Thought Leadership: Peter Hawes on monitoring the peformance of long-term contracts

Peter Hawes, managing director, Norse Commercial Services

Peter Hawes, managing director, Norse Commercial Services - Credit: Archant

Longer term contracts have benefits for suppliers and clients alike – service supply continuity, demand predictability, staff employment stability, foreseeable cost and revenue streams ? the list goes on.

Having agreed service levels, costs and key performance indicators (KPIs) it would be foolish, once the contract is signed, to just let the commercial partner get on with the job.

Yes you can over-control, but sound measurement and management throughout the contract will help avoid problems in terms of service delivery, customer/supplier relations, pricing, quality etc.

With any new agreement the supplier will initially focus on ensuring a good impression but, as the term progresses, initial supplier team members may move on, newly signed client pressures can take priority, KPIs might slip and prices or timescales may start to creep up. It is then that problems can then start to arise and, if not properly managed, can spiral out of control.

The mid-term of a contract is often the most vulnerable, as the renewal date is off the radar and attention to quality or service detail are potentially not as high as they should be.

As with any extended contract, it is important to recognise that unpredictable economic pressures and factors may impact on the original agreement, and some degree of sympathetic negotiation maybe necessary by both parties.

However, many latent problems can be contained if the initial implementation plan is robust enough and regular monitoring of KPIs, timely audits, strong collaborative management of potentially adverse results are in place.

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Both parties must also recognise the difference between operational contact issues (ensuring the tactical, day-to-day terms and outcomes of the contract are delivered) and structured reviewing and reporting (which guarantee long-term strategic goals and objectives are achieved); the former processes being no substitute for the latter procedures.

: : Peter Hawes is managing director of Norse Commercial Services.