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Route 2

Lifecycle Impact Mapping focuses on social and environmental impact rather than cost.   It helps the user identify and assess impacts. 

It may help to focus attention on the disposal phase before the procurement is carried out.  This would allow you to build end-of-life management requirements into successful contract performance clauses and your own internal management procedures. For example the uplift and recycling of printer cartridges, reusing delivery pallets, etc.

Please note:  Life cycle impact mapping can be used alongside life cycle costing as part of the procurement process.

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Lifecycle costing covers part or all of the following product or service costs::

a) costs produced by the Organisation or other users, such as:

  • purchase costs 
  • usage costs e.g. energy consumption, other resources;
  • maintenance costs;
  • end of life costs, such as collection and recycling costs; and

(b) product or service life cycle environmental costs  To include such values you must be able to calculated and confirm them.  This may include the cost of greenhouse gas emissions, other pollutant emissions, other climate change aviodance costs.

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In very exceptional circumstances a "design" specification may be unavoidable for a product or service.   In such cases the type of requirement makes it essential to narrow the options by writing a detailed full design specification including exact details.


  • physical dimensions
  • materials to be used
  • power input and out
  • the manufacturing processes required

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The specification should be written in "performance" terms which focus on the product function or service output required.

It builds the specification around a description of what is to be achieved rather than a fixed description of exactly how it should be done. This encourages marketplace innovation, allowing and encouraging suppliers to propose modern (including environmentally preferable) solutions.

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Within a technical specification you should avoid reference which may favour or eliminate suppliers e.g. by asking for a specific material or goods.  

You should not reference a specific make or source or to a particular process, trademark, patent, type, origin or means of production.


Do not specify "Hoover" when you mean a vacuum cleaner or "Intel" when you mean a central processing unit of a personal computer.

In exceptional circumstances such mention may be justified if:

  • the contract subject makes using it unavoidable or
  • where the contract subject cannot be described in any other way that is precise and able to be understood by all potential bidders.

In either of the above circumstances such mentions should be accompanied by the words "or equivalent".

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An exit strategy is necessary to:

  • identify possible risks,
  • define potential losses,
  • ensure service continuity

It should be a ‘front end’ activity created before the contract is signed. This may appear counterintuitive.  However without a well thought out strategy (which is consistent with your overall sourcing strategy) your Organisation risks:

  • becoming stuck in an unsatisfactory contract relationship or
  • being forced to pay more to terminate the contract and minimise operational impact.

Having an exit strategy at the start of a supplier relationship means not only that your Organisation’s needs will be included into the contract, but that the supplier will have a clear road map through to contract close (this is particularly supportive for smaller business who may rely heavily on public sector contracts). The exit strategy should also include what would happen in the case of early termination and so help to ensure there will be minimum business and customer disruption if the relationship were terminated.

Exit strategies should be reviewed annually, or when significant change occurs

There are several considerations to be made when developing an exit plan, including:

  1. Continuing Service Requirements
  2. Data Security and Privacy
  3. Knowledge and Documentation Transfer
  4. Costs
  5. Pesonnel

Below suggests some factors for consideration.  This is not conclusive. Each contract / supplier relationship should be considered on its own merits.

1. Continuing Service Requirements

An exit strategy should set forth your organisation’s service requirements when the parties are transitioning out of the relationship. These requirements may include:

2. Data Security and Privacy

Data privacy and security are critical.  The Exit Strategy should consider provision for:

3. Knowledge and Documentation Transfer

Strict documentation and knowledge transfer contract requirements will be advantageous. Be sure to:

  • Require the supplier to give you access to everything your organisation will need to maintain the service

  • Clearly state responsibilities i.e. which party owns the work performed by the supplier and which party is responsible for the transfer of ownership.

  • Fully document the service description for any transition period additional services.  These are services required from the supplier (e.g. employee training,  training new supplier personnel).

  • Require the supplier to supply your Organisation with copies of data, procedures, access logs, error logs, documentation and other information generated as part of providing the contract services. The supplier should also grant your organisation the right to provide this information to potential successor suppliers.

4. Costs

Transition, termination and timing are a key part of the financial aspects of an exit strategy. Be sure the contract:

5. Personnel

An exit strategy should cover personnel issues, such as:

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Contract Administration Checklist

What you Need to Do

Points to Consider


Administration of the contract is important

Contract administration is concerned with the relationship between the customer and supplier(s).


Its importance should not be underestimated. Clear procedures help all parties to understand who does what, when and how.

