6.3.1 What is Contract Management? Why is it important?

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The term Contract Management refers to the procedures that allow a Contracting Authority to verify that the Contractor is executing the Project in accordance with the terms of the Contract, providing the services/ supplying the products or constructing the public works that have been set forth by the Tender documents, at the time and in the quantity defined in the Contract but also with the quality and the cost that have also been defined in it. Contract Management, apart from the acceptance management includes administrative tasks and most important, the building and keeping of a good working relationship with the Contractor.

Ineffective contract management has been proven that it may bring about the following:

Decisions are not taken at the proper time thus allowing potential risks to appear
The Contractor executes the Project based on the understanding that he has formulated himself regarding the contract requirements, without realising the actual goals and results expected from the execution of the Project
The Project implementation described in the contract is underestimated by the Contractor both in terms of time and human resources required, leading eventually to deviations from the initial planning and possibly to exceeding the initially estimated budget
The Project is implemented at a slow rate
The opportunities to improve value for money are lost
The variations in the contract are not realised in accordance with a specific and agreed fashion thus increasing the possibility for new risks to appear in the implementation of the Project
The products, services and public works are delivered/ accepted without meeting the acceptance criteria that had been set for them
The payments that are made and the amounts paid do not correspond to the works that have been fully or adequately implemented
The handling of problems that arise during the execution of the Contract is not conducted timely and effectively, which usually leads to tension between the Contracting Authority and the Contractor
Communication between the Contracting Authority and Contractor is limited, increasing the possibility for misunderstandings, misinterpretations and the drawing of incorrect conclusions
The Contractor's performance is not evaluated throughout the execution of the contract thus not allowing for actions to be taken to increase the performance and effectiveness of the contract.

The Republic of Cyprus, in recognising the importance of the procedures in contract management, has issued and put into effect the Regulation 115/2004, which applies to the Ministries, Services, Departments of Ministries, Independent Offices and Independent Services of the Republic and which sets forth - irrespective of whether the contract involves supply of products, provision of services or execution of public works - the following:

The obligations of the parties
The establishment and operation of the competent bodies for the management of variations and claims
The procedure for the acceptance of supplies (products/ goods)
The procedure for the evaluation of the Contractor and the sanctions in case of his inability to execute the contract.

© 2007 Republic of Cyprus, Treasury of the Republic, Public Procurement Directorate
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