Commercial Notes

No. 22
9 May 2007

MANAGING CONTRACTS IN THE PUBLIC SECTOR

Clare Derix Senior Lawyer
T 02 6253 7274 F 6253 7301
clare.derix@ags.gov.au

Henry Addison Senior Executive Lawyer
T 02 6253 7264 F 02 6253 7311
henry.addison@ags.gov.au

In Commonwealth procurement the business of managing contracts is generally not well understood. Public accountability obligations mean agencies are held to a higher standard of contract management than private sector organisations. Poor contract management in Commonwealth procurement is an ongoing issue which is highlighted in ANAO reports and Senate Estimates hearings.

What is contract management?

Contract management is the process through which agencies seek to effectively manage the inherent risks of a commercial relationship to ensure that the rights and interests of the Commonwealth are safeguarded. In the Commonwealth context, additional complexity is added to the commercial relationship through the operation of Commonwealth legislation and policies (e.g. the Financial Management and Accountability Act 1997, the Commonwealth Authorities and Companies Act 1997, the Archives Act 1983 and the Auditor-General Act 1997).

This note discusses issues regarding the contract management phase of a goods or services contract under the purchaser/provider model, as this represents the ‘standard’ form of Commonwealth procurement. A tailored contract management plan is required for specialised contracting models such as strategic alliances and public private partnerships. Contract management is influenced by the entire procurement process but it is beyond the scope of this note to discuss how contract management issues should be addressed throughout the procurement cycle, specifically the pre-contract (Request for Tender preparation), tender evaluation to contract, and contract implementation phases. Nonetheless, the importance of these stages to contract management cannot be underestimated, and careful consideration, and in some cases specific advice, is required.

A prerequisite to effective management in the contract management phase of a procurement is that the contract¹:

properly defines the services or the scope of work
contains appropriate risk mitigators (e.g. warranties, indemnities, liquidated damages, financial undertakings and performance guarantees)
contains appropriate performance measures
complies with Commonwealth legal and policy requirements (e.g. privacy, confidentiality and security concerns).

If the contract is deficient in any of these respects then potentially there will be significant inherent issues to manage.

Effective contract management involves actively engaging with the contractor to achieve agreed outcomes. The extent of the engagement will depend on the contracting environment and the scope of the risks to each party that flow from the contract.

In addition to active engagement, the key to effective contract management is monitoring the performance of the contract to:

ensure that the commitments and obligations of both parties are met
diligently manage identified risks to the agency
monitor contractual events to ensure problems do not occur
deal with problems that do occur in a proactive manner to limit their effect.

Poor contract management is often a major cause of disputes, leading to dysfunctional and adversarial relationships between the parties which may culminate in commercial litigation. Without effective contract management, agencies may also fail to obtain value for money through the life of the contract.

Contract objectives should be clearly defined and appropriate processes set in place to help monitor progress and provide feedback to ensure that contract deliverables, including services, are provided:

as required
to the agreed standard

and that inadequate standards are detected as early as possible and promptly addressed.

The ANAO has recently published Developing and Managing Contracts: Better Practice Guide (February 2007) which is a useful reference tool for use by agencies when managing contracts.

This note is intended as a summary of some of the important contract management tasks and issues that will confront contract managers during the life of a contract. It is not intended to be a contract management manual. If a manager is faced with specific contract management issues outside their experience and expertise, then AGS recommends that the manager seeks advice from the agency’s procurement area and/or seeks legal advice.

Legal and policy environment

The legislative framework, within which an agency must conduct its procurement activities, includes:

For FMA bodies

Financial Management and Accountability Act 1997 (FMA Act)
Financial Management and Accountability Regulations 1997
Financial Management and Accountability Orders 2005
Agency Chief Executive Instructions (CEIs), policies and procedures

For CAC bodies

legislation which establishes the body
the Corporations Act 2001 (for CAC companies)
Commonwealth Authorities and Companies Act 1997 (CAC Act)
Commonwealth Authorities and Companies Regulations 1997
Finance Minister’s (CAC Act Procurement) Directions 2004

Public Service Act 1999 for most FMA bodies and some CAC bodies
Archives Act 1983
Auditor-General Act 1997
Commonwealth Procurement Guidelines for all FMA bodies and most CAC bodies
Agency Operational Instructions on, for example, Procurement of Goods and Services.

