1. Proportionate to risk – higher-risk contracts require more robust planning and documentation.
2. Collaboration – early engagement with the supplier sets the tone for partnership working.
3. Transparency and documentation – all agreements should be minuted and filed.
4. Service continuity – the mobilisation plan must minimise disruption to service users.
5. Governance first – roles, responsibilities, and decision pathways must be agreed before work starts.

A structured handover ensures that the contract manager has the necessary information.

Procurement should provide the contract manager with:

• Signed contract / Terms and Conditions (T&Cs)
• Specification and schedules
• Tender responses (technical and commercial)
• Pricing schedules
• Scored evaluation sheets
• KPI and service level requirements
• Risk and issues identified during procurement
• Award letters and standstill documentation
• Transfer of Undertakings (Protection of Employment) (TUPE) information (if applicable)
• Data protection agreements
• On-boarding requirements

Handover Meeting Should Cover:

• Context and purpose of the contract
• Key risks highlighted during evaluation
• Supplier strengths and potential areas requiring attention
• Contract management expectations
• Mobilisation timeline and Go-Live target date

All documents should be stored in the contract/relevant file.

Internal Mobilisation Planning 

 Before meeting the supplier, the public body must align internally. Key actions should include:

Establishing the contract management team, including:

• Contract Manager
• Technical leads
• Finance
• IT/Data protection
• Human Resources (HR)/TUPE leads
• Legal (if required)
• Reviewing resourcing needs
• Mapping internal dependencies
• Agreeing internal governance (who approves what, and when)
• Checking budget availability and coding
• Identifying training needs (e.g., system access, technical knowledge)

Supplier Mobilisation Kick-Off Meeting 

 A formal kick-off meeting is essential in medium–high risk contracts.

Agenda should typically include:

1. Introductions and governance structure
2. Review of the contract objectives and outcomes
3. Mobilisation plan and timelines
4. Supplier resource allocation
5. KPI dashboard/balanced scorecard and reporting templates
6. Data and system access requirements
7. Business continuity expectations
8. Health & Safety, General Data Protection Regulation (GDPR), security or regulatory requirements
9. Risk review and new risks identified
10. Communication and escalation routes

The meeting should end with:

• A joint action plan
• Named points of contact
• Mobilisation timeline
• Agreement on next steps

Minutes should be recorded and shared.

Confirming KPIs, SLAs & Reporting 

Medium–high risk contracts require clear and tested performance measures from the start.

Actions:

• Walk through each KPI and Service Level Agreement (SLA) with the supplier
• Ensure definitions and measurement methods are clear
• Test reporting templates before Go-Live
• Agree frequency of monitoring (monthly/quarterly)
• Confirm data sources (supplier-provided vs internal systems)
• Agree tolerances and thresholds (green/amber/red)
• Identify KPIs that require base-lining during mobilisation
• Establish how under-performance will be addressed

The supplier must sign off on the agreed KPIs.

A dedicated contract risk register should be created before the contract starts.

Minimum required risk categories include:

• Service continuity
• Supply chain risks
• Financial stability
• Cybersecurity and data protection
• Health & Safety
• Workforce (including TUPE)
• Business continuity
• Dependency on subcontractors
• Political or reputational risks

Each risk should have:

• Likelihood and impact scores
• Owner (public body or supplier)
• Mitigation actions
• Early warning triggers

Risk registers should be reviewed at least weekly during mobilisation.

Medium–high risk contracts require documented, structured governance.

Governance should define:

• Roles and responsibilities
• Delegated authority levels
• Meeting structures:
  • Weekly or biweekly mobilisation meetings
  • Monthly contract review meetings (from Go-Live)
  • Quarterly strategic review meetings
• Reporting expectations
• Decision-making routes
• Dispute escalation procedures
• Audit and record-keeping requirements

This structure must be formally agreed with the supplier.

Early clarity prevents future misunderstandings.

Agreements should include:

• Operational contacts (day-to-day)
• Commercial contacts
• Senior escalation paths
• Emergency contacts
• Response times for routine and urgent communications
• How issues, risks and incidents will be reported
• Shared document locations (if applicable)

A communication plan/matrix should be issued to both sides.

A mobilisation plan is mandatory for medium–high risk contracts.

The plan should outline:

• Activities
• Owners
• Timescales
• Dependencies
• Risks
• Milestones
• Gate reviews (“ready for service” checkpoints)

Examples of mobilisation tasks:

• Staff on-boarding / TUPE transfers
• System access setup
• Site surveys
• Equipment installation
• Process mapping
• Business continuity rehearsals
• Trial runs / test scenarios
• Training delivery
• Data migration (if relevant)

The plan should be reviewed weekly.

Before Go-Live, a Readiness Assessment must be completed.

This should confirm:

• All staff are trained and cleared
• Systems and data access work
• KPIs and reporting are tested
• Business continuity plans are implemented
• Health and Safety and compliance checks passed
• Risks are within acceptable tolerance
• Stakeholders are informed
• Supplier has demonstrated ability to meet service levels

If concerns remain, Go-Live should be delayed or a controlled soft-launch used.

The formal Go-Live requires:

Sign-off from:

• Contract Manager
• Procurement Lead
• Senior Responsible Officer (SRO)
• Legal (if required)

A Go-Live communication sent to:

• Supplier
• Internal stakeholders
• Service users (if relevant)

A contract management pack should be finalised containing:

• Signed contract
• Mobilisation records
• KPI dashboards/balanced scorecard
• Risk register
• Communications and escalation map
• Meeting calendar
• Contact lists
• Reporting templates

Demand Management can be defined as:

“the alignment of a business’ consumption with its business requirements”

It is applicable to all goods and services where internal demand and consumption can be influenced to reduce costs.

Demand Management is a key aspect of effectively aligning external resources to meet requirements. When Demand Management is considered, it is often seen as a simple matter of stopping people spending money. However there are ways to look at Demand Management without completely preventing spend.  These can provide notable savings and have a less drastic impact on the business.

Demand often results from internal practices and processes rather than from addressing a real need of the Organisation. The approach is about addressing change ‘in’ an Organisation. Therefore the starting point will be the culture, policy and behaviours of your Organisation.

Your Organisation can also participate by sharing best practice, benchmarking behaviour, creating policy guidance and undertaking peer review.

Demand Management can come at different points in the procurement process. For example, during the initial purchase point e.g. that software licences are purchased for the correct number of users at a single point in time. Demand Management can also occur in situations where costs are recurring as an ongoing activity such as in a category where spend is ongoing and regular (e.g stationery or postal services).

Demand Management, including behaviour change, represents a significant and untapped opportunity.

There are 3 main principles of demand management:

1. Each business unit should have exactly what it needs in order to deliver its business objectives;

2. Any resources consumed above this level represents a waste to the Organisation;

3. There may be many and very different ways of meeting a user's needs. Each way represents a different level of resource to achieve the same outcome.

The three strategies listed below could be independently or jointly applied.

With Demand Management you should consider:

• a reduction in the demand for goods
• if there is an option to use recycled goods to avoid buying new? Could recycled goods be supplied under an existing contract?;
• is there an opportunity to consolidate orders/ services to reduce costs?;
• improving your purchase to pay system to reduce transactional costs

There are a number of benefits to an effective Demand Management strategy. Many benefits are driven by:

• a change in the Organisation culture and outlook; and
• how goods and services are specified and requested.

When robustly implemented across all goods and services Demand Management drives public sector Organisations’ efficiency and effectiveness. The Organisation uses all  the external resources it procures to meet operational requirements.

The Demand Management process challenges the norms, standards, customs and practices of an Organisation. This is done to a degree not usually found in other processes.

Using Demand Management to prepare Strategic Sourcing, you can establish that the Organisation's requirements are sourced to a very specific level. This can avoid the development of a sourcing strategy for over-specified operational requirements.

Used routinely Demand Management can ensure the highest possible resource levels are directed at front line services. This is especially important in the public sector.

