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.
| In the short term | changing expectations |
| in the medium term | changing participation |
| in the long term | in the long term |
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.
| Eliminate | Is the requirement really needed? Can the consumption be stopped? e.g. cancel non-essential meetings, or stop the use of mobile phones for non-business calls. |
| Replace | Can we use lower cost or more effective alternatives? e.g. use video-conferencing for meetings or ensure non-confidential papers are not treated as confidential waste |
| Reduce | Can we use less of a product / service? e.g. don’t order a monitor with every PC purchase or, schedule meetings for the same day |
With Demand Management you should consider:
There are a number of benefits to an effective Demand Management strategy. Many benefits are driven by:
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.
This should be monitored and managed throughout the lifetime of the contract. Failure to do so could result in:
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:
Where practical, you should look to reduce future demand and costs by using strategies such as:
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:
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.
Good Contract and Supplier Management processes should encourage both supplier and organisational innovation. It should be recognised that suppliers often have innovative ideas to improve their own and their customer’s service. However suppliers can be blocked in their attempts to put these ideas forward.
You should want to be a customer of choice i.e. suppliers will invest and bring innovation to the contract. You should adopt these behaviours and allow supplier innovation and added value activity to flourish:
Quickfire Guide
Innovation is a two way process. Your organisation should be equally active in exploring innovative ideas which will help your suppliers improve their performance and service delivery.
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:
This guidance sets out the responsibilities and best practice for staff who are involved in managing contracts and/or engaging with suppliers as part of their role and responsibilities but are not part of the procurement/commercial team.
It applies to all contracts and framework call-offs for goods and services.
It should be used alongside your organisational procurement procedures and relevant Scottish Government policies.
The contract management approach should have been set by the Procurement Team, based on the contract’s value and risk.
Your role is to apply that approach proportionately in day-to-day delivery — e.g. the frequency of check-ins, recording issues early, and escalating sooner for critical services
For more comprehensive CSM guidance, please refer to:
The level of contract and supplier management required for each contract is set during the Tender Stage by the procurement team, based on risk and value
As the person responsible for managing or are using the contract, your role is to apply that agreed approach in practice and flag any changes in risk or service delivery as early as possible.
This means:
Non-procurement staff often have key roles in:
If there is a lack of clarity or training provided for those staff, risks include non-compliance (legal / regulatory), cost overruns, poor quality, and reputational damage
This guidance is here to help anyone involved in managing or using a contract understand what good practice looks like and how to apply it in a simple, proportionate way.
Good contract management protects services, supports effective supplier relationships, and ensures public funds deliver maximum value.
More in depth guidance on Roles and Responsibilities can be found in Route 3
| Role | Responsibility | Examples[L |
| Contract Owner | Accountable for overall contract delivery |
|
| Contract Manager | Day-to-day management of supplier relationship |
|
| Contract User | Orders and/or receives goods or services |
|
| Non-procurement Staff Role | May also have the role of Contract Owner and/or Contract Manager |
|
| Procurement / Commercial Team | Provides professional procurement advice |
|
| Finance | Payment controls and budget monitoring |
|
| Supplier | Deliver goods/services in line with contract |
|
Quickfire Guide
- Value for money / Best Value
- Legal compliance – public procurement law, Scottish policy etc.
- Transparency and fairness
- Ethical standards, conflict of interest
- Risk management
- Sustainability (where relevant and proportionate)
These principles underpin decisions and ensure staff act in line with policy. Helps in making judgement calls.
A Contract Compliance Checklist document is available for you to use, these can be found at the bottom of this page.
Before you begin contract management, take a moment to get familiar with the basics:
This quick check helps you understand the status of the contract before you start managing performance or escalating issues.
If you cannot easily find the contract, the owner, or evidence of monitoring, that is itself a risk and should be raised early.
The following steps should guide staff through what to expect and what their responsibilities are at each stage. This should help staff avoid missteps such as unapproved extensions or inadequate monitoring:
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.
