Presented by Ms. Galaletsang Matseliso

1. Presented by Ms. Galaletsang Matseliso Workshop on Contract Management OCPO: National Treasury | 20 July 2017

2. CONTENTS 2 • Contract Management • Definition • Purpose and benefits • Types of contract management • Contract Management Framework (CMF) • CM cycle • Contracts/ Agreements • Creation • Types 4. Questions from FSPT 5. Discussions

3. Contract Management: Definition 3 The management of the contracting process from-; • Service Identification (market/product analysis); • (procuring) Tender process; • Negotiation and Appointment; • Service Management; and • Contract Termination.

4. Contract Management: Definition 4 Contract Management v Project Management • 3 key persons within the contract management SCM practitioners are not involved in the management of services but in the contract administration. (see slide 13)

5. Contract Management: Purpose and Benefit 5 • Purpose • To enable an institution to have effective system for recording contracts and the proper management thereof. • Benefits • Curbs fruitless and wasteful expenditure; • Curbs irregular expenditure; • Mitigation of risk and litigation; • Institutional data integrity on contracts; and • Value for money.

6. Contract Management: Types 6 • Manual • the manual documentation of the process • Manual contract register (includes excel) • Electronic • Oracle Procurement Contract • Puridion • Many More

7. CMF: General Principles 7 General principles • The Public Procurement Management Bill will makes contract management mandatory in Chapter 3. • Application- The Framework will be applicable to all state organs as described in section 239 of the Constitution. Requirements • Develop/update policies, procedures, systems within the scope of this Framework for compliance.

8. CMF: Contract Management life cycle 8 • Contract negotiation; (At what stage) • Contract development and signing; (party obligations v conditions of services) • Contract registering; • Contract amendments/ or variation; • Contract termination

9. CMF: Contract Management life cycle 9

10. CMF: Life Cycle 10 Initiation Phase • The Contract Administrator + Project Managers (end user) must-; • Conduct needs and market analysis to determine -; • the correct specifications that are in line with the needs of the Institution; • the correct cost implications (estimations) (to enable the Institution to identify competitive pricing); • identity any potential risk and its mitigation;

11. CMF: Life Cycle 11 Appointment • the Contract Administrator shall ensure that the proper procurement process that is in line with the PFMA and its subordinate legislations is followed in the procurement of services or commodities that are in line with the specifications developed. • Letter of Appointment

12. CMF: Life Cycle 12 Contract Negotiations and Signing • The Contract administrator + Legal Services + Project Manager • Negotiation (When should they take place) • No introduction of new services or conditions in relation to the service • Ensure that there is no contradiction between • Contract (service level agreement) • and the specifications, • bid proposal, • letter of appointment and SBD 7.2. (Contract form)

13. CMF: Life Cycle 13

14. CMF: Life Cycle 14 • Contract must be signed in duplicate; • Signed by person with relevant authority to sign; • Must be dated; • 2 witnesses per signatory; • Initial each page; and • Registration on Contract Register.

15. Contract Register 15 CONTRACT REGISTER • Contract number – each Contract should be provided with a unique number for filing purposes. • Tender/order number- This is to ensure that there is clear reference to appointment process followed. • Duration of Contract – Full details relating to the commencement and expiry of the Contract. There should be a column that records extension or early termination (reasons for early termination or extension should be recorded). • Contract Value– Full contract price should be recorded. All adjustments should also be recorded. (reasons for any price adjustment must be recorded) • Payment milestones and Penalties – All payments that are linked to a milestone should be recorded and reasons be provided for any payment that is not linked to a milestone. If there are any penalties that are linked to a service level then the penalties should be recorded. • Service Provider – The full details of the Service Provider must be recorded. • Services- Clear description of services or commodity should be recorded.

16. Contract Register 16 CONTRACT REGISTER • Hard copy contracts must be filed in line with filing policy. • MAY electronically file copies of contracts. • MUST file and lock up original copy in central depository. • Continuous Contract Register update to ensure integrity of information on register and that it is an effective assessment tool for the contract management of the Institution. • Each contract to be managed throughout its life cycle. NB: If information integrity is compromised then its as good as not having the register.

17. Contracts 17 Types of Contracts • MOU • SLA • Addendums • Purchase and Sale Agreement • Professional Service Agreements • Maintenance and support Agreements

18. Creation of Contract 18 Tender process • Invitation to submit proposal- The tender invitation • Offer- The bidders tender proposal • Acceptance – Acceptance letter issued by the Department

19. NB Clauses in a contract 19 Must have clauses in a contract (clauses must be drafted in such a way that it does not lead to double interpretation. Clauses must be definite) • commencement and duration of Contract; • Full description of Services (Service Levels); • Fees and payment (milestones attached to payment); • Delays or unsatisfactory performance; • Breach of Contract; • Termination clause; • Amendments and variations; • Warrantees and indemnity; • Dispute Resolution; • Intellectual Property rights; General clause (e.g waiver, cession or assignment, governing law, entire agreement, survival, indulgence); and • Notices and domicilium.

20. Example of clauses 20 Purchase and sale (As and when required) • Services description clause and payment clause Service description clause – “The seller shall provide the purchaser with the services as detailed in Annexure as and when requested by the purchaser in writing”. The seller acknowledges that there is not limited number or orders to be places as the order by the purchaser shall be dependent of the purchasers operational requirements.”

21. Example 21 Professional Services (NB: each deliverable must be unpacked to enable institution to measure performance)

22. Cost clause 22 Costs (Fees) • Must be definite. There must be a total contract price and not open. • Price escalations – The method of calculating price escalations must be definite. • CPI • RoE (volatile market – Try to curb the uncertainty and limited to Service Providers that directly incur this cost) • Annually based on an occurrence of an event (annual Psira rate increase for security services). • A particular percentage

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