This list is not exhaustive.

FMA agencies – Financial Management and Accountability Act framework

The FMA Act regulates the exercise of powers by chief executives of agencies regarding the spending of public monies (among other things). Chief executives usually devolve these powers by delegation or authorisation to specified senior officers in the agency. The CEIs of each agency provide guidance to the particular agency on the application of aspects of the FMA Act framework. CEIs often include instructions on topics such as ‘Approving and Authorising Proposals to Spend Public Money’, ‘Procurement of Property and Services’ and ‘Contract Management and Variations’. Only a person who is designated as an ‘approver’ of the spending of public money under the FMA Act framework can approve spending which is to be made under a contract. This strictly means that only an ‘approver’ can authorise (within their delegation) claims for payment or variations to the contract involving expenditure.

It can therefore be helpful if contract managers are ‘approvers’. If they are, they should be aware of the ambit of their delegated power. If they are not, they will need to work in close collaboration with a person who is an approver.

It is not uncommon for officers who are not ‘approvers’ (i.e. hold no financial delegation) to be involved in routine contract administration tasks (e.g. processing claims for payment, reporting requirements under the contract etc.).

Australian Public Service (APS) Code of Conduct

Most public sector contract managers are APS employees and as such must comply with the APS Code of Conduct set out in section 13 of the Public Service Act 1999 (PS Act). In order to comply with the code, APS employees must, among other things:

behave honestly and with integrity in the course of APS employment
act with care and diligence in the course of APS employment
when acting in the course of APS employment, treat everyone with respect and courtesy, and without harassment
when acting in the course of APS employment, comply with all applicable Australian laws. For this purpose, ‘Australian law’ means:

any Act (including the PS Act), or any instrument made under an Act, or
any law of a State or Territory, including any instrument made under such a law

use Commonwealth resources in a proper manner
not provide false or misleading information in response to a request for information that is made for official purposes in connection with the employee’s APS employment
at all times behave in a way that upholds the APS values and the integrity and good reputation of the APS.

Acting fairly and reasonably

The APS Code of Conduct and the FMA regime are consistent with a number of judicial statements requiring the Commonwealth to act fairly and reasonably at all times in its commercial dealings. For example, the Federal Court referred to this requirement in the Hughes case.² This essentially means that the Commonwealth may be held to a higher standard than commercial parties.

CAC bodies – Commonwealth Authorities and Companies Act framework

CAC authorities

The authority’s enabling legislation and the CAC Act and associated regulations, orders and directions establish the framework under which CAC authorities undertake procurement activities. Powers and functions of CAC authorities are usually vested in either the board of the body or the chief executive, with the ability for delegations or authorisations to be put in place to other officers of the body. In some cases, significant contracts (including significant variations to existing contracts) are required to be approved by the relevant minister.

Officers of CAC authorities will need to ensure that they have appropriate authorisation to undertake procurement activities and contract management and are acting in accordance with the body’s internal procedures and instructions.

The CAC Act imposes obligations on the officers and employees of CAC bodies in relation to:

the exercise of care and diligence
the requirement to act in good faith
the requirement not to use their position or information gained through their position to gain advantage for themselves or others or to cause detriment to the body.

CAC companies

For CAC bodies that are companies, the Corporations Act 2001 imposes similar obligations to the CAC Act on officers of the company in relation to good faith obligations etc. In addition, the company’s constitution will also establish the framework under which the company’s business is undertaken by identifying which decisions are to be made by shareholders (e.g. the minister) and directors. Most companies will have specific authorisations and procedures issued by the board or the chief executive for company officers to undertake procurement and contract management activities, particularly those involving spending money.

Contract manager’s role

Complex or significant contracts often have a designated ‘contract manager’ who is responsible for day-to-day administration and management of the contract and a designated ‘contract authority’ who is responsible for ‘strategic’ decision-making under the contract (e.g. approving variations, dispute resolution). The term ‘contract manager’ is used generically in this note to refer to the person who: is the primary agency representative with whom the contractor has dealings, has legal and contractual oversight of the contract and is generally responsible for defining the kind of relationship to be fostered between the agency and the contractor. This role requires the contract manager to actively manage the working relationship between the agency and the contractor.