Consideration as to how the demand will be forecasted and fluctuations managed should be initially undertaken at the ‘Shaping the Requirement’ stage. This should be subsequently monitored and managed throughout the lifetime of the contract. Failure to do so could result in:

• excess material purchases and subsequent material write off/ waste disposal costs;
• inadequate material availability resulting in additional recovery costs and/ or service breakdown;
• excess, inadequate or inappropriately positioned resource;
• reputational damage as a result of service breakdown; and
• detrimental impact on the end user. 

Effective Demand Management forecasts also give the supply base the opportunity to manage their costs. This can be achieved by positioning resource and materials in line with demand.

Demand forecasting should be based on considerations such as:

• historical consumption
• supplier lead times
• market forces
• service criticality
• key stakeholder input
• purchase cost; and
• information from other buying organisations, trade bodies and business support organisations e.g. Federation of Small Businesses and Chambers of Commerce, etc.

Where practical, you should look to reduce future demand and costs by using strategies such as:

• considering if there is an option to fully or partially transition to recycled goods, instead of buying new;
• reducing transactional cost by improving the purchase to pay system;
• innovating supplier(s) to reduce mutual cost which should have been previously written into the contract / agreement with the supplier.

For any supplier to operate effectively, it must understand and manage its demand. They can use this knowledge to tailor its resources and processes proportionately.  This will ensure they deliver their service in the most efficient and cost effective manner. By understanding historical demand, an organisation can work with its suppliers to realise mutual cost and efficiency gains.

The most effective way to forecast future demand is to consider a combination of:

• historical demand;
• market forces;
• the Organisation’s business plan/strategic direction.

Forecasting is not an exact science and will never be 100% accurate. However these elements should provide sufficient information to allow the Organisation to develop forecasts. These forecasts should be accurate enough to accommodate demand fluctuations during the lifetime of the contract(s) with minimal cost.

The Organisation should ensure the supplier stays in regular contact with all key stakeholders (including other suppliers).  This will ensure that all parties are aware of the supply/demand position, especially during periods of fluctuation.

Contract management activities must include sufficient checks to ensure suppliers are meeting their Data Protection Legislation obligations as the Processor. These checks  may include audits undertaken by the controller or a third party auditor.

If obligations are not being met, organisations should take urgent remedial action with the supplier to address issues and risks.

More detailed information can be found in Additional Resources.

Weak interactions between an Organisation’s  finance, commercial, and contract management functions provide an opportunity for fraud and overbilling. This could be as a result of error and inefficiency, or by deliberate intent.  

Without basic scrutiny of payments and performance an Organisation’s departments may rely on the supplier to interpret the contract correctly which may result in errors . Better scrutiny of payments and improved contract knowledge within your Organisation will identify any possible overbilling and fraudulent activities Organisations can then take appropriate action.

Guidance on fraud can be found in the Additional Resources section of the Procurement Journey

A key element of Contract and Supplier Management is the proactive identification and management of risk. Guidance can be accessed on the Risk Management page.

Blacklisting refers to the practice of systematically denying individuals employment who would otherwise be able to be employed.  This can be on the basis of information, accurate or not, held in some type of database.

The Scottish Government regards blacklisting or the compiling of a blacklist as unacceptable. 

Effective contract management ensures the practice of blacklisting does not occur in public contracts.

The Employment Relations Act 1999 (Blacklists) Regulations 2010 provide rights for individuals if blacklisting results in refusal of employment, detriment, dismissal or redundancy.  

Any bidder which has been found to have breached, or has admitted breaching, these Regulations must be excluded from the procurement process for a period of three years. This is unless it can demonstrate to you that it has taken appropriate remedial steps.  The Scottish Government regards blacklisting or the compiling of a blacklist as totally unacceptable. Blacklisting refers to the practice of systematically denying individuals employment, who would otherwise be able to be employed, on the basis of information, accurate or not, held in some type of database.

If entering a joint procurement exercise with one or more public sector organisations you must have already agreed the legal status and requirements of such an exercise.

A “lead” authority may have been agreed at strategy stage.  Legally they are responsible for forming the contract with the awarded supplier(s.

Alternatively a truly “joint” exercise may be initiated.  Here procurement conduct is  carried out in the joint name(s) of the participating organisations. 

In either case, the organisations each remain responsible for meeting their contractual obligations.

Where you have determined only part of the procurement will operate as a joint exercise, the organisations will be jointly responsible for those activity areas declared as joint.  Each organisation will retain sole responsibility for the activities carried out on its own behalf.

All of above factors determine the subsequent approach to contract management.  Although considered at Strategy Development stage when deciding subsequent practical considerations these must remain a factor when determining the operational approach such as:

• who is responsible for contract management,
• how Key Performance Indicators (KPIs) will be managed and communicated and
• the reporting / communication network needed both between your organisations and the supplier(s).

Step 1: Gather Data

• Spend analysis (annual spend per supplier)
• Risk assessment (financial, operational, reputational)
• Business dependency and strategic relevance
• Contract complexity and length

Step 2: Define Segmentation Criteria

There are tools to support you when performing contract and supplier segmentation e.g. Kraljic Matrix , risk assessment, spend analysis etc.

When defining segmentation criteria, Organisations should consider a combination of financial, operational, risk, and policy-related factors:

Contract Value and Spend Profile

• Total contract value (annual and whole-life cost)
• Spend concentration (single supplier vs multiple suppliers)
• Impact on budget if costs increase or savings are not achieved

Purpose: Supports prioritisation of high-value contracts for enhanced oversight and benchmarking.

Criticality of the Goods or Services

• Impact on statutory duties and public service delivery
• Consequences of service failure or interruption
• Degree of substitutability or availability of alternative suppliers

Purpose: Identifies contracts requiring robust performance and continuity management.

Risk Profile

• Financial stability of the supplier
• Complexity of delivery or reliance on subcontractors
• Health, safety, information security, or safeguarding risks
• Reputational risk to the contracting authority

Purpose: Aligns with risk-based governance and internal control requirements.

Market Conditions and Supply Chain Resilience

• Level of market competition
• Supplier dependency or monopoly positions
• Supply chain fragility or geopolitical risk

Purpose: Informs engagement strategy and contingency planning.

Performance and Compliance History

• Delivery against KPIs and service levels
• Contractual compliance and issue frequency
• Responsiveness to improvement actions

Purpose: Enables differentiation between stable suppliers and those requiring closer management.

Policy and Strategic Importance

• Contribution to National Outcomes
• Community Benefits delivery
• Fair Work First compliance
• Climate change, sustainability, and net zero commitments

Purpose: Ensures alignment with Scottish Government policy priorities and Scottish Procurement Policy Notes (SPPNs).

Contract Complexity

• Degree of specification flexibility
• Change frequency and variation levels
• Contract duration and extension options

Purpose: Identifies contracts requiring specialist commercial or legal oversight.

Example dimensions:

• Annual spend
• Business criticality
• Risk exposure
• Performance history
• Innovation potential

Step 3: Classify Suppliers

Use the Kraljic Matrix to assign each supplier to a category (e.g. Strategic, Leverage, Bottleneck and Routine)

Step 4: Tailor Contract Management Activities

Align contract management intensity to supplier category:

• Strategic: Ensure effective contract delivery and supplier performance, risk management and maximisation of supplier and market development opportunities.
• Leverage: Ensure continuity of supply, value for money, risk management and supplier performance. Seek supplier development where possible. Retain/gain market knowledge
• Bottleneck: Ensure continuity of supply, value for money, risk management and supplier performance. Seek supplier development where possible. Retain/gain market knowledge
• Routine: Ensure continuity of supply and risk awareness

Step 5: Monitor and Review

• Reassess segmentation twice a year or when major changes occur
• Track supplier performance KPIs and risk indicators

The Kraljic Matrix – Supply Management Positions Template, which can be found at the bottom of the page, allows you to record all CSM activities for each segment. There are some examples pre-populated in this document which can be deleted/amended as required and to suit your organisation. 

