Contract administration is a term used to describe the functions that are performed after the contracting parties have signed the contract.
As a precise term, contract administration refers to those activities that take place after contract award and can include a plethora of activities ranging from routine to unusual.
It requires the contract manager to remain focused on the program goals and objectives. Good contract administration fails when program goals and objectives are not met.
Contract administration includes the development of a contract administration plan, performance monitoring, contract closeout, and analysis.
Contract administration activities include payment, monitoring of progress, inspection and acceptance, quality assurance, monitoring and surveillance, modification, negotiation, contract closeout, and many others.
Purpose of contract administration
Contract administration focus on the achievement of stated goals and objectives that fall within the framework of the negotiated contract.
Contract administration protects the rights of the parties and ensures that the obligations of the parties are met.
From the public sector perspective, contract administration is concerned with the wise expenditure of public funds and the design and application of a decision-making process, which results in outcomes that are in the best interests of the citizens it serves.
Contract administration requires the effective and efficient management of executed contract agreements.
Contracts are created to meet the validated requirements of public organizations. So each contract makes some contribution to the operational effectiveness of any organization. Contractual arrangements are mission-oriented so contribute to the success of the mission of the organization
Typical Contract Administration Problems
1. Wrong or unsatisfactory product is delivered.
2. Delay in delivery or completion.
3. Dispute over the definition of acceptance.
4. Change orders.
5. Personality conflicts between the contractor and the agency representatives.
6. Limited or no replacement sources of supply.
7. Poor performance.
8. High risk of failure.
9. Use of subcontracts.
10. High costs.
To effectively manage a contract, the procurement department should anticipate which of these contract administration problems will most likely be encountered and then develop specifications, contract clauses, and a contract-monitoring plan to avoid or manage the problems.
The Benefits of Good Contract Administration
1. Effective Control – ensuring that both parties know their obligations and implementing a contract control system that reflects the performance requirements of the contract and provides mechanisms for the coordination and dissemination of information.
2. Performance to the required standard – Full use should be made of a contractor’s own management information and performance measurement system, with the contractor reporting progress through the agreed procedure.
3. Compliance with contract conditions – Managing the contract conditions will help to ensure that they are met; if they are not met, they provide remedies to be applied properly and promptly.
4. Clear and documented records – These are essential in the event of invoking default procedures or seeking correction of failures to perform.
5. Management of change – It is the contract administrator’s responsibility to define appropriate change control procedures which enable him/her to anticipate, manage and control changes to requirements and/or costs.