The following templates are available for you to use, these can be found at the bottom of this page:
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.
A Contract Variation Request Form can be found at the bottom of this page
A Contract Variation Request Form is available for you to use and can be found at the bottom of this page, if required.
An Exit Strategy Document is available for you to use, these can be found at the bottom of this page.
Quickfire Guide
Good relationships with suppliers can help avoid conflicts and improve delivery; clear communication ensures expectations are aligned.
Video Guide
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:
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.
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.
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
Stage | Example of Conflict |
Contract execution | Overlooking supplier non-performance because of personal relationships.
|
Renewal/extension | Extending a contract without competition due to personal benefit or pressure. |
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
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.
Case study
Organisation: A Scottish public sector body
Department: Community Wellbeing Team (non-procurement staff)
Contract Type: Low-value, low-to-medium risk
Contract Title: Community Support Helpline – Call Handling Service
Supplier: XXX
Contract Value: £42,000 per year
Contract Duration: 2 years + optional 1-year extension
Route to Market: Quick Quote on Public Contracts Scotland (PCS)
Contract Owner: Service Manager (non-procurement professional)
Procurement Support: Corporate Procurement Unit (CPU) at award stage only
The organisation operates a community support helpline offering advice, information, and onward referral. Due to changes in service demand, the organisation outsourced call-handling for out-of-hours operations.
The CPU supported the tender and award, but ongoing contract and supplier management responsibilities sit with operational staff, mostly with no formal procurement training.
This case study demonstrates how non-procurement staff can manage a contract effectively and proportionately.
Service Manager - Contract Owner & Day-to-Day Manager
Helpline Team Lead - Monitors performance data & logs issues
CPU (Procurement Team) - Provides advice on changes, disputes, extensions
Finance Team - Manages invoices and budget
Supplier Account Manager -Single point of contact for service queries
Information Governance Officer -Advises on data/Breach management
Performance Standards
Quality Requirements
Commercial Terms
Risk Level
Because this is a low-value/low-to-medium risk contract, the management approach is proportionate, but still structured.
Service Monitoring
Relationship Management
Financial Management
Risk & Compliance Oversight
In months 4–5, call-answering performance dropped to 82% due to supplier staff shortages.
Actions Taken:
Learning Point for Non-Procurement Staff:
Performance issues should be recorded, discussed, and monitored, not ignored.
A vulnerable caller was misinformed about emergency support availability.
Actions Taken:
Learning Point:
Non-procurement managers should feel confident to raise quality concerns—they are central to protecting service users.
Supplier invoiced £4,000 instead of the contractually agreed £3,500 for one month.
Actions Taken:
Learning Point:
Basic commercial checks prevent over-payments and maintain contract integrity.
A formal annual review was held between the non-procurement contract manager, CPU, and the supplier.
Outcomes
Decision:
The organisation agreed (subject to CPU review) that extending the contract was appropriate because:
Market testing not required for low-risk continuation
You do not need to be a procurement expert to manage a contract well.
Following structured processes and using CPU support is enough for most low-to-medium risk contracts.
Document everything.
Issue logs, meeting notes, and performance records provide important information for continuous improvement and are vital evidence that help solve problems that may arise.
Be proactive with supplier relationships.
Engage regularly—not only when things go wrong. Good supplier relationships offer opportunities to share good practices and encourage joint problem solving and a positive attitude to contract delivery.
Understand the basics of the contract.
Read the specification, KPIs, and pricing schedule at minimum.
Use procurement support appropriately.
CPU should be involved for variations, extensions, disputes, and legal questions.
Contract and supplier management is the day-to-day management of a contract after it has been awarded. It focuses on:
Non-procurement staff are often:
Your role helps ensure contracts deliver what was paid for.
You are responsible for:
You are not responsible for:
It helps ensure:
Non-procurement staff play a key role in achieving these outcomes.
You should have access to:
These are usually stored in a contract register, contract handover document, shared drive or contract management system.