The output from the Resource Planning Tool can be input into this tool. This document helps you segment your contract portfolio into four categories (Leverage, Strategic, Bottleneck, Routine).  This will allow your organisation to record the extent of work involved in managing each category.  This includes frequency of performance review meetings and frequency of Management Information, etc.

There is a natural tendency to over-estimate the work required and it is important to avoid this by being as pragmatic as possible. It is worthwhile comparing/collaborating with a similar organisation which has a more mature CSM operation. Especially where an organisation lacks the experienced managerial staff required to make informed judgements. This collaboration will allow your  organisation to benefit from the mature organisation’s experience You should factor in distortions such as the learning curve they experienced on the journey towards maturity.

Suggested Responsibilities/Considerations

• understanding requirement specification/contract scope and deliverables
• confirm roles and responsibilities
• review contract documents, KPIs and reporting requirements
• involvement of procurement
• risk assessment
• financial checks

Why it is Important

• it’s the bridge between procurement and delivery
• ensures both buyer and supplier understand what’s been agreed, what needs to happen next, and how performance will be measured
• prevents confusion or misalignment once the contract goes live
• makes sure the supplier is ready to deliver as promised from day one
• confirms pricing structures, invoicing processes, and performance measures are clearly understood
• avoids costly misunderstandings, disputes, or delays later in the contract
• reduces operational disruption when switching from an outgoing supplier or starting a new service

Suggested Responsibilities/Considerations

• ensuring documentation is correct and accessible (contract, terms, annexes)
• contract handover—who does what – complete a contract handover document (a template can be found at the bottom of the page for you to use)
• ensure contract documentation is accessible.
• complete handover checklist (a checklist document can be found at the bottom of the page for you to use)
• once the handover is complete, responsibility for the day-to-day performance management sits with the contract manager - with the procurement team available for advice and escalation (if required)

Why it is Important

• it’s the bridge between procurement and delivery
• ensures both buyer and supplier understand what’s been agreed, what needs to happen next, and how performance will be measured
• prevents confusion or misalignment once the contract goes live
• makes sure the supplier is ready to deliver as promised from day one
• confirms pricing structures, invoicing processes, and performance measures are clearly understood
• avoids costly misunderstandings, disputes, or delays later in the contract
• reduces operational disruption when switching from an outgoing supplier or starting a new service

A CSM Handover document and a CSM Handover Checklist are available for you to use, these can be found at the bottom of this page.

Suggested Responsibilities/Considerations

• for low-risk contracts, monitoring may simply be occasional check-ins and good record-keeping.  Before continuing, refer to the contract handover from the Procurement Team to ascertain the level of contract management that was agreed with the supplier.
• schedule regular performance meetings (agree frequency of reporting – e.g. monthly, quarterly etc.)
• what performance data should be tracked (cost, time, quality, supplier risk etc).
• track KPIs, SLAs, and delivery milestones.
• record issues and actions taken.
• use the Balanced Scorecard, if applicable (this can be found at the bottom of this page)
• maintain accurate records for audit (A Compliance and Audit Checklist document is available at the bottom of the page if it is relevant and proportionate for your contract)
• consider how to capture benefits / savings / sustainable outcomes achieved

Why it is Important

• ensures continual oversight
• allows identification of trends or issues early
• confirms that the supplier is delivering the goods, works, or services as specified in the contract — on time, to the right quality, and within budget
• highlights early if there are any deviations, delays, or performance shortfalls
• keeps both parties accountable to the agreed Key Performance Indicators (KPIs) or Service Level Agreements (SLAs).
• without monitoring, you’re managing on assumptions — not evidence
• regular reports provide clear data on performance, costs, and outcomes
• enables managers to make informed decisions about renewals, extensions, variations, or corrective actions
• creates an auditable trail showing how performance was managed and value was achieved
• confirms that payments are linked to actual performance and outcomes
• encourages suppliers to focus on continuous improvement and efficiency
• regular reporting and performance reviews create open communication channels.
• encourages collaboration, transparency, and shared problem-solving
• builds trust and helps maintain a positive working relationship — even when issues arise
• demonstrates that the organisation is managing contracts responsibly, in line with policy and statutory requirements (e.g. procurement regulations, public spending controls)
• provides assurance to senior management  that contracts are being managed effectively
• enables tracking of trends over time — spotting patterns in performance data and identifying opportunities for improvement
• encourages innovation and better value through lessons learned and supplier feedback

 The following templates are available for you to use, these can be found at the bottom of this page:

• A Supplier Performance Review Template,  
• Meeting Agenda and Minutes Template
• CSM Balanced Scorecard

Please note that the proportionate level CSM required should have been agreed between the Procurement Team and the Supplier and should set out in the Contract Handover documentation.  If in doubt, please contact your Procurement Team for clarification.

Suggested Responsibilities/Considerations

• when permitted,
• process to follow - all changes must follow formal change control procedures
• procurement must be involved in significant amendments

A Contract Variation Request Form can be found at the bottom of this page

Why it is Important

• A variation, extension, or amendment changes the terms of a legally binding agreement
• proper management ensures changes are authorised, documented, and compliant with procurement and governance rules
• prevents disputes or claims later about what was or wasn’t agreed
• without a formal process, even small changes can invalidate parts of the contract or create ambiguity
• public sector organisations must show that all contract changes are fair, transparent, and traceable
• clear records of variations support audit, governance, and reporting requirements.
• demonstrates accountability for decision-making and use of public funds
• A structured variation process creates documented evidence of:
• what changed and why
• who approved it;
• when it was implemented
• the impact on cost, scope, and delivery.
• this is vital for governance, risk management, and lessons learned.

 A Contract Variation Request Form is available for you to use and can be found at the bottom of this page, if required. 

Suggested Responsibilities/Considerations

• escalate issues early to procurement or legal
• follow dispute resolution procedures set out in the contract

Why it is Important

• ensures staff know what to do when things go wrong
• avoids delay or avoidance of necessary action
• every contract sets out obligations, rights, and remedies for both parties
• having a clear dispute resolution and termination process ensures the organisation can enforce those rights lawfully if things go wrong
• prevents informal, inconsistent, or unlawful actions that could lead to legal claims, damages, or reputational harm
• proper procedures protect both the buyer and supplier — ensuring fairness and due process
• disputes or terminations are moments of high risk

An Exit Strategy Document is available for you to use, these can be found at the bottom of this page.

Suggested Responsibilities/Considerations

• conduct post-contract review
• capture lessons learned
• conduct lessons-learned workshops after contract closure, if applicable
• share good practice and case studies across teams
• the contract Exit Strategy should have been agreed during the Tender Stage by the Procurement Team

Why it is Important

• helps the organisation learn
• improves future contract management
• helps embed good practice
• ensures that both the supplier and the organisation have completed all deliverables, payments, and reporting

A conflict of interest arises when personal, financial, or other interests could compromise (or appear to compromise) the impartial performance of duties in managing or overseeing a contract.

In contract management, this can happen at any stage — from tendering and evaluation to awarding, monitoring, or renewing contracts. Listed below are some of the typed of conflict that can occur:

1. Actual Conflict

A real and existing conflict between personal interest and professional duty.
 Example: A contract manager awards a contract to a company owned by their spouse.

2. Perceived (or Apparent) Conflict

When it looks like someone’s personal interests could influence their decisions — even if they don’t.
 Example: A procurement officer socialises regularly with a bidder, creating suspicion of bias.

3. Potential Conflict

A situation where personal interests could conflict with official duties in the future.
 Example: An employee involved in a tender process later plans to seek employment with one of the bidding companies

 Examples of “Conflict of Interest” in Contract Management 

Consequences of Conflict of Interest

• unfair or biased contract awards

• legal or regulatory penalties

• damage to organisational reputation

• financial losses due to poor value for money

• internal disciplinary action or termination

Prevention and Management Strategies

Disclosure - Require all employees, evaluators, and consultants to declare any personal or financial interests.