This means the contract manager will also generally:

act as an initial point of contact for the contractor for all correspondence and legal and operational communications under the contract
negotiate and agree contract variations
maintain records of all interactions with the contractor
seek to resolve disputes (in accordance with the relevant contract provisions)
provide advice on purchasing and contractual issues, as required, including liaison with other branches and other agencies on contracting matters including policy and procedures.

Getting to know your contract

The contract manager should be familiar with the contractual requirements, including:

key provisions of the contract
timetables and deadlines for key activities
the contractor’s commitments
the agency’s commitments
a list of potential risk areas.

There are generally two types of contract provisions: background provisions and moving provisions. Background provisions set out the parties’ agreed legal framework, for example, the intellectual property rights of the parties or confidentiality and privacy obligations. Moving provisions affect the day-to-day relationship between the parties – such as the payment and reporting requirements.

Sometimes there can be an overlap between the provisions, for example the confidentiality provisions can require undertakings to be provided by subcontractors as they commence work on the project. The difference between these two types of provisions needs to be understood in order to design an appropriate contract management system.

Timetables and deadlines

The manager should maintain a list of tasks and commitments, which should be updated regularly, and should include such items as scheduled completion dates, responsible individuals, and a description of the last action taken by each party in regard to each commitment/responsibility. This list should be checked against the contract for the purpose of monitoring and confirming the completion of tasks. For this to be effective, it relies on the contractor’s commitments and the agency’s commitments being properly defined in the contract.

Potential risk areas

The contract manager should also understand the risk allocation mechanisms in the contract. By definition, a contract is a risk allocation mechanism between the agency and the contractor. All contracts, regardless of their size or type, will encounter in their operation some form of risk that may adversely impact on the achievement of their objectives. The specific risk allocation mechanisms in the contract should reflect the risk assessment conducted at the beginning of the procurement process. Major procurements often have a specific risk management plan.

The risk assessment should be updated throughout the life of the contract to address changes in circumstances and associated risks with the performance and management of the contract. Standard risk mitigators are:

provisions for the reduction and/or the deferral of fees for failure to perform, which tend to be quite common in service contracts
an indemnity clause (An indemnity is a promise to reimburse the loss suffered by the indemnified party where it has arisen as a result of an event covered by the indemnity.)
provisions limiting the agency’s (or the contractor’s) liability
clauses for the provision of performance guarantees (A performance guarantee is a promise by a third party to either perform work or pay money or both in the event the contractor defaults.)
liquidated damages (LD) clauses (LD clauses should be a genuine estimate of loss that the agency would suffer if the contractor breaches its obligations. If the contractor breaches its obligations under a liquidated damages clause it is required to pay the agency the amount specified in the clause as compensation for the agency’s loss.)
insurance requirements (The contract should require the contractor to insure for the risks it takes on under the contract. Standard insurance categories for contractors are: public liability, professional indemnity and workers’ compensation. Specialised insurance (such as product liability) may be specified depending on the nature of the goods or services. For most Commonwealth agencies, insurance arrangements are with Comcover and Comcare for employees.)
warranties (A warranty is a promise whereby one party provides certain assurances to another party.)
rights of termination for default (Under the general law a party to a contract may terminate the contract and seek damages from the other party where the other party has defaulted in a way that goes to the ‘root of the contract’ or is a ‘fundamental breach’. Generally a termination clause is exercised where a party is unable, or no longer willing to perform its obligations under the contract.)
clauses which allocate responsibility to one party to either deal with, or pay for, particular contingencies that may arise (e.g. rectification clauses, clauses making one party responsible for particular costs that may arise during the project, or clauses providing for an adjustment to fees in the event that certain contingencies arise, such as changes in the law).

In terms of ‘knowing your contract’ the use of flow charts or tables to break down internal processes and the requirements of the contract can be useful educative and management tools. They are commonly used to break down a variety of processes under the contract, including:

dispute resolution processes
performance management regimes
payment regimes
processes for contract change proposals.