You should:
Avoid informal agreements or commitments outside the contract.
You should:
Do not ignore issues or accept reduced service without approval from your Procurement Team
You should:
If issues repeat or escalate, involve your manager or Procurement.
No — not informally.
Any change to scope, cost, duration, or deliverables must:
Always involve Procurement if a change is proposed.
You should contact Procurement if:
A contract variation is a formal, approved change to the contract.
It ensures:
Verbal or informal changes are not permitted.
Yes, if you are authorised and:
If something looks incorrect, you should query it before payment.
You should keep records of:
Good records support audit, transparency, and accountability.
A conflict of interest arises when personal interests could influence (or appear to influence) decisions.
Examples include:
All conflicts must be declared in line with your organisation’s policy.
No.
Contracts can only be extended if:
Always plan ahead and involve Procurement early.
Yes.
While monitoring may be lighter, you must still:
Public sector accountability applies to all contracts.
A low-value / low-risk contract is one where:
Even so, public money and public sector rules still apply.
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Case study
Organisation: XXX
Contract Title: Provision of Scheduled Medical Equipment Maintenance
Contract Value: £450,000 over 3 years
Risk Level: Medium value / medium risk
Supplier: XXX
Contract Type: Framework call-off (from a national medical equipment servicing framework)
Contract Manager: Estates & Facilities Manager
Service Areas Affected: Radiology, Theatres, Outpatients, Community Care
The Health Board required a reliable supplier to provide maintenance and repair services for a range of diagnostic and treatment equipment. Downtime of equipment affects patient care, waiting times, and clinical risk—but the contract value and complexity place it in the medium-risk category.
A mini-competition was run under the national framework, with award criteria based on:
The winning supplier demonstrated strong technical competence and offered a transparent pricing structure.
A formal handover meeting took place between the procurement team and the contract manager. Key documents handed over included:
Contract Manager (Health Board)
Service User Leads (Radiology, Theatres, Outpatients)
Supplier Contract Lead
Procurement
The contract aimed to:
| KPI | Target | Measurement |
|---|---|---|
| Equipment availability | 90%+ | Supplier reports + spot checks |
| Urgent fault response | 4 hours | Logged system timestamps |
| Routine maintenance completion | 95% by due date | Maintenance schedule |
| Customer satisfaction | 4/5 average | Quarterly survey |
| Compliance with HTM & MHRA standards | 100% | Audit evidence |
Mobilisation
The Health Board held a mobilisation meeting to:
Monthly reporting provided:
Quarterly Review Meetings
Each quarter, the contract manager reviewed:
Minutes and action logs were maintained.
Issue Example:
In Month 5, Radiology experienced repeated delays in CT scanner repairs due to supplier staffing shortages.
Actions Taken:
Risk Example:
Risk of delayed preventative maintenance affecting clinical availability.
Mitigation:
The supplier proposed two improvements:
The Health Board accepted both, resulting in:
| Objective | Outcome |
|---|---|
| 90% equipment availability | Achieved 93% |
| 4-hour urgent fault response | 96% compliance |
| 95% preventative maintenance completion | 98% achieved |
| Customer satisfaction | Increased to 4.4/5 |
| 20% downtime reduction | 17% achieved (slightly below target but improving) |
This case study demonstrates practical, proportionate, and effective contract and supplier management for a medium-value, medium-risk contract within the Scottish public sector. The combination of structured governance, consistent reporting, and collaborative problem-solving resulted in improved service performance and value for money.
Case study
Organisation: XXX
Contract Title: Supply, Delivery & Maintenance of Communal Waste Containers
Contract Value: £320,000 over 4 years
Risk Level: Medium value / medium risk
Supplier: XXX
Contract Type: Open procurement – 60/40 Quality/Price
Contract Manager: Waste Services Operations Lead
Service Areas Affected: Waste & Recycling, Neighbourhood Services, Customer Services
The council required a reliable supplier to provide communal bins for housing estates and public spaces, as well as maintenance and replacement services. The contract’s operational impact—public safety, waste service continuity, and community satisfaction—classified it as medium-risk.