Segregation of Duties - Ensure that no single person controls multiple stages of the contract process.

Conflict of Interest Policy - Implement clear rules and guidance on identifying, declaring, and managing conflicts.

Independent Oversight - Use committees or auditors to review high-value or high-risk contracts.

Training and Awareness - Regular training on ethics, procurement law, and conflict management.

Documentation - Keep detailed records of decisions, declarations, and mitigation measures.

• Scottish Public Procurement Policy Handbook — applies across wider Scottish public sector.
• Procurement Reform (Scotland) Act 2014 and associated Regulations.
• Scottish Government’s Procurement Strategy (2025-28) which emphasises supplier engagement, contract management, capability building.  

Contract and supplier management is the day-to-day management of a contract after it has been awarded. It focuses on:

• Making sure goods or services are delivered as agreed
• Managing the relationship with the supplier
• Monitoring performance, costs, and risks
• Ensuring public money is spent properly

Non-procurement staff are often:

• The main users of the service
• Closest to delivery and performance issues
• Best placed to spot risks or value-for-money concerns

Your role helps ensure contracts deliver what was paid for.

You are responsible for:

• Using the contract correctly
• Monitoring delivery and performance
• Raising and recording issues
• Managing routine supplier contact
• Ensure goods or services are delivered as agreed
• Check invoices before approval
• You are not expected to be a procurement expert

You are not responsible for:

• Running procurement exercises
• Negotiating new contract terms
• Agreeing price changes or extensions without approval

It helps ensure:

• Proper use of public funds
• High-quality services
• Legal and regulatory compliance
• Transparency and public trust

Non-procurement staff play a key role in achieving these outcomes.

You should have access to:

• The signed contract or call-off agreement
• Specification / statement of requirements
• Pricing and payment terms
• KPIs or service levels

These are usually stored in a contract register, contract handover document, shared drive or contract management system.

You should:

• Communicate professionally and fairly
• Keep discussions focused on contract delivery
• Keep a written record of key conversations and decisions

Avoid informal agreements or commitments outside the contract.

You should:

1. Check what the contract says
2. Raise the issue with the supplier
3. Agree corrective actions and timescales
4. Record the issue and actions taken
5. Escalate if performance does not improve

Do not ignore issues or accept reduced service without approval from your Procurement Team

You should:

1. Raise the issue with the supplier
2. Agree a simple fix or correction
3. Keep a brief record (e.g. email)

If issues repeat or escalate, involve your manager or Procurement.

No — not informally.
Any change to scope, cost, duration, or deliverables must:

• Follow a formal variation process
• Be assessed for value for money and compliance
• Be approved by the appropriate authority

Always involve Procurement if a change is proposed.

You should contact Procurement if:

• A supplier requests changes
• Performance issues persist
• You are unsure what the contract allows
• A contract is nearing expiry
• There are compliance or value-for-money concerns

A contract variation is a formal, approved change to the contract.
It ensures:

• Changes are lawful and transparent
• Risks are assessed
• Audit requirements are met

Verbal or informal changes are not permitted.

Yes, if you are authorised and:

• The invoice matches the contract
• The service or goods have been delivered
• Any variations have been formally approved

If something looks incorrect, you should query it before payment.

You should keep records of:

• Key supplier communications
• Performance reports or reviews
• Issues, risks, and actions
• Variations, extensions, or approvals

Good records support audit, transparency, and accountability.

A conflict of interest arises when personal interests could influence (or appear to influence) decisions.

Examples include:

• Personal relationships with supplier staff
• Gifts or hospitality
• Financial interests

All conflicts must be declared in line with your organisation’s policy.

No.

Contracts can only be extended if:

• An extension option exists in the contract
• The extension is compliant with procurement regulations
• The correct approvals are obtained

Always plan ahead and involve Procurement early.

Yes.

While monitoring may be lighter, you must still:

• Check delivery
• Confirm invoices are correct
• Record issues

Public sector accountability applies to all contracts.

A low-value / low-risk contract is one where:

• The financial value is relatively small
• The service or goods are routine or standard
• There is limited impact if something goes wrong

Even so, public money and public sector rules still apply.

The BSC typically uses four quadrants. For contract management, these can be adapted to suit the commodity/service as required.  The BSC in the Procurement Journey provides some standard (and recommended) standard metrics, which can be supplemented as required:

Guidance Notes

Monitor cost-effectiveness while ensuring quality standards are met. Use reporting to track financial performance.

Ensure that the contract delivers intended public service outcomes. Stakeholder engagement and feedback should be documented.

Track compliance with contractual terms, Scottish public sector policies, and risk management plans.

Encourage proactive improvement from suppliers and internal teams. Document lessons learned and share across departments.

Below are some suggestions of the steps you can take to implement your BSC:

1. Define Objectives and Outcomes
   • Identify the strategic goals of the contract (e.g., service quality, cost savings, compliance).
   • Align these goals with the organisation’s priorities and Scottish public sector standards.
2. Select Metrics and KPIs
   • Use a mix of quantitative and qualitative indicators.
   • Ensure metrics are measurable, relevant, and achievable.
3. Set Targets and Thresholds
   • Define what constitutes acceptable, satisfactory, and unsatisfactory performance.
   • Include thresholds for medium and high-risk contracts that trigger escalation.
4. Data Collection and Monitoring
   • Determine how data will be collected (e.g. supplier reports, management, information, surveys).
   • Schedule regular performance reviews, at least quarterly for medium-risk, monthly or bi-monthly for high-risk contracts.
5. Analysis and Reporting
   • Compare actual performance against targets.
   • Identify trends, risks, and areas for improvement.
   • Report findings to relevant governance boards or senior managers.
6. Action and Improvement
   • Implement corrective actions when targets are not met.
   • Encourage suppliers to adopt best practices and continuous improvement initiatives.
   • Document lessons learned for future contracts.

• Medium to High-Risk Contracts: Require closer monitoring with detailed KPIs and thresholds.
• Data Quality: Ensure that metrics are based on accurate, timely, and verifiable data.
• Escalation: Establish clear escalation routes for non-performance or critical risks.
• Governance: Ensure compliance with the Scottish Public Finance Manual (SPFM) and other relevant guidance.

Quality

Cost (Financial Performance & Value for Money)

Sustainability (Social, Environmental, Fair Work)

Service (Performance, Responsiveness, Delivery)

There is a Balanced Scorecard available for you to use at the bottom of this page. 

The scorecard can be issued to multiple users of the contract and responses compiled to use as discussion point during the supplier review meetings.

The Key Performance Indicators (KPIs) can be edited to suit the commodity/service area.  To support consistency and objectivity it’s important to define and communicate clearly what thresholds apply for Red, Amber or Green classification. e.g. Green is 97% of deliveries on time, Amber is 92% of deliveries on time and Red is <92% of deliveries on time.

• Value:Typically £500,000 – £5m (can vary by sector and thresholds).
• Risk: Contracts where failure could impact service delivery, finances, or stakeholder trust
• Often includes IT systems, social care provision or consultancy frameworks.
• Involves complex supply chains or innovative/IT-heavy solutions.
• Is strategically important or politically sensitive.
• Risk factors include supplier dependency, complex delivery requirements, or political/operational sensitivity.

Lack of CSM can result in issues including:

• Service disruption
• Cost creep
• Delays  
• Supplier insolvency
• Supplier under-performance
• Reputational or political damage
• Litigation and contractual disputes

Effective management ensures value for money, protects the public purse, and maintains service continuity.

Medium-high risk contracts often lack dedicated resources, so structured management is very important.

• Assign a Contract Owner / Manager with clear authority and other roles and responsibilities  
• Define escalation routes for issues, including risk or financial alerts.
• Maintain regular reporting and audit-ready documentation.

