Contract Management

The Audit Office of NSW has released its report regarding the management of high value contracts by HealthShare NSW. The audit examined whether HealthShare NSW, as part of NSW Health, has the required contract management capability to effectively manage goods and services contracts valued over $250,000.

The audit found that HealthShare is not applying the capability needed to effectively manage high-value goods and services contracts. Consequently, the value for money or savings it achieves when it negotiates contracts is at risk of being eroded over the life of these contracts.

Specifically, the Audit Office found that HealthShare:

• did not use contract management plans for over 80 per cent of the contracts it managed
• was not effectively using PROcure, its mandatory contract management tool
• did not provide enough information to its customers by way of contract user guides (e.g. warranties, managing use-by dates, payment terms, etc.)
• had transferred contract management responsibilities for some high-value to its customers, which contravened Health procurement policy
• provided limited guidance to contract managers on how to validate performance information.

Finally, the review confirmed that HealthShare’s contract management practices were limited by inadequate performance monitoring.

WHAT YOU NEED TO DO

Effective contract management is essential for all organisations to ensure contracts are delivering the goods and services expected, and achieving value for money, safety and quality.

There are substantial reputational and financial risks for organisations that do not manage their contracts well.  Consequences could include financial loss, unmanaged and increasing costs, bad media coverage, loss of stakeholder confidence and/or unrealised goods, services and assets.

Good practice contract management includes, as a minimum, the following management controls:

• senior management commitment, support and oversight
• an up-to-date policy and procedural framework
• effective financial and administrative delegations
• staff knowledge, experience and specialist skills
• appropriate monitoring and reporting
• accurate recordkeeping (including for contract variations).

The Audit Office report should prompt all public sector agencies (including Local Councils) to review their controls over contract management. And while many agencies may not manage high-value contracts (i.e. over $250,000), the findings of the report are relevant for all contracts of material value given an agency’s size and context.

HOW CENTIUM CAN HELP

This report should act as a call to action for all Agencies regarding the importance of maintaining strong controls over contract management, especially given the reputational and financial risks associated with ineffective contract management.

As such, it may be opportune to consider a contract management audit (or even a follow-up audit) to confirm the effectiveness of internal controls.  

As experienced auditors of contract management in a wide variety of organisations we would be pleased to assist in this regard.  Centium would also be available to review and provide expert advice on your related frameworks and systems, for example, those relating to procurement, asset management and/or project management. We invite you to reach out to our highly qualified Risk & Assurance Directors Penelope Corkill. We would also invite you to check out information regarding our clients, recent success stories, and other service lines on our website.  And please – follow us on LinkedIn