.
5. Unlock discretionary effort
Meeting contractual requirements, including achieving KPIs, should be seen as the baseline. Many suppliers will go beyond the contract to foster strong relationships and collaborate on innovations or process improvements. Examples include sharing insights on market trends or contributing resources to multi-supplier improvement initiatives. Strong working relationships are often a key determinant of where suppliers choose to focus their discretionary efforts.
6. Review and Refresh KPIs
The 2023 Procurement Act introduced new flexibilities, allowing KPIs to be adjusted during the life of the contract to ensure that they remain relevant, useful, and reflective of evolving circumstances. Any changes must align with the contract terms and be documented appropriately. Regularly refreshing KPIs ensures they remain aligned with the contract’s scope, challenges, and service needs, focusing efforts where they matter most. Some KPIs may become obsolete, and agreeing to cease reporting on them can save valuable time.
These straightforward, practical activities are often overlooked, both in the private and public sectors. By adopting these practices, you can significantly enhance the effectiveness of your contract management.
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