EXTENDED SCM FORUM PRESENTATION- CONTRACT MANAGEMENT.PPTX

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1. EXTENDED SCM FORUM CONTRACT MANAGEMENT 7 DECEMBER 2016 1

2. CONTENTS Introduction Legislative Framework Contract Management Prescripts Supply Chain Management Value Chain Causes of Contract Management Failure Contract Management Process/Activities Departmental Requirements for Effective Contract Management Contract Management Framework

3. 1. INTRODUCTION A contract can be defined as “the written agreement entered into between the purchaser and the supplier, as recorded in the contract signed by the relevant parties , including all attachments/appendices thereto and all documents incorporated by reference therein”. Contract management can be defined as “the process of maintaining control over the contractual arrangements between a department (purchaser) and the appointed supplier (contractor) being the other contracting party by performing the contractual management or administration activities commencing at the conclusion of a contract”. 3

4. 2. LEGISLATIVE FRAMEWORK Contract management falls under the umbrella of Supply Chain Management which is regulated, directly and indirectly, by a plethora of legislation and prescripts. The following are some of the critical pieces of legislation : Constitution of the Republic of South Africa, 1996; Public Finance Management Act (1 of 1999) (PFMA ); Treasury Regulations issued in terms of Section 76 of the PFMA; Preferential Procurement Policy Framework Act (5 of 2000 ); Preferential Procurement Regulations of 2011; Broad-Based Black Economic Empowerment Act (53 of 2003 ); Construction Industry Development Board Act (38 of 2000 ); State Information Technology Agency Act (88 of 1998 ); Promotion of Access to Information Act (2 of 2000 ); Promotion of Administrative Justice Act (3 of 2000 ); and Prevention and Combating of Corrupt Activities Act (12 of 2004). 4

5. 3. CONTRACT MANAGEMENT PRESCRIPTS The following prescripts have been issued by the National and Provincial Treasuries relating to contract management: National Treasury: National Treasury Contract Management Framework; and National Treasury Contract Management Guide. Provincial Treasury: Contract Management Strategy of the Eastern Cape Province. Other prescripts issued periodically that have contract management implications (circulars, practice notes and instruction notes). 5

6. 4. SUPPLY CHAIN MANAGEMENT VALUE CHAIN 6 Where does contract management fit into the SCM value chain?

7. 5 . CAUSES OF CONTRACT MANAGEMENT FAILIURE Poor planning; Poor specifications; Poor contracting; Lack of tools/systems for managing contracts; Poor or non-management of contracts and contractors; Non-payment or delays in payments; Poor or no risk management; Poor or no oversight and governance; Poor management of price adjustments and variation orders; Non-application of penalties iro poor or non-performing contractors; Poor or ineffective document management; Lack of skills/inadequate resourcing of contract management units; Lack of ethics; and Fraud and corruption . 7

8. 6. CONTRACT MANAGEMENT PROCESS/ACTIVITIES 2015/06/04 8

9. 6. CONTRACT MANAGEMENT PROCESS/ACTIVITIES (Cont.) Monitoring of contractual performance milestones utilising contract management tools/systems; Provide additional monitoring and support for SMMEs; Risk management; Price adjustments; Managing variations to the contract; Managing and monitoring payments; Dealing with poor and/or non-performance by contractors; Enforcement of the terms and conditions of the contract; Applying contractual default penalties; Managing cessions of contracts and/or payments; Document management; and Providing support during litigation. 9

10. 7. DEPARTMENTAL REQUIREMENTS FOR EFFECTIVE CONTRACT MANAGEMENT Contract management framework; Supporting procedures and protocols; Contract management unit; Adequate number and skilled staff; Contract management systems/tools; Contract register; Active risk management; Support from executive management; Support from legal services; Effective dispute resolution mechanisms; and Effective relationships, internally and externally. 10

11. 8. CONTRACT MANAGEMENT FRAMEWORK Contract management framework: Definitions, abbreviations and acronyms; Introduction and purpose; Regulatory framework; Role players; Relationship management; Governance and oversight; Risk management; Organisational arrangements; Resourcing and skills development; Contract management systems; Planning and managing the contract and contractor performance; Dispute resolution; and Review. 11

12. THANK YOU