Below is an example of a flow chart that delineates the dispute resolution process under a significant and complex services contract.

The contract dispute resolution process

Relationship management

This is a key role for the contract manager. After contract signature, the contractor will be sensitive to indications as to how the contract manager intends to work with them. The contractor will most likely respond to the contract manager’s approach with a similar approach on their side. Therefore, adopting a strict ‘manage to the contract’ approach will probably produce a similar approach from the contractor.

If the contract manager demonstrates a more flexible, outcomes focused (rather than process focused) approach, the contractor is likely to be more flexible. The challenge for a contract manager is to implement an approach that combines the benefits of flexibility and a focus on the business outcomes, with the administrative rigour required to manage risk and satisfy the agency’s and the contract manager’s accountabilities.

While the legal requirements of the contract are determinative of the proper course of conduct in contract management, the exercise of skill and judgment is often required to effectively protect the agency’s interests. It is important to manage and not to seek to control the contractor. Equally, it is important not to be ‘captured’ or controlled by the contractor. Contract managers should not fall into the trap of abdicating decision-making responsibilities and deferring completely to the judgment of the contractor for direction.

A strategic relationship with the contractor is also important. Although there is a formal contractual relationship, the parties need to recognise their mutual dependence and mutual interest in developing a cooperative relationship. The relationship is more likely to be a successful one if:

there is shared qualitative understanding of the task to be achieved and the objectives of the contractual relationship
if the expectations of both parties are realistic
there are effective mechanisms for clear, open and effective communication to permit the contractor to accommodate the agency’s specific needs.

Managers must provide guidance in setting responsibilities for the contractor, managing the performance of the contractor in respect of those responsibilities, and facilitating the delivery of the services by the contractor. Contract managers should be alert to opportunities to assist the contractor. This will also include managing client or stakeholder expectations of the contractor’s performance, including:

establishing realistic expectations of the contractor’s capabilities and desired outcomes
establishing the limits of the contractor’s responsibilities
educating clients or stakeholders about how the contract will fit into the agency’s business strategy
ensuring that the agency complies with any obligations it has under the contract
developing processes in relation to service delivery and interaction with the contractor.

Communication and contract amendments

Effective contract management requires the agency (i.e. the contract manager) to establish and maintain clear and effective lines of communication and reporting procedures with the contractor, including mechanisms to address performance issues and resolve disputes. Systematic contacts and formal communication procedures can ensure that a continuous dialogue is maintained with the contractor so that the contractor is aware of developments within and outside the agency, particularly changes that might impact on the scope of work and service delivery.

A crucial part of managing the flow of information between the contractor and the agency involves understanding the implications of such communication. As illustrated in the decision of the Federal Court of Australia in the GEC Marconi case³ which is analysed in AGS Commercial Notes No. 8 (17 January 2004), a contract can be varied by conduct (including waiver and/or estoppel) or oral representation.

In Australia there are no statutory requirements concerning the form of contract variations except for certain limited classes of transactions, such as dealings in land. A contract will usually have a standard clause providing at a minimum, that the contract can only be amended by agreement in writing. Notwithstanding this writing requirement, a contract can be amended at common law by:

waiver (the renunciation of some legal right)
oral representation
acting inconsistently with the terms of the contract (‘estoppel’, the prevention of a party from asserting in legal proceedings a position contrary to that established by other means).

It is important for contract managers to assess the implications of their communications by considering whether the verbal directions they intend to give the contractor accord with the terms of the contract. If they do not, the contract manager may unintentionally create a contract variation. Where contract managers are dealing with what may be an out-of-scope requirement, they should minimise the risk of unintentionally varying the contract by making it clear in any communications (including oral and email communications) they have with the contractor, that discussions are subject to agreement being reached in writing and signed by both parties.

Monitoring performance

A significant obligation of the contract manager involves monitoring performance in accordance with the contractual performance measurement system and making timely decisions.