Typical requirements could include:

• Early risk identification and mitigation plan.
• Detailed mobilisation plans
• Early risk workshops and continuous risk management
• Performance monitoring (bi-weekly/monthly/quarterly depending on risk).
• Use KPIs or milestones appropriate to contract scale with clear corrective action routes
• Schedule regular review meetings and document decisions
• Detailed financial monitoring of the supplier, including supplier solvency checks
• Formal change control processes
• Continuous stakeholder communication

Using a structured approach, you may wish to:

• Maintain a contract-specific risk register
• Score likelihood and impact (financial, operational, reputational)
• Assign risk owners and track mitigation actions
• Review risk quarterly or more frequently for higher-risk areas

You may wish to:

• Ensure KPIs / milestones must be clearly defined in the contract
• Conduct quarterly progress reports and financial checks
• Conduct regular performance dashboards
• Hold formal review meetings with agendas and minutes
• Maintain communication logs for decisions and clarifications
• Ensure prompt action if KPIs are not met

Steps could include:

• Informally raise performance issues early
• Issue formal Improvement Notices or Rectification Plans
• Escalation to steering group for high-impact risks
• Consider contractual remedies or contingency plans
• Escalate to the contract board/other governance arrangement if no progress
• Prepare business continuity and exit strategies if risk escalates

• Review annual accounts and financial health checks
• Quarterly financial checks (or monthly for very high-risk contracts)
• Monitor for cash-flow problems, litigation, or management changes
• Monitor market news, mergers, legal disputes
• Consider parent company guarantees or insurance clauses
• Use contingency plans in case of supplier failure

• Strong change control to avoid scope creep
• Benchmarking and market comparison
• Auditing of supplier invoices and open-book accounts
• Performance-linked payments
• Ongoing contract review for efficiency opportunities

Organisations should have:

• Pre-established continuity plans
• Step-in provisions (where applicable)
• Access to source data, assets, or IP
• Backup suppliers / frameworks identified
• Communication plans for stakeholders and service users

Through a formal process that includes:

• Written request
• Impact analysis (cost, time, risk)
• Approval by the contract board/other agreed governance structure
• All changes should be documented and approved
• Assess impact on cost, timeline, and risk
• Update KPIs and reporting requirements if necessary
• Ensure formal record is maintained for audit purposes

No change should occur without formal approval.

• Medium-high risk contracts can fail due to weak governance or unclear requirements
• Supplier relationship management is critical; lack of oversight increases risk
• Financial and performance monitoring should match risk level, even for “medium” contracts.

Clear documentation and audit trails reduce dispute risk.

• Contract and all schedules
• Change register
• Risk register
• Meeting minutes
• Performance logs
• Communication logs
• Payment records
• Supplier financial assessments
• Decision audit trail

This protects auditability and supports dispute resolution.

Contract management arrangements should identify what happens when the contract is not being delivered as agreed or, the agreed quality standards are not being met.

Performance issues should be addressed immediately, and escalated within the supplier's organisation if not resolved promptly;

If you find that the supplier is not delivering the agreed level of service, you should raise this with them immediately. For quickness, this can be done by telephone but should be followed up in writing. The supplier should be asked for an action plan to ensure that the required levels of service re-commence in a short time frame. Depending on the severity of the issue, it may also be necessary to hold a face-to-face meeting with the supplier. All discussions/meetings, etc. should be minuted to ensure an audit trail exists. If resolution of the issue is not completed within the timescales agreed then the issue should be escalated (see below) and your Organisation’s procurement contact notified of the problem;

• If the issue(s) raised are not resolved to your satisfaction, they should be escalated within the supplier's organisation. An early face-to-face meeting should be arranged where actions and timescales to remedy the situation should be agreed and implemented. The recovery actions should be monitored on a regular basis to ensure that the agreed recovery/ resolution dates do not slip. All discussions/ agreements should be noted in writing;
• Contract Managers/ Contract Management Officers should ensure the escalation process is clearly defined, understood and communicated to all stakeholders and end users.

A structured approach ensures disputes do not escalate unnecessarily and risks are managed systematically.

Below is a four-level escalation model for medium–high risk contracts.

Level 1 – Informal Resolution (Operational Level)

Purpose: Resolve issues quickly and locally.
Led by: Contract Manager

Typical Scenarios

• Late delivery
• Key Performance Indicators (KPIs) performance issues
• Poor-quality service
• Minor invoicing discrepancies

Expected Actions

• Contract Manager discusses issue with Supplier Contract Lead
• Agree corrective action plan with timescales
• Document the issue and resolutions in the issues log
• Monitor KPIs and improvement within a defined period (typically 30 days)

If issue persists - escalate to Level 2.

Level 2 – Formal Performance Escalation

Purpose: Address unresolved issues affecting service delivery or compliance.
Led by: Senior Contract Manager / Category Lead

Triggers

• Repeated KPI failures
• Breach of service levels
• Non-compliance with statutory or regulatory requirements
• Health & Safety concerns

Expected Actions

• Issue a formal escalation note or improvement notice
• Hold a structured meeting with supplier senior management
• Update the risk register to red/amber
• Increase monitoring intensity (e.g., weekly MI)
• Agree a revised CAP with milestones and reporting

If no improvement - move to Level 3.

Level 3 – Dispute Resolution (Formal Contractual Route)

Purpose: Follow the dispute mechanism defined in the contract.
Led by: Head of Procurement / Legal Services (joint)

Triggers

• Material breach of contract
• Significant financial loss
• Supplier refusal to comply with contractual obligations
• Reputational or statutory risk

Actions

• Activate the contract’s dispute resolution clause, usually including:
  • Senior executive engagement
  • Mediation
  • Expert determination
• All communications must be formally documented
• Suspend parts of the service if contract allows (rare and high risk)
• Consider partial remedy, deductions, or withholdings

If dispute remains unresolved - Level 4 (termination consideration).

Level 4 – Pre-Termination Process

Purpose: Assess whether termination is justifiable, safe, and compliant.
Led by: Legal Services + Chief Officer + Senior Procurement Lead

Required Actions

• Undertake a termination impact assessment, covering:
  • Service continuity
  • Replacement supplier options
  • Cost of termination vs continuation
  • Impact on citizens and service users
  • Labour, TUPE, and data protection implications
• Confirm the type of termination:
  • Termination for breach
  • Termination for convenience
  • Partial termination
  • Suspension

Decision-Making

• Escalate the recommendation to the appropriate governance board or accountable officer.
• Document all decisions, evidence, and legal advice.

Termination should be a last resort and must follow the exact contractual provisions.

Types of Termination

Termination for Material Breach

Used when the supplier has committed a significant breach and failed to rectify it.

Usually requires:

• Notice of breach
• Opportunity to remedy (e.g. 10–30 days)
• Evidence of failure to remedy

Partial Termination

Used for multi-lot or modular contracts where part of the service can be removed.

Suspension

Temporary cessation of services where safety or statutory concerns exist.

For further guidance in contract termination, please visit the Exit Strategy Station

Before issuing termination:

• Seek legal advice
• Conduct a risk and options assessment
• Prepare a contract exit plan (see section 5)
• Notify internal stakeholders (e.g., Finance, IT, HR, Data Protection)
• Ensure compliance with:
  • Procurement regulations
  • Audit requirements
  • Contractual notice periods

For further guidance in contract termination, please visit the Exit Strategy Station

A structured communication plan should identify:

• Who needs to be informed
• When notices will be issued
• Messaging for service users, staff, and suppliers
• Media and reputational risk management

Medium to high-risk contracts require a formal exit plan, which may be agreed at contract start and updated annually.

Objectives of Contract Exit

• Ensure smooth transition to new provider or in-house delivery
• Protect service users
• Avoid data loss, service interruption, or unmanaged risks
• Recover assets and outstanding materials
• Ensure compliance with FOI, GDPR, and records management requirements

Key Components of the Exit Plan

Governance Structure

• Exit Manager (public body)
• Supplier Exit Lead
• Weekly exit meetings
• Clear milestone plan

Exit Timeline

Typical phases:

1. Initiation – 0–2 weeks
2. Transition – 2–8 weeks
3. Handover – weeks 8–12
4. Closeout – after new contract goes live

Timeline depends on contract complexity and should be adjusted accordingly.