The elements that need managing include:

  • Contract maintenance and change control
  • Notice periods, contract closure or termination
  • Charges and cost monitoring
  • Ordering procedures
  • Payment procedures
  • Budget procedures
  • Resource management and planning
  • Management reporting
  • Asset management

Maintain the contract documentation


It is normal for contracts to change within acceptable parameters during their lifetime. Documents need to be maintained to reflect changes in arrangements.


Contract maintenance means keeping the documentation up to date and relevant to what is happening.


Maintaining contract documentation is an important activity.

Establish procedures to keep contract documentation up to date.


Ensure all contract documents  are consistent, and that all parties have the correct version.


Changes must be controlled - this is often an area where there can be misunderstandings and contract conflict.


Changes to services, procedures or contracts may have an effect on:

  • service delivery,
  • performance,
  • costs  
  • whether the contract represents value for money.


The specification and administration of change control is an important area of contract administration.

Appropriate procedures need to be in place. Both customer and supplier representatives must manage, review and authorise change requests.


Changes must  not fall outside the original advertisement’s scope.  Otherwise you may come into conflict with procurement regulations – seek advice if you’re unsure.


Additional demands on the supplier should be carefully controlled.


Formal authorisation procedures will be required.  This ensures  only new requirements that can be justified are added to the service.


Make sure management understands what is happening


Reporting procedures will ensure  information about contract problems reaches management.  Management can then make decisions as soon as it is possible.

Service performance reports and management information requirements should be built into the contract.  You must state these requirements confirmed at the tender stage.





You  should use your organisation's own management information and performance measurement systems, if these are available


For many business managers a service summary, detailing any exceptions, is normally sufficient.


Information requirements may change over the life of a contract.


Blank rows provided for your use e.g. to add additional checklist items.

Contract Changes/Variations

Background to Contract Variations

All contracts should detail how to include and manage contract variations . Although a supplier may request a contract variation, varying the contract must be approved, managed and controlled by the customer.

It is normal practice for a contract variation  to be agreed between the customer and the supplier in writing through a formal amendment of the contract. This practice is also known as a "change management process", "change control procedure" or something similar.

No-one involved in managing and administering the contract should agree to informal contract amendments. All potential contract variations/changes must be fully explored. This must include the appropriate contract managers/stakeholders. Any agreed variations should be undertaken in line with the change management process (see below).

The reasons for the variation should be clearly documented. Variations should not be used to hide poor performance or serious underlying problems.  The effect on original contract timeframes, deliverables and value for money should be assessed. You must consult/advise senior management and other stakeholders if the proposed contract variation(s) are significant.

Contract variations should be planned. You must inform customers in good time of any changes.  You must let customers know that multiple contract changes may shift contract risk or transfer particular risks to the customer.  It is important to analyse all consequences of a suggested amendment - make sure there is no negative effect on the contract or service levels.

You must make sure that contract variations are not significant i.e. they must not change the original contract requirement and/or substantial parts of the original transaction.  This would be "substantial modification" and it may be necessary to undertake another procurement process.  This is because the revised arrangements are substantially different from the original procurement that you advertised and awarded.

Quickfire Guide

Quickfire Guide

Contract Variations Do's and Don'ts


Do's    yes

Don'ts    no

Assess value for money of the variation(s)    


Change the original contract requirements i.e. there is no substantial modification.

Assess the effect of the variation on the original contract e.g. no detrimental effects on timeframes and deliverables.


Use variations to hide poor performance or serious underlying contract problems.

Consult senior management/stakeholders if variation(s) are significant.  Follow your organisations governance procedures.


Agree to contract variations on your own.


Clearly document the reason(s) for the variation and the amendment in writing.


Inform customer(s) of the contract change(s)





Contract Variations Checklist

Key issues to consider in managing contract variations include:

Key Areas


Are procedures required by the contract being followed?


Have the reasons for the proposed variation been assessed?  Does this indicate an emerging or actual problem?


Have the impact of the proposed variation on contract deliverables been assessed? Particularly whether the variation or the work it represents is actually required and is part of the original contract deliverables?


Have the effect on contract price of the proposed variation been determined?


Has authrotiy been given for making the variation?


Has the variation and its impact been properly documented?


Have you undertaken all reporting requirements?



Blank rows are provided for your use e.g. to add additional checklist items.

Change Management Process

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.

You should run a formal pilot if change is required but the effect of getting things wrong would be significant. If your pilot fails to meet expectations you can revisit and retest.  This allows you to achieve the required results before committing your resources and reputation on a wider scale.

For example "Plan, Do, Check, Act (PDCA)" is a recognised continuous improvement model.  You can use PDCA to ensure your change delivers the desired results.

