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Contract & Supplier Relationship Management

22/03/2024

The Procurement Act – spotlight on Contract and Supplier Relationship Management

The Procurement Act has raised the profile of Contract and Supplier Relationship Management in public sector procurement. This is an area which is often given insufficient attention in both the public and private sectors. If undertaken properly, Contract Management (CM) can ensure that what is agreed in the contract is delivered, while Supplier Relationship Management (SRM) can add value and foster innovation through a collaborative working relationship.

This post describes the differences between CM and SRM and highlights the skills required for each.

Contract Management

Contract Management encompasses the comprehensive oversight of contracts from inception to conclusion. Its focus is to ensure that the value of the contract is delivered with efficiency and compliance. This is done through agreeing Service Level Agreements which align to the needs of the business and measuring their performance through Key Performance Indicators. If CM is not undertaken, as much as 75% of the value of the contract can be lost, and, more importantly, depending on the nature of the contract, the contracting authority opens itself to increasing exposure to risk.

Key Skills for Contract Management:

• Attention to detail: the ability to grasp the detail of the contract and ensure that the detailed requirements are fulfilled.
• Collaboration and conflict resolution: the ability to work effectively across stakeholders and resolve conflicts without damaging relationships.
• Organisational Skills: the ability to set and meet clear goals and timelines, monitor supplier performance, and drive continuous improvement.
• Negotiation: ability to negotiate effectively to secure the best terms and conditions for the organisation,
• Communication: the ability to articulate ideas and feelings effectively to a wide range of people.
• Analytical Thinking: Skills in evaluating contract performance, identifying improvement opportunities, and implementing best practices.

Supplier Relationship Management: Cultivating Strategic Partnerships

Supplier Relationship Management is a strategic activity and builds on the more operational CM activity. Emphasis should be placed on soft skills as technical skills should be a given. Its focus is on creating future value through working collaboratively with the supplier for joint benefit in areas such as innovation, quality improvement, risk reduction and supply chain resilience. Proper governance of the relationship is critical on both sides and will involve increasingly senior executives commensurate with the degree of strategic risk and value of the contract.

Key Skills for Supplier Relationship Management:

• Strategic Vision and thinking – ability to see a future ‘big picture’ and comfortably generate and assess options to deliver it.
• Strong Communication skills – the ability to articulate issues clearly to stakeholders at all levels internally and externally.
• Collaboration – able to work collaboratively with people from different backgrounds and cultures and at all levels internally and externally.
• Strong relationship building and interpersonal skills – the ability to ‘read the room’ and understand the ‘unsaid’ and to build trust which will sustain long term relationships.
• Negotiation: ability to negotiate at the strategic level, looking way beyond cost/price to achieve a ‘win-win’ outcome commensurate with the strategic level of the procurement activity being undertaken.

Conclusion

The dual approach of integrating effective Contract Management and Supplier Relationship Management is vital for public sector organisations aiming to optimise service delivery and ensure responsible use of taxpayer funds. By recognising the unique contributions of CM and SRM and fostering the necessary skills in these areas, public sector entities can achieve a balance of efficiency, accountability, and strategic foresight. This, in turn, can lead to improved public services and enhanced value.

Authors: Douglas MacKellar & David Turner

Douglas MacKellar and David Turner are experienced procurement professionals in both the public and private sectors. They bring a ‘hands on’ approach to learning, guiding their clients through procurement activity by demonstrating what they have learned by ‘doing’.

 

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