Exit Deliverables

The supplier must provide (as per contract and as required):

Asset and Inventory Lists

• Equipment
• Locations
• Serial numbers
• Outstanding repairs

Data & Records

• Service logs
• Asset histories
• Invoices and payments due
• Security access reviews
• GDPR-compliant data transfer

Knowledge Transfer

• Process maps
• Training for new supplier or internal staff
• Outstanding risks/issues and mitigation plans

Final Reporting

• Exit report summarising performance
• Lessons learned log
• Confirmation of warranty position

Managing Service Continuity During Exit

For medium/high-risk contracts, the following should be enforced:

• Dual running of supplier and successor (where possible)
• Increased monitoring during transition
• Contingency plan activation if risks escalate
• Clear approval processes for any service changes
• Validation of data handed over
• Independent verification of assets

For further guidance in contract termination, please visit the Exit Strategy Station

After contract closure:

• Review performance issues and dispute triggers
• Identify root causes of escalation
• Update organisational contract management frameworks and templates
• Capture learning for future procurement exercises (e.g., strengthen KPIs, risk clauses, mobilisation plans)

A lessons-learned report should be stored in the contract file and shared with procurement governance boards.

For further guidance in contract exit, please visit the Exit Strategy Station

Lawful and Transparent

All changes must comply with

• Procurement (Scotland) Act 2014,
• Public Contracts (Scotland) Regulations 2015, and
• Organisation-specific standing orders/financial regulations.

If a change risks being considered a new contract or a substantial modification, the contract must be re-tendered.

Control and Governance

Medium-to-high risk contracts require:

• Robust oversight,
• Senior management approval, and
• Formal documentation of decisions and rationale.

Proportionality & Risk Assessment

The complexity and level of scrutiny should match the risk level, value, and potential impact of the change.

Value for Money

Changes must be commercially justified and deliver:

• Outcomes aligned with the original contract,
• Cost efficiency,
• Continued service performance.

Variation

A change to the contract’s scope, requirements, deliverables, service levels, or working methods.

Examples:

• Adding new reporting requirements
• Changing a service delivery location
• Increasing or reducing volumes
• Adjusting Key Performance Indicators (KPIs) or service levels

Contract Extension

Extending the contract term where:

• The original contract includes an option to extend, and
• The value including extensions was accounted for in the procurement.

Amendment

Any change to contractual terms and conditions such as:

• Pricing mechanisms
• Governance arrangements
• Liability clauses
• Payment terms

Changes must meet one of these conditions:

1. Clearly provided for in the original contract (e.g., indexation, agreed change control mechanism).
2. Not substantial (i.e., do not materially alter the nature of the contract).
3. Below legal thresholds and within permitted percentage increases (as per regulations).
4. Unforeseen circumstances make the change essential and compliant with regulation allowances.

There are a variety of issues that should be considered in any change management process to ensure that it is effective. Three key areas for consideration are:

• the need for change impact reports;
• any pricing principles that will apply to the change; and
• the supplier's obligation to undertake the change.

Where the consequences of getting things wrong are significant and it is recognised that a change is required, it makes sense to run a formal pilot. If the pilot fails to meet expectations, you can revisit and retest until you achieve the required results. This can be done before committing your resources to, and reputation on a wider scale contractual change.

For example, "Plan, Do, Check, Act" (PDCA) is a recognised continuous improvement plan (CIP) model. It can be utilised to ensure your change will deliver the desired results. As its name indicates, there are 4 steps to the model of which steps 2 and 3 can be repeated until the desired result is achieved. The 4 steps can be summarised as:

Variations (changes to requirements) to the contract should be exceptional, not routine.

Contract variations should only be permissible where changes do not significantly alter the original contract’s scope, value or duration.

A significant change could be to the:

• contract scope
• contract value
• contract duration

If a proposed change is significant (change in scope, large value increase, much longer duration) then you may need to conduct a new procurement exercise.

If you are unable to estimate the value of a contract that contract will be explicitly made subject to the procurement rules.

If a significant change to the contract is proposed, you must contact your local Procurement Function or Centre of Expertise for advice on how to proceed before making changes.

Suggested Responsibilities/Considerations

• when permitted.
• process to follow - all changes must follow formal change control procedures.
• procurement must be involved in significant amendments.
• escalation should be earlier for high-risk/strategic suppliers, and proportionate.

Why it is Important

• variations or amendments changes the terms of a legally binding agreement
• proper management ensures changes are authorised, documented, and compliant with procurement and governance rules
• prevents disputes or claims later about what was or wasn’t agreed
• without a formal process, even small changes can invalidate parts of the contract or create ambiguity
• public sector organisations must show that all contract changes are fair, transparent, and traceable
• clear records of variations support audit, governance, and reporting requirements
• demonstrates accountability for decision-making and use of public funds
• a structured variation process creates documented evidence of:
  • what changed and why
  • who approved it
  • when it was implemented
  • the impact on cost, scope, and delivery

A Contract Variation Request Form is available for you to use and can be found at the bottom of this page.

Step 1 — Identify the Need for Change

Triggers include:

• Legislative or regulatory changes
• Business needs shifts
• Performance issues requiring remedy
• Budget changes
• Operational needs discovered during delivery

All changes must be justified in writing.

Step 2 — Assess the Impact

Assessment should consider:

Contractual Impact

• Does the scope change?
• Is the change substantial?
• Does it alter competition?

Commercial Impact

• Price changes
• Market benchmarking
• Supplier cost justification

Risk Impact

• Service continuity
• Reputational or legal risks
• Risk of challenge by non-winning suppliers

Operational Impact

• Implementation timelines
• Resources required

Financial Impact

• Budget availability
• Whole-life cost implications

Complete a Change Impact Assessment Form. There is  a template available for use to use at the bottom of this page.

Step 3 — Legal and Procurement Review

• Procurement colleagues must review the change.
• Legal services should confirm compliance.
• If necessary, conduct a procurement law risk analysis.

Failure to do this may invalidate the contract.

Step 4 — Governance Approval

Approvals depend on organisational rules, but common requirements include:

• Contract Manager recommendation
• Senior Responsible Officer (SRO) sign-off
• Finance approval (for cost increases)
• Procurement approval
• Legal approval

High-risk changes may require:

• Governance board approval
• Audit committee notification
• Change control board sign-off

Step 5 — Supplier Engagement

Do not start discussions or negotiate with the supplier(s) until internal approval is secured.

Supplier engagement should cover:

• Necessity of the change
• Commercial impacts
• Implementation timelines
• Risks and mitigations
• Alternative options

Document all discussions.

Step 6 — Formal Change Control Documentation

Use a Change Control Notice (CCN) or Contract Modification Form including:

• Description of change
• Justification
• Revised pricing or contractual terms
• Implementation timeline
• Signatures from both parties
• Updated schedules / KPIs / pricing tables

All signed documents must be retained in a contract file.

Step 7 — Update Documentation & Systems

Update:

• Contract registers
• Risk logs
• Balanced scorecard/KPIs
• Contract management plan
• Procurement documentation
• Financial forecasting and budgets

If the change results in a modified value above thresholds, publish a Contract Modification Notice on Public Contracts Scotland (PCS).

Before any change request can be properly considered, the customer and the supplier must understand the implications of the proposed change. To support this you may require the service provider to prepare an impact report. (The service provider will normally be in the best position to assess the impact of a change). Ideally, the impact report will present a full description of the change, including how the change is to be implemented and, where relevant, detail:

• the feasibility of the change;
• the effect of the change on the ability of the supplier to meet its obligations under the contract;
• any cost implications of the change;
• any consequential impact of the change;
• where appropriate, acceptance testing procedures and acceptance criteria for the proposed change; and
• any other information likely to be of relevance.