There are 4 steps to the PDCA model. Steps 2 and 3 can be repeated until the desired result is achieved. The 4 steps can be summarised as:


Quickfire Guide

Quickfire Guide

Plan, Do, Check, Act (PDCA)

  1. Plan: Define the problem to be addressed.  Collect the relevant data.  Understand the root cause(s) of the problem(s)

  2. Do: Develop possible solution(s).  Select the most appropriate solution(s) and implent a small sclae pilot; decide how you will measure the pilot.

  3. Check: Check the problems you have encountered and identify the root cause(s). Measure how effective the solution has been by comparing pre-pilot and post-pilot data. Depending on the success of the pilot, you have the option of repeating the “Do” and “Check” phases.  You can incorporate additional improvements until you get the desired result

  4. Act: You can implement your solution. If you are using the PDCA as part of a continuous improvement initiative, you need to loop back to the Plan Phase (Step 1) and seek out further areas for improvement

Change Impact Reports

You and the supplier must understand the implications of the proposed change before being able to properly consider them . This may require the supplier (who will normally be in the best position to assess the likely impact of a change) to prepare an impact report. The impact report will present:

  • a full description of the change;
  • how the change is to be implemented;
  • the feasibility of the change;
  • the effect on the ability of the supplier to meet its contract obligations;
  • 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.

Pricing Principles

Your change management process should specify how any change costs will be allocated between the customer and the supplier.

Normally you would be required to pay for a change where it is not within the scope of the existing contract.

When a change is outside the scope of the existing contract, the change management process should detail the pricing  principles i.e. what you pay for. For example, the change management process may stipulate that the price for any change should be:

  • reasonable;
  • competitive and
  • no higher than the price at which a customer could buy similar products or services from another supplier.

Your  change management process can include the supplier having to provide an auditor's certificate i.e. to confirm agreed the pricing of any change complies with the pricing principles.

Supplier's obligation to undertake the change

A detailed change management process  is of little value if the supplier can refuse to implement the customer's change request.

Your  change management process can include that the supplier cannot unreasonably refuse (either directly or indirectly) a change requested by you.

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 despite the subject matter being reasonably related to/or connected with the services.

Impact reports, pricing principles and the supplier's obligation to undertake the change are just some of the matters that need to be considered in any change management process to ensure that it is effective. A carefully drafted change management process can ensure that the contract remains compliant and flexible to meet the system/services required during the term of the contract.

Account Pack

The Account Pack is intended to be a place where the current and historical contract / supplier status is recorded. Ideally, if anyone wants to understand the contract status or how the supplier is performing, this pack should provide them with the current status.

Any documents you need are listed below

Account Pack Document

(file type: pdf)

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This section of the Contract and Supplier Management process outlines a number of activities and tools to effectively manage and improve the performance of your suppliers.  You must be careful not to substantially modify the contract when considering some of the following. 

Contract Managers/Contract Management Officers should present information in regular reports to senior managers

Contract Managers should:

  • prepare and issue reports summarising the management actions they have taken since the last report;

  • identify any significant issues;

  • detail conclusions 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(s) required to secure improvement;

  • consult suppliers on the accuracy of all reports;

  • communicate regularly with suppliers; and

  • ensure emerging findings are discussed at an appropriate level within their organisations.

Care and Support Services

For Care & Support Services please also read Additional Guidance when Reviewing a Care and Support Service.

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

Care and Support Services should describe the process for agreeing the 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).

Contracts are awarded following a thorough evaluation process which looks at some standard elements. Your Organisation should perform periodic supplier ‘health checks’.  They should undertake these checks throughout the life of the contract to ensure standards are maintained. These checks could include:

  • Financial Status,
  • CIS Registration,
  • Business Probity,
  • Conviction of Criminal Offences,
  • Compliance with Legislation and Regulatory Provisions (including Equality),
  • Corporate Social Responsibility:
  • Sustainable Procurement and Environmental Practices
  • Health & Safety
  • Insurances
  • Care Inspectorate Inspection Reports and records.

The frequency of the checks depends on  the type of contract, e.g. strategic and bottleneck contracts will be checked more frequently than collaborative and routine contracts.

In addition there should be a process for agreeing the necessary improvement (where appropriate, in discussion with the Care Inspectorate) to the service and the timescales that will apply.  The contract itself should specify the circumstances where the public body has a right to terminate the contract (for example insolvency, service failure, loss of registration).

Measuring Supplier Performance

Understand Contract Terms & Conditions

The purpose of Contract and Supplier Management is to ensure suppliers meet their contractual obligations and the contract requirements are successfully delivered. 