The council evaluated suppliers on:
The supplier scored highest due to strong warranty terms and a sustainability-led manufacturing process.
A structured contract handover meeting was held to transition ownership from procurement to the waste services team.
Contract Manager (Council)
Service Supervisors
Supplier Account Manager
Procurement (Council)
| KPI | Target | Monitoring Method |
|---|---|---|
| Delivery times | 95% within 10 days | Order tracking data |
| Repair completion | 90% within 5 days | Work orders / reports |
| Quality of bins | <2% failure rate | Inspections / reports |
| Sustainability | 30%+ recycled content | Annual certification |
| Customer complaints | Reduce by 15% | Reports |
Mobilisation Phase
Initial mobilisation activities included:
Ongoing Monitoring
The supplier provided a monthly performance dashboard showing:
The council’s waste supervisors cross-checked deliveries weekly.
Quarterly Review Meetings
Topics covered:
Minutes and corrective action plans were recorded.
Issue Example: Delivery Delays During Peak Period
In Month 7, several housing estates did not receive replacement bins on time due to supplier factory downtime.
Actions Taken
Risk Example: Vandalism Leading to High Failure Rates
Mitigation Measures
Two continuous improvement actions were delivered:
The supplier began analysing repair trends to preemptively replace wheel-sets.
These initiatives supported the council’s waste reduction and circular economy goals.
Outcomes After Year 1
| Objective | Outcome |
|---|---|
| 95% on-time delivery | Achieved 92% (slightly amber due to early delays) |
| Repairs within 5 days | Achieved 96% |
| Quality failure rate <2% | Achieved 1.4% |
| Sustainability target | 38% recycled material achieved |
| Complaint reduction | 12% decrease (on track but not yet met) |
Overall, the contract was evaluated as “Good – performing within expected parameters with minor improvements required.”
This case study demonstrates practical, balanced, and proportionate supplier management within a Scottish local authority setting. Despite initial challenges, collaborative governance and structured performance monitoring enabled strong value for money and supported community outcomes.
Lack of CSM can result in issues including:
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.
Maintain regular reporting and audit-ready documentation.
Typical requirements could include:
Using a structured approach, you may wish to:
You may wish to:
Steps could include:
Organisations should have:
Through a formal process that includes:
No change should occur without formal approval.
This protects auditability and supports dispute resolution.
This guidance supports organisations to manage disputes, potential contract failure, termination, and contract exit in medium- to high-risk contracts.
Its aims are to:
Quickfire Guide
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;
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.
Purpose: Resolve issues quickly and locally.
Led by: Contract Manager
Typical Scenarios
Expected Actions
If issue persists - escalate to Level 2.
Purpose: Address unresolved issues affecting service delivery or compliance.
Led by: Senior Contract Manager / Category Lead
Triggers
Expected Actions
If no improvement - move to Level 3.
Purpose: Follow the dispute mechanism defined in the contract.
Led by: Head of Procurement / Legal Services (joint)
Triggers
Actions
If dispute remains unresolved - Level 4 (termination consideration).
Purpose: Assess whether termination is justifiable, safe, and compliant.
Led by: Legal Services + Chief Officer + Senior Procurement Lead
Required Actions
Decision-Making
Termination should be a last resort and must follow the exact contractual provisions.
Used when the supplier has committed a significant breach and failed to rectify it.
Usually requires:
Used for multi-lot or modular contracts where part of the service can be removed.
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:
For further guidance in contract termination, please visit the Exit Strategy Station
A structured communication plan should identify:
Medium to high-risk contracts require a formal exit plan, which may be agreed at contract start and updated annually.
Typical phases:
Timeline depends on contract complexity and should be adjusted accordingly.
