UK: Contract Management - How To Get Comfort That Your Contracting Processes Are Efficient And Effective?

Last Updated: 15 October 2015
Article by Ruth Ireland

With sound contracts playing such an important to successful businesses, how can you get comfort that your contracting processes are efficient and effective?

Many leading Directors and Board members are able to articulate their most critical functions. These tend to be manufacturing, sales, marketing, and IT amongst others, but contract management rarely features. However, it doesn't matter whether you are a large, medium or small enterprise, or what sector you are involved in (i.e. manufacturing, services, construction etc. ) you will always have and need customers and suppliers who will want  'watertight' contracts that make it clear to all parties their obligations to each other, and all of these contracts need to be planned, awarded and managed thereafter.

Taking supplier contracts as a case in point, organisations often use internal procurement functions to support with their sourcing strategy, supplier selection and award, and negotiation and contract development.  Nevertheless , too often 'Procurement' will see their task as complete once they have 'procured' the provider and the contract is signed, moving quickly onto the next procurement assignment. If you're lucky the budget-holder will have been involved during the procurement process and will take over at this point; although, most often the contract is put away in a draw, filling cabinet or random electronic storage location,  never to be looked at again.....until something goes wrong! 

Recently, we have seen dramatic stories about poor contracting in the press. What about the collapse of phones4u or the ghost Formula 1 contract between Daimler and Henkel, or the HP and Oracle contract dispute over £billions, or even Starbucks being sued by a small snack company over breach of contract. Even the bigger players such as Kraft and Coke, have fallen foul of poor contracting.

As internal audit professionals we often see excellent procurement processes undone by poor contract management, resulting in the quality and value initially negotiated at the award stage not being delivered by the supplier, and which often results in costly legal disputes or the need to re-tender. Conversely, for those organisations without a dedicated procurement function, procurement may not be robust, but this can be recovered through effective contract management arrangements. Good contracting means getting everything you asked and paid for.

How are you using internal audit to provide assurance over your contract management arrangements?

There are two important areas where internal audit can give assurance over contracting arrangements.  Firstly, internal audit are used year on year across all industries to carry out contract audits to the value of billions of pounds. These are normally in-depth audits of an individual contract for strategically important suppliers; the main focus being whether or not suppliers are performing to their obligations and expected service standards. There are many benefits to carrying out detailed contract audits, but most importantly it will give an early indication of key risks that need to be proactively managed, such as under performance or non-compliance with contractual requirements, delays ,; cost overruns,  poor value for money, and poor quality products or services.

Secondly, internal audit are often used to review the overriding contract management framework, which typically involves a number of key departments and individuals including procurement and/or contracts team, budget holders, regional or area management, senior management and the Board. Assurance is sought over the design of the contracting framework and to test whether it is operating effectively to minimise any contracting risks. So what should you watch out for? There are a number of fundamental control principles that we see fail regularly and so need to be considered as part of your contracting arrangements:

  • Define what matters to you from the start - An effective contract management process should start right at the beginning of the procurement activity.
  • Ensure you have a signed version of the contract or service level agreement - One of the most common failings relates to a lack of version control and retaining a final copy of the signed; ultimately, much of the time this does not have an impact on the business, unless there is a contract dispute.
  • Ensure your 'contract managers' have the skills to succeed – More often than not, contract managers end up with the responsibility by default - i.e. they are either the budget holder or their background is in that particular area. Rarely do businesses consider the need of detailed skills, knowledge and experience of contracting The most successful contract managers follow project management frameworks and adopt project methodology disciplines.
  • Take a proportionate and risk based approach to monitoring contract performance – Suppliers will regularly promise the world but quickly fall into the same old performance they adopt with all their customers. This often results in poor quality or value for money not being achieved. However, most contract managers do not have the time or resources to robustly monitor every supplier's performance. Where you have limited resources, it is important to remember that not all suppliers are as important as one another i.e. just because a contract may be large in value, it does not mean it needs more focus.
  • Not all contracts are created equal - you need to consider the strategic importance, value, complexity of the service and the subsequent risk profile a supplier poses to the business.  You need to think about what could go wrong with each contract and adopt a proportional approach to alleviating that risk. The most successful contract managers will risk rate their suppliers and will adopt a more rigorous approach to high risk suppliers including:
    • frequent contract management meetings;
    • site and audit visits;
    • monitoring of validated key performance indicators;
    • supplier payment reconciliations to agreed contract terms;
  • We strongly believe that Internal Audit can, and should, be a key player in assessing an organisation's contract management arrangements. This will help boards to establish whether the way in which their company contracts is suitable for ensuring high quality goods and services that offers real value for money.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.