A detailed Change Management Process is of little value if the change required has been determined, and the supplier refuses to implement. Accordingly, the Change Management Process may mean the supplier cannot unreasonably refuse (either directly or indirectly) a change requested by the Organisation.

Unreasonable grounds for refusing a change might include:

• demanding unreasonable charges for the change;
• imposing unreasonable conditions for undertaking the change; or
• refusing to include the change under the agreement.  This could be despite the subject matter being reasonably related to, or connected with, the services.

A carefully drafted Change Management Process can mean the difference between what the customer requested in terms of systems/services, and what they discover is actually needed during the term of the contract.

You should specify how costs associated with any change will be allocated between your Organisation and the supplier(s).  This should be done as part of the Change Management Process.

Ordinarily, the Organisation should be required to pay for a change when the change is not considered to be within scope of the existing contract.

Where a change falls outside the scope of the existing contract, the Change Management Process may detail the principles that will determine the price to be paid by the Organisation. For example, the Change Management Process may stipulate that the price for any change should be:

• reasonable;
• competitive; and
• not higher than the price a customer would pay for similar products or services from another supplier.

The Change Management Process may enable the Organisation to request the supplier to provide an auditor's certificate.  This could confirm that the pricing of any change complies with the pricing principles.

Principles

To extend legally:

1. Extension option must be included in the original contract.
2. Original estimated value must include all extension periods.
3. Extension must not alter the original scope.
4. Approvals and governance must be followed.

Extension Due Diligence Checklist 

• Review contract performance
• Assess supplier capability
• Consider market testing (if appropriate)
• Review value for money
• Update risk assessment
• Confirm budget availability
• Prepare a contract extension report/approval paper
• Obtain approval from senior management or governance board

Document the Extension

Use a Formal Extension Agreement signed by both parties.

When a variation becomes a new procurement

A change may be deemed substantial if it:

• Introduces material new services
• Changes the overall nature of the contract
• Alters the economic balance in favour of the supplier
• Increases value beyond permitted thresholds

If substantial → a new procurement is required.

Avoiding Scope Creep

Actions:

• Enforce a strong change control process
• Challenge unnecessary changes
• Document and monitor all variations
• Use a central register of changes
• Ensure value for money remains demonstrable

Audit and Accountability

Medium-to-high risk contracts must maintain a clear audit trail, including:

• Justification documents
• Approval evidence
• Change logs
• Negotiation notes
• Updated KPIs and performance reports

It is possible for an Organisation to terminate a contract during its term.  These circumstances are covered in the Dispute Resolution, Termination & Contract Exit 

Please note: you cannot terminate a contract with the aim of avoiding procurement rule obligations.

The fundamental purpose of Contract and Supplier Management is to ensure that:

• Suppliers meet their contractual obligations for the duration of the contract
• The contract's requirements are successfully delivered. This includes any special contract performance conditions included in the competition documentation and related to the contract subject-matter.  This may cover economic, innovation-related, environmental, social or employment-related conditions.
• Anyone engaged in managing suppliers must read and fully understand the contract terms and conditions. This will ensure they are not at a disadvantage should any issues arise.

It is essential that your Organisation’s Contract Manager/ Contract Management Officer is engaged from the Develop Strategy stage early in the process and participates in the development of the terms & conditions.

The Balanced Scorecard can be used for managing and monitoring contract and supplier performance. A template for you to use can be found in the Balanced Scorecard station

The scorecard can be issued to multiple users of the contract and responses compiled to use as discussion point during the supplier review meetings.

The Key Performance Indicators (KPIs) can be edited to suit the commodity/service area.

Performance Monitoring

• KPIs & SLAs – Define measurable Key Performance Indicators (KPIs) and Service Level Agreements (SLAs) in the contract.
• Regular Reviews – Monthly or quarterly reviews depending on risk level.
• Benchmarking – Compare supplier performance against industry or previous contract benchmarks.

KPIs provide a mechanism to measure the four quadrants of the balanced scorecard (Quality, Cost, Sustainability, and Service). KPIs help organisations understand how well they and/or their suppliers are performing against their strategic goals and objectives.

This ensures suppliers meet agreed KPI’s and service levels. Early detection of under-performance allows corrective actions, reducing the chance of contract failure.

Financial Monitoring

• Budget Compliance – Track spend against budget and forecast future costs. Compare budget vs actual spend; flag deviations early.
• Cost Variance Analysis – Investigate deviations or unexpected cost increases.
• Value for Money Assessment – Assess whether the contract continues to deliver expected outcomes.
• Financial Monitoring: Compare budget vs actual spend; flag deviations early.

Risk Monitoring

There are several types of risk to take into consideration:

• Financial risk: Medium/high-risk contracts often involve larger sums of public money. Monitoring ensures funds are spent appropriately and cost overruns are identified early.
• Operational risk: These contracts might support critical public services. Monitoring ensures service delivery remains uninterrupted and meets agreed standards.
• Reputational risk: Failure in these contracts can damage public trust in government bodies. Regular reporting helps detect issues before they escalate.

The following activities can help you manage risk in CSM:

Reporting 

Frequency: Monthly or quarterly, depending on contract risk level.

Content:

• Performance against KPIs
• Financial status (budget vs actual)
• Risk updates and mitigation actions
• Issues or disputes and resolutions
• Forecasts and recommendations for corrective action

Audience: Contract owner, senior management, procurement team, and auditors as appropriate.

Reporting Channels

• Internal: Contract Owner → Contract Manager → Senior Management/Board
• External (if applicable):Scottish Government, stakeholders

Escalation & Issue Management 

• Define clear thresholds for escalation (e.g., KPI < 80%, spend > budget by 10%).
• Maintain issues log with actions, owners, and resolution deadlines.
• Issue & Escalation Tracking: Identify and record non-compliance, delays, or risks; escalate promptly.
• Use formal escalation procedures for unresolved critical issues to senior management or procurement governance boards.

Managing Continuous Improvement 

• Conduct post-contract evaluations to identify lessons learned.
• Integrate monitoring insights into future procurement strategies.
• Encourage supplier development plans for performance improvement.
• Monitoring generates insights into supplier performance and procurement practices.
• Lessons learned can improve future tendering, risk assessment, and contract management practices.

Financial Control and Value for Money

• Helps ensure efficient use of public funds.
• Regular monitoring highlights overspending, cost inefficiencies, or opportunities for renegotiation to achieve better outcomes.

Managing Transparency and Accountability

• Organisations are accountable to stakeholders, including the Scottish Government and the public.
• Reporting provides a clear audit trail of contract performance, decisions made, and remedial actions taken.

Documenting Decisions

• Maintain clear records of actions, approvals, and communications.

Early Issue Detection

Route 2/Route 3 contracts can involve complex deliverables. Monitoring allows early identification of risks such as:

• Supplier financial instability
• Delivery delays
• Non-compliance with contractual obligations

Further guidance on Risk Management can be found in Additional Resources

Frequency

• Monthly: Operational performance and financial tracking
• Quarterly: Comprehensive performance, risk, and compliance reporting
• Annually: Strategic review of supplier performance, contract outcomes, and lessons learned

Content

Reports should include:

1. Executive Summary – High-level overview of performance and key issues.
2. Performance Metrics – KPI/SLA achievement/Balanced Scorecard feedback, delivery milestones, quality indicators.
3. Financial Summary – Spend to date, forecast, and variances.
4. Risk Update – Key risks, mitigations, new issues, escalations.
5. Compliance Status – Regulatory, legal, and contractual compliance.
6. Action Plan – Corrective measures, responsible parties, deadlines.

MI is used to monitor the supplier's or contract's performance. It ensures management have the information necessary to make effective strategic and operational decisions.

It is important that your MI requirements are clearly defined and communicated to the supplier. The reporting arrangements can be included in your specification and/ or in the terms and conditions of the contract. Reporting arrangements must be fair and proportionate and not duplicate information already provided.

Your MI approach should minimise demands on suppliers for information about goods/ service delivery. The frequency and level of reporting should be informed by a risk assessment. Reporting may increase in certain circumstances, for example, if a complaint is made about service/ delivery.