The supplier must provide (as per contract and as required):
For medium/high-risk contracts, the following should be enforced:
For further guidance in contract termination, please visit the Exit Strategy Station
After contract closure:
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
Checklist
For further guidance in contract exit, please visit the Exit Strategy Station
This guidance helps organisations manage changes to medium-to-high risk contracts in a compliant, transparent, and controlled way.
Variations, extensions and amendments must be planned, justified, risk-assessed, and formally documented to ensure they do not breach procurement rules or compromise value for money.
All changes must comply with
If a change risks being considered a new contract or a substantial modification, the contract must be re-tendered.
Medium-to-high risk contracts require:
The complexity and level of scrutiny should match the risk level, value, and potential impact of the change.
Changes must be commercially justified and deliver:
A change to the contract’s scope, requirements, deliverables, service levels, or working methods.
Examples:
Extending the contract term where:
Any change to contractual terms and conditions such as:
Changes must meet one of these conditions:
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:
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:
Quickfire Guide
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:
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.
A Contract Variation Request Form is available for you to use and can be found at the bottom of this page.
Triggers include:
All changes must be justified in writing.
Assessment should consider:
Contractual Impact
Commercial Impact
Risk Impact
Operational Impact
Financial Impact
Complete a Change Impact Assessment Form. There is a template available for use to use at the bottom of this page.
Failure to do this may invalidate the contract.
Approvals depend on organisational rules, but common requirements include:
High-risk changes may require:
Do not start discussions or negotiate with the supplier(s) until internal approval is secured.
Supplier engagement should cover:
Document all discussions.
Use a Change Control Notice (CCN) or Contract Modification Form including:
All signed documents must be retained in a contract file.
Update:
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:
Checklist
Key issues to consider in managing contract variations include:
| Key Areas | Achieved? |
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For above threshold contracts, the starting position is that contract changes will require a new competition to be held. This is unless one of six exceptions can be applied. These exceptions are:
Quickfire Guide
Where the change is provided for in a clear, precise and unequivocal review clause. This clause must have been included in the initial procurement documents.
Where additional goods & services or supplies are now necessary and a change of supplier is not possible for economic or technical reasons. Where such a change would result in significant inconvenience or substantial duplication of costs. This is provided that any price increase does not exceed 50% of the initial contract value.
Where the need for change is brought about by circumstances which an Organisation could not reasonably have foreseen, does not alter the overall nature of the contract; and does not result in a price increase greater than 50% of the initial contract value or framework agreement.
Replacement of the original supplier by another under a review clause; universal or partial succession, perhaps due to takeover, merger, acquisition or insolvency; or where the Organisation steps in and assigns some or all of the goods, or services back to itself. The new supplier must meet the selection criteria of the original tender.
Where changes, irrespective of their value, are not substantial. This could include a change to the economic value of the contract in favour of the successful supplier(s).
For minor changes, these must not affect the nature of the contract, must be valued below the relevant threshold and be less than 10% of the initial contract value for goods and services.
When making successive modifications you must take care that the cumulative value of these does not breach any of the previous requirements. This does not apply in the case of point 3, where successive modifications would, by definition be unrelated and so the value limitation of successive modifications does not cumulate.
If planned modifications are determined not to meet the criteria or have not been provided for in the original contract documentation, then a new procurement procedure must be undertaken. Legal advice should be sought.
For more information on contract modification during the term of the contract, please see Regulation 72.
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:
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:
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.
To extend legally:
Use a Formal Extension Agreement signed by both parties.
A change may be deemed substantial if it:
If substantial → a new procurement is required.
Actions:
Medium-to-high risk contracts must maintain a clear audit trail, including:
Quickfire Guide
| Role | Responsibilities |
|---|---|
| Contract Manager | Identify need, draft impact assessment, lead negotiations, update records |
| Procurement | Assess legality, advise on process, ensure compliance, approve changes |
| Legal Services | Review contractual implications, confirm regulatory compliance |
| Finance | Approve additional spend, validate budgets |
| Senior Responsible Officer | Approve strategic or high-risk changes |
| Supplier | Provide evidence, agree change terms, implement change |
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.
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