There are a number of steps that will facilitate effective performance monitoring:

Ensure good internal corporate knowledge of the performance measurement system. (Ideally performance indicators and measures should be integrated with both parties’ management, accounting and financial systems. Intrusive reporting will be counter-productive and costly, placing administrative burdens on both parties.)
Ensure good internal project planning, particularly if the contract is being performed in stages or as an ongoing service.
Hold timely meetings with the contractor regarding day-to-day operations and performance, including problem and risk management.
Promptly follow up on the cause of performance problems and remedial efforts undertaken by the contractor to prevent the recurrence of problems.
Periodically review and, where necessary, vary the contract requirements in order to reflect changing business priorities, lessons learned from experiences in the relationship, and improved performance capabilities.

Record management – audit trail

Record management provides information critical to competent contract management, including performance monitoring, decision making and dispute resolution. Sound contract management and administration relies on the maintenance of a complete audit trail to ensure decisions or processes can be reviewed and to demonstrate accountability to program managers (and ultimately to Parliament). The extent of the documentation required largely depends on the circumstances and likely consequences but is also dependent on satisfying the legislative requirements regarding Commonwealth record keeping (under the Archives Act 1983, the FMA Act and the CAC Act).

In contract management, routine matters can quickly and easily escalate to become non-routine and/or expensive disputes. Having access to all relevant correspondence and records of events can be vital in settling a dispute before it escalates. It can also be crucial in any litigation proceedings as it is likely that the agency will be called upon to produce a wide range of documents relating to the procurement process and management of the contract. Accurate record keeping will also ensure the agency retains valuable corporate knowledge and expertise gained in respect of contract management. Corporate memory of key issues, lessons learned, the strengths and weaknesses of the contract and the parties, and possible improvements are a valuable asset which can be retained and disseminated through documentation of contract procedures and the maintenance of good contract records.

Contract management skills

The skills and experience of the people assigned to contract management functions is an important consideration. The ideal mix of skills will change as the procurement moves through its life cycle. Nevertheless, relevant skills and experience include:

an understanding of the project’s needs
experience in managing projects
good negotiation and interpersonal skills
an understanding of government accounting and financial principles, including the ability to control budgets and expenditures
knowledge and understanding of Commonwealth procurement processes and the legal framework in which the agency is required to manage projects (e.g. FMA Act or the CAC Act, Auditor-General’s Act 1997)
knowledge and some understanding of relevant aspects of commercial law, including the principles of contract law
an understanding of risk management techniques and contingency planning
the ability to work effectively as a member of a team
well developed analytical skills
the ability to exercise sound judgment
the ability to work reliably under pressure and prioritise competing demands
technical expertise sufficient to provide the agency with correct advice on the contractor’s performance.

Common legal issues

In our experience, contract management is often poor (with commensurate contractual and legal implications) in the following key areas:

Work commences before execution
The parties have acted as if a contract is in place when the contract has not yet been signed or is still being negotiated and there are later disputes about whether or not there is a contract, and if so, the scope of the contract, its duration and conditions.

Incomplete records
There are deficient or incomplete documentary records of contract management decisions (such as directions given to the contractor) or the outcomes of significant interactions with the contractor (whether each party has a common understanding of how to proceed). Where the agency and the contractor have a difference of view on a particular issue, it is important for the agency to ensure that it documents its position with the contractor and does not leave correspondence from the contractor asserting a particular position unanswered – this may otherwise give rise to an implication that the agency accepts the contractor’s position.

Variations not in the appropriate form
This follows and is linked to the previous area, particularly the requirement that any amendment to the contract be in writing and signed by both parties. Instances of a contract being amended orally (in meetings or over the telephone), by conduct (especially failure to act consistently with the contract), by email exchanges or by informal ‘letter agreements’ kept in ‘bottom drawers’ (i.e. not on file) are relatively common.

Variations or waivers not properly authorised
A complex contract will often specify that only the ‘contract authority’, not the designated ‘contract manager’, can formally approve variations or waivers.

Breach of insurance provisions
Over time, particularly in longer term contracts, the contractor may not renew its insurance policies or the coverage or terms of those policies may change in such a way as to reduce the protection that they afford. As a consequence, it is not unusual for contractors to be in breach of the insurance provisions of a contract unless the agency has an annual process for checking the extent to which the contractor maintains the required insurance policies on an ongoing basis.