For some specific services you should avoid duplicating information which is collected by and is available from regulatory bodies. This can be achieved through the development of Memorandum of Understanding and regular discussions between the Organisation and the regulatory bodies.

Contract Managers/ Contract Management Officers should present information gained through contract management in regular reports to senior managers. In order to fulfil their role, they should:

• prepare and issue reports summarising their actions, identifying any significant issues and detailing the conclusions that they have reached;
• consider the consistency of their conclusions with those arising from the work of the regulatory bodies;
• clearly identify the nature and grounds for any concerns and the action that is required to secure improvement;
• consult suppliers on the factual accuracy of all reports;
• communicate regularly with suppliers and ensure that emerging findings are discussed at an appropriate level within their organisations.

The Management Information Example document which can be found at the bottom of the page, provides examples of what could be included in MI reports as well as some examples of KPIs that could be included in an Invitation to Tender (ITT).

Performance Review Meetings provide your Organisation and the supplier with an opportunity to:

• Focus on end to end performance;
• Identify issues and opportunities; and
• Put appropriate action plans in place.

The Performance Review Meeting standard agenda template can be completed by your Organisation and the supplier before the meeting.  This will provide a structure to the meeting..

It is best practice to hold at least an annual review for suppliers identified (under the segmentation process) as requiring ‘medium level’ supplier management.  At least two review meeting per year should be held for ‘high level’ suppliers.

The Review Meeting Template and a Performance Review Agenda Example are available at the bottom of this page to download an to assist you in doing this (and can be amended to suit your commodity/service contract).

Contracts are awarded following a thorough evaluation process which addresses some standard elements.

Throughout the life of the contract, your Organisation’s Contract Managers/Contract Management Officers should perform periodic supplier ‘health checks’. This ensures the standards demonstrated during the initial evaluation are being maintained. Health checks could include:

• Financial Status;
• Business Probity;
• Conviction of Criminal Offences;
• Compliance with Legislation and Regulatory Provisions (including Equality);
• Corporate Social Responsibility;
• Sustainable Procurement and Environmental practices;
• Health & Safety; and
• Insurances.

The frequency of the checks should be in line with the type of contract. For example, Strategic and Bottleneck contracts should be checked more frequently than Leverage and Routine contracts.

For guidance on how to segment your contracts, please visit the Segmentation Station.

Improvement opportunities can be identified by anyone engaged with you Organisation, both internally and externally.

Many improvement ideas can come from management, employees and supplier(s) operationally involved in the delivery of the service/ goods contract. Supplier(s) and employees can be particularly insightful as they are regularly exposed to operational inefficiencies which may not be visible higher up in the Organisation.

Your Organisation should seek feedback and should work to develop a culture where everyone in the Organisation is encouraged to look for, and suggest, operational improvements. All suggestions should be considered.

Incentives and sanctions should be used appropriately to maintain/improve the contract/supplier performance.

There are specific contract terms and conditions (T&Cs) that can be used to help drive contract compliance/performance. These should be incorporated into the contract T&Cs.

You should ensure that you understand the contract's specific T&Cs. Any incentives and sanctions must be appropriate and legally enforceable. You must seek legal advice if you are in doubt as to the wording, appropriateness or legality of a proposed condition.

Examples of incentives and sanctions which could be considered are listed below. These must not be applied autonomously. Appropriate internal approval must be sought and received prior to implementation.

Incentives could (subject to avoiding substantial modification) include:

• contract extension options as;
  • a longer contract opportunity could provide performance motivation;
  • payment by result, e.g. milestone payments (linked to defined deliverables).

Conditions of Contract could include:

• retention e.g. legitimately withholding payment if deliverables are not completed with genuine and notified reason, but compliant with previously agreed contract terms and conditions;
• legal action;
• termination of the contract. (Please note: you cannot terminate a contract with the aim of avoiding procurement rule obligations);
• collecting liquidated damages. Please note that Liquidated Damages is the amount which the parties designate during the formation of the contract for the injured party to collect as compensation should a specific breach occur.

For a sanction to be effectively enforced, sufficient evidence is required to justify the claim or action. It is therefore important to have clear records which could include records of; agreed service levels; notice periods; reminders; communications; agreements etc.

Any enforced incentive or sanction must comply with the agreed terms and conditions for the contract or agreement.

Sustainable Procurement outcomes, for example Fair Work Practices, must be an integral element of the contract and supplier management process. They should be included as a standard agenda item at supplier review meetings and considered alongside all other contract management matters.

It is important to ensure monitoring includes the use of any agency or sub-contractor workers throughout the duration of the contract. This will include any new members joining the workforce engaged on the contract's delivery.

Evidence should be sought from suppliers to demonstrate compliance with agreed contract conditions. This includes what the main contractor is doing to ensure Sustainable Procurement outcomes, such as Fair Work First commitments, down the supply chain to subcontractors and to agency workers. Evidence which should be sough can include, reviewing recruitment information which could include pay policy and the terms and conditions for workers  involved in the delivery of the contract. 

Where there are material concerns regarding a supplier’s compliance with any sustainable procurement commitments or the contractual obligations it has made, an Organisation could consider whether to undertake general sustainability audit of the contract.

For Care & Support Services please also read the Additional Guidance when Reviewing a Care and Support Service and Additional KPI Guidance documents, which can be found at the bottom of this page.

In some areas Contract Management Officers routinely attend the Care Inspectorate’s post- inspection feedback sessions with service providers.

Contract management arrangements should identify what happens when the contract is not being delivered as agreed or, the agreed quality standards are not being met.

As an example, for Care and Support Services, the content management arrangements should describe the process for agreeing necessary improvements (where appropriate, in discussion with the Care Inspectorate) to the service and the timescales that will apply. The contract itself should specify the circumstances in which the public body has a right to terminate the contract (for example, insolvency, service failure, loss of  registration).

Award notification: Send formal letters via Public Contracts Scotland (PCS) or direct communication, including standstill periods if applicable.

Record decision: Document the award decision, including rationale, evaluation scores, and approvals.

Contract signing: Ensure both parties sign all contract documents.

Communicate obligations: Share the contract’s reporting, performance, and governance requirements with the supplier.

Transition plan: Develop a detailed plan covering:

• Responsibilities of the Contract Manager(s)
• Supplier on-boarding timeline
• Systems access, document handover, and key contacts
• Initial performance reporting schedule
• Communication and escalation procedures

Resource allocation: Ensure staff are assigned for monitoring, reporting, and day-to-day liaison.

Risk transfer confirmation: Confirm the supplier has accepted and understands risk responsibilities.

Technical readiness: Confirm any relevant technical systems, premises, or equipment are prepared for delivery.

Kick-off meeting: Hold a formal meeting with all relevant stakeholders and the supplier to review:

• Contract objectives, deliverables, Key Performance Indicators (KPIs), and timelines
• Governance and reporting requirements
• Risk register and mitigation measures
• Communication and escalation processes
• Initial invoicing, payment schedules, and milestones

Action log: Maintain a live log of actions and responsibilities arising from the meeting.

Supplier induction: Ensure supplier staff are familiar with reporting templates, IT systems, and relevant Scottish public sector policies.

Initial reporting period: Typically the first 1–3 months, focusing on compliance, milestone delivery, and financial tracking.

Check risk response: Review supplier’s approach to initial risks and ensure mitigation measures are in place.

Early corrective action: Address any deviations immediately to prevent escalation.

Document lessons: Capture handover lessons for future contracts.

Steering group oversight: Ensure a formal governance forum is in place for medium-to-high risk contracts.

Regular reporting: Agree the frequency (monthly or quarterly) for performance, risk, and financial reporting.

Escalation routes: Clarify which issues escalate and to whom – e.g. Contract Owner, Senior Reporting Officer (SRO), or senior management.

Audit and assurance: Ensure internal audit or independent assurance is scheduled for the first 6–12 months.