The Queensland Government plans to spend billions of dollars on infrastructure projects over the coming years, and with Brisbane recently announced as host city for 2032 Olympic Games, further expenditure is expected. It’s crucial that government entities undertake effective contract management to make sure these projects achieve value for money and serve Queenslanders as they were intended.
In our recent report Contract management for new infrastructure (Report 16: 2021–22), we highlight the importance of effective contract management. We also recommend that:
all government departments review their internal policies, procedures, and guidance for managing infrastructure contracts at least every 3 years and, where necessary, implement changes to enhance their contract management performance.
In this blog, we provide key learnings and areas of focus to help your entity improve its design and implementation of contract management frameworks.
Guidance and support for managing infrastructure contracts
Do you provide your project teams with appropriate guidance and support to manage contracts effectively and efficiently, and in line with relevant frameworks?
Providing adequate guidelines, processes and training to project teams means they can scale contract management activities to the project’s value, complexity, and risk profile.
Alongside this, clearly documenting roles, responsibilities and delegations drives accountability for the effective and efficient delivery of projects.
It’s really encouraging to see some entities recently reviewing their contract management frameworks and practices – some were well overdue, and they identified critical gaps and weaknesses. Any entity (regardless of the services it provides or performs) can benefit from periodic reviews to stay in line with contemporary better practice.
Appropriate and adequate guidance and support to project teams helps foster a culture of service excellence and continuous improvement. Entities’ internal audit teams and audit and risk committees also have a key role in ensuring this occurs.
Systems to support successful contract management
Do you have an appropriate system to manage contracts over their entire life cycle, generally from procurement stage to contract closure?
A single system is ideal for managing various contract management aspects, including contract variations and contractor performance. A single, up-to-date and fit-for-purpose contract management system provides entities with a single ‘source of truth’ and a means to provide accurate and reliable information to inform decision making.
Doing so can:
- increase efficiency by facilitating consistent and effective contract and project management approaches
- provide a unified approach for managing contracts and projects
- reduce the risk of non-compliance with required frameworks and standards
- enable easier transfer of business knowledge by ensuring it’s recorded and shared with other team members
- increase opportunities for sharing lessons learned and continuous improvement processes.
Undertaking effective contract management planning
Do you plan from the outset? Planning is critical and ensures your entity clearly establishes project aims, parameters and expectations.
Planning sets the basis for all that follows in a project.
Key aspects include developing and implementing planning documents, such as a:
- contract management plan – outlines the key strategies, activities, and tasks required for managing a contract
- legislative compliance strategy – identifies legislative requirements that apply to a project and outlines a process to ensure compliance with them
- risk management plan – outlines processes for managing project and contract risks, including how risks will be identified, mitigated, monitored, and reported.
These documents are requirements under relevant contract and project management frameworks. They are an important part of contemporary better practice planning.
Managing contract risks and issues
Do you appropriately identify and manage contract risks and issues?
It’s critical that project teams adequately identify, assess, and manage risks and issues throughout the life of a contract.
While cost overruns in infrastructure projects represent one aspect of risk, another is the downstream impact, specifically the delay in securing the benefits expected from completed infrastructure projects.
Entities need to provide clear guidelines and processes to appropriately support their project teams to manage contract risks and issues. Deficiencies in these processes could contribute to teams not appropriately managing key risks and issues, leading to significant project schedule and cost overruns.
Managing contract variations
Do you adequately manage changes in project scope and contract variations?
It’s likely that changes will occur during a project. Changes resulting in contract variations are both a source of risk and a potential opportunity to extract additional benefits.
In some cases, the number, timing, and nature of variations can indicate a range of issues. This includes where project teams have not properly consulted with stakeholders and appropriately defined the contract deliverables before finalising the contract.
Entities should clearly define and document their policies and procedures for engaging with stakeholders. This information helps project teams determine the level of engagement needed when defining what the contract and project are expected to deliver. It will also help them better understand the stakeholders’ needs; maximise value; and minimise delays, unnecessary contract variations, and costs.
As we highlighted in our report, a lack of clearly defined and documented processes for contract variations can result in inconsistent and sometimes ineffective practices across project teams.
Managing contractor performance
Do you effectively assess and manage contractor performance?
An area often neglected in contract management is contractor performance. There is no doubt that building contractors are one of the most vital stakeholders in any infrastructure project. As the quality of their work can have a major impact on project delivery, entities should have appropriate procedures and processes for managing their performance.
However, procedures and processes will be of little value if entities are not applying them as intended. They should appropriately assess, report, and where necessary, act on contractor performance to assist in effectively delivering their projects.
Effectively managing contractors’ performance can:
- improve contractor performance
- enhance relationships with contractors
- better manage risk
- improve project outcomes.
Capturing lessons learned
Do you record and share lessons learned from contract management activities?
Recording and sharing lessons learned is an important element for effectively managing contracts.
Clearly defining procedures and processes to record and share lessons learned enhances your ability to facilitate continuous learning and improve contract management activities.
For example, you might establish centralised locations (such as intranet sites) for project teams to record and share lessons learned or have processes such as regular project staff forums or network meetings to allow staff to share information and good practices.
- Contract management for new infrastructure (Report 16: 2021–22)
- Department of Energy and Public Works’ Capital Works Management Framework
- Queensland Treasury’s Project Assessment Framework