Payment not properly authorised
Decisions to approve payments are not made by an officer with the appropriate level of financial delegation.

GST under the contract not managed effectively
Most contracts contain provisions dealing with GST. However, in addition to having the right GST clause in the contract, it is often necessary to manage particular GST considerations, particularly for contracts that are cost plus or allow for reimbursement of expenses. A common issue with these contracts is for a contractor to claim reimbursement for the full amount of an expense, including GST paid, where it is also able to claim an input tax credit for that expense – this in effect gives the contractor a windfall.

Plans not followed up
Contracts often provide for various matters to be dealt with under plans that are developed and approved post signature (e.g. risk management plans or transition out plans) and are required to be implemented. In many cases, agencies do not follow up on these plans and when the time comes to implement the plan (e.g. on transition out) the contractor has no plan and is uncooperative.

Deferral or reduction of fees not enforced when appropriate
Contracts often contain a clause allowing the agency to defer or reduce payments if the services are not being performed by the contractor to the agency’s satisfaction. It is not unusual for an agency to continue to make payments to the contractor despite poor performance. In addition to raising questions about the extent to which such payments are an ‘efficient and effective’ use of public money under the FMA Act, in some circumstances, payments to the contractor can waive the agency’s right to remedies under the contract and at law.

Difficulties in identifying confidential information
Contracts typically contain confidentiality clauses which allow parties to identify material which is to be regarded as commercial-in-confidence for a specified period, subject to specific agency accountability processes. Over time, where there are many interactions between contractor and contract manager with a mixture of confidential and non-confidential material, clearly identifying which material is covered by the confidentiality clause can become difficult.

Extension of the contract not managed effectively
Whether to re-tender or extend the contract is often considered too late. Where a contract is extended, often this gives rise to a new procurement and requires consideration of the Commonwealth Procurement Guidelines, and for FMA agencies, FMA Regulation 9 approval and where applicable FMA Reg 10 authorisation. Similarly, contracts are often extended without a corresponding extension to the terms of any risk mitigation mechanisms under the original contract, such as unconditional financial undertakings or performance guarantees.

This list is not exhaustive. Contract managers will need to assess the extent to which of the areas outlined above may arise in their contracts and develop an appropriate contract management system.

When to seek legal advice

A contract manager cannot be expected to deal with every possible situation that arises in relation to a contract. An important skill in contract management is recognising when to seek legal advice. As a contract manager has the ability to affect the agency’s rights through their actions it is important to be pro-active throughout the life of the contract and seek legal assistance before issues escalate.

Situations where it would be prudent to consider obtaining legal advice include where:

the contract manager believes that the contractor may be in default under the contract
the agency is considering terminating or reducing the contract’s scope for convenience
it is necessary to change the nature or scope of the contract
the agency is in dispute with the contractor about any material matter or the contract manager considers that dispute is likely
a conflict of interest arises
a security breach or a breach of confidentiality occurs.

Again this list is not exhaustive. Contract managers will need to exercise their judgment if other contract management issues arise that could require legal advice.

This note has been prepared by Clare Derix and Henry Addison with the assistance of Kathryn Graham, Senior General Counsel and Cathy Reid, Senior Executive Lawyer.

Clare Derix joined AGS’s Commercial Group in Canberra in 2002 after spending two years working in private practice in the commercial and financial services area. Clare has drafted a broad range of contracts for clients and regularly advises on how best to manage and administer contracts. She has extensive experience in providing legal and probity advice in relation to acquisition and market-testing projects, tender documentation and the legal and Commonwealth policy re-quirements with respect to procurement.

Henry Addison joined AGS’s Commercial Group in Canberra in 1999. Prior to that he had a varied commercial law career, including private practice in London and Los Angeles. Henry has extensive experience in contract administration and management, and a comprehensive knowledge of Commonwealth requirements and policies in relation to pro-curement, competitive tendering and contracting and the use of whole-of-government arrangements. He also has broad experience as probity adviser on tender documentation and contract negotiations.

Notes

‘Contract’ here is used generically to refer to all relevant contractual documentation, not just the terms and conditions of contract (e.g. the Schedules of the contract such as the Statement of Work or Functional Performance Specification, the Performance Measurement System, the Project Plan etc.). The term also includes documents that are incorporated by reference, such as Australian Standards or industry codes of practice.
Hughes Aircraft Systems International v Air Services Australia (1997) 146 ALR 1.
GEC Marconi Systems Pty Limited v BHP Information Technology Pty Limited (2003) 201 ALR 55.

Ten key principles of contract management

The following principles apply to any contracting situation and should be borne in mind for successful contract management:

Be proactive in contract management – do not allow minor problems to become major ones.
Communicate regularly and effectively with the contractor – work for a strategic relationship with the contractor.
Understand the contract and what is required of all parties – clearly define roles and responsibilities.
Identify the particular risks faced by the contract and monitor events to limit their effect – actively manage risks.
Ensure the contractual obligations of both the agency and the contractor are fulfilled in accordance with the contractual requirements.
Behave ethically and honestly at all times, and require the same standards of the contractor.
Regularly review the requirements of the contract and the contractor’s performance.
Seek professional advice when warranted – advice from the agency’s procurement area and legal advice, should be sought where required.
Be reasonable and fair when dealing with the contractor but enforce the contractual terms and conditions when appropriate – there are limits to conciliation.
Ensure variations to the contract are justified, provide value for money and do not diminish the agency’s requirements or interests.

Reference material for contract managers

Commonwealth Procurement Guidelines, Department of Finance and Administration, January 2005 (Financial Management Guidance No. 1)

Guidance on Confidentiality of Contractors’ Commercial Information, Department of Finance and Administration, February 2003 (Financial Management Guidance No. 3)

Guidance on the Listing of Contract Details on the Internet, Department of Finance and Administration, January 2004 (Financial Management Guidance No. 8)

Guidance on Complying with Legislation and Policy in Procurement, Department of Finance and Administration, January 2005 (Financial Management Guidance No. 10)

Guidance on Identifying Consultancies for Annual Reporting Purposes, Department of Finance and Administration, July 2004 (Financial Management Guidance No. 12)

Guidance on the Mandatory Procurement Procedures, Department of Finance and Administration, January 2005 (Financial Management Guidance No. 13)

Guidance on Ethics and Probity in Government Procurement, Department of Finance and Administration, January 2005 (Financial Management Guidance No. 14)

Guidance on Procurement Publishing Obligations, Department of Finance and Administration, January 2005 (Financial Management Guidance No. 15)

Guidance on the Gateway Review Process – A Project Assurance Methodology for the Australian Government, Department of Finance and Administration, August 2006 (Financial Management Guidance No. 20)

Developing and Managing Contracts – Getting the Right Outcome, Paying the Right Price: Better Practice Guide, Australian National Audit Office, February 2007

‘Commercialising intellectual property’ and ‘Commercialisation and confidentiality’, AGS Commercial Notes No. 18, 24 February 2006

‘Indemnities in Commonwealth contracting’, AGS Legal Briefing No. 79, 26 July 2006

AGS contacts

AGS has national teams of lawyers specialising in contract development and management, including managing contractual disputes. For further information on the article in this issue, or on other contract management issues please contact John Scala (development and management) or Simon Daley (disputes), the authors, or any of the lawyers listed below.

National	John Scala Simon Daley	03 9242 1321 02 9581 7490*
Canberra	Garth Cooke Andrew Whiteside Andrew Berger	02 6253 7010 02 6253 7137 02 6253 7405*
Sydney	John Berg Simon Daley	02 9581 7624 02 9581 7490*
Melbourne	Paul Lang Susan Pryde	03 9242 1322 03 9242 1426*
Brisbane	Richard Silver Barry Cosgrove	07 3360 5700 07 3360 5647*
Perth	Scott Slater Jonathan Jacobson	08 9268 1144 08 9268 1135*
Adelaide/Darwin	Andrew Schatz	08 8205 4201
Hobart	Peter Bowen	03 6210 2104

* For enquiries regarding disputes.

The material in these notes is provided to AGS clients for general information only and should not be relied upon for the purpose of a particular matter. Please contact AGS before any action or decision is taken on the basis of any of the material in these notes. © AGS All rights reserved