It is essential that anyone engaged in managing suppliers reads and fully understands the contract terms and conditions, otherwise they will be at a permanent disadvantage should any issues arise.

Your Organisation’s Contract Manager/Contract Management Officer should engage early in the process, from the Develop Strategy stage,  and participate in the development of terms & conditions.

The Full Balanced Scorecard is a recognised tool for monitoring and managing contract and supplier performance.



Key Performance Indicators (KPIs)

KPIs provide a way 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. 


You must ensure effective contract management and monitoring so that the practice of blacklisting does not occur in public contracts.

Management Information (MI)

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

You must clearly define your MI requirements communicate these to your supplier(s).

Your MI reporting arrangements must be fair and proportionate and not duplicate information already provided.

Your MI reporting approach should minimise demands on suppliers for information about the delivery of the goods/service.

You can undertake a risk assessment to help decide what the frequency and level of reporting should be.  This may change/increase in certain circumstances, for example if a complaint is made about the service/delivery.

The reporting arrangements can be included in your specification and/or the terms and conditions of contract.

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



You should detail what will happen if the contract is not being delivered or the agreed quality standards are not being met.

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

Contract Managers/Contract Management Officers should ensure the escalation process is clearly defined, understood and communicated to all stakeholders and end users.

If you find that the supplier is not delivering the agreed level of service:

  • you should raise this with them immediately. For speed this can be done by telephone but should be followed up in writing.
  • Ask your supplier for an action plan to ensure that the required levels of service re-commences in a short time frame.
  • If the issue is major 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 procurement contact notified of the problem.  When escalated with the supplier, and an early face-to-face meeting should be arranged.  Here actions and timescale 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.

Incentives and Sanctions

There are specific contract terms and conditions that can be used appropriately to help drive and maintain contract compliance/performance. 

You should incorporate these into the Terms and Conditions (T & Cs) of contract. You should understand the specific contract T & C’s, and that any incentives and sanctions considered are appropriate and legally enforceable. You must seek legal advice if 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, but must not be applied on your own. Appropriate internal approval must be sought and received prior to implementation.

Incentives could include (subject to substantial modification):

  • Contract extension options
  • A longer contract opportunity could provide performance motivation
  • Payment by result, e.g. by use of milestone payments (linked to defined deliverables)
  • Reduced payment terms

Conditions of Contract could include:

  • Retention e.g. legitimately withhold payment if deliverables are not completed (only with genuine and notified reason.  This must be compliant with previously agreed contract terms and conditions)
  • Litigation
  • Termination of the contract
  • Liquidated Damages (compensation amount(s) agreed to be paid when the contract was created if a specific breach occurs)

To enforce a sanction sufficient evidence is required to justify the claim or action. You must therefore have clear records e.g. agreed service levels, notice periods, reminders, communications, agreements, etc.

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

Feedback and Improved Communication

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

Many improvement ideas don’t come from management, but from employees and suppliers operationally involved in the delivery of the service.  These are the people who are regularly exposed to issues which may not be visible higher up in the Organisation.

Your Organisation should seek feedback and work to develop a culture where everyone  is encouraged to look for and suggest operational improvements.  To do so the Organisation must show that all suggestions will be considered.

Demand Management - What is Demand Management?

Demand Management can be defined as:

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

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

Demand Management is a key aspect of aligning external resources to meet our requirements. People often think demand management is stopping people spending money. However there are a number of other ways to look at demand management without completely preventing spend.  These can still provide notable savings and have a less drastic impact on the business.

Demand often comes from internal practice and processes rather than real need. As the approach is about addressing change ‘in’ an organisation the starting point will be the culture, policy and behaviours of that organisation. The organisation can also participate by:

  • sharing best practice
  • benchmarking behaviour
  • policy guidance
  • peer review

Demand management can occur at different points in the procurement process.  For example:

  • from initial purchase  - making sure that software licences are purchased for the correct number of users at a single point in time or
  • where costs are reoccurring as an ongoing activity -  in a category where spend is ongoing and regular, such as stationery or postal services.

Principles of Demand Management

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

In the short term, this is about changing expectations; in the medium term about changing participation; and in the long term about reducing need.

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 need, with each way representing a different level of resource to achieve the same outcome

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


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


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


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:

  • A reduction in the demand for goods
  • If there is an option to use recycled goods to avoid buying new, and could recycled goods be supplied under an existing contract
  • If there is an opportunity to consolidate orders/services to reduce costs
  • If you can reduce your transactional cost by improving the purchase to pay system

Benefits of Demand Management

There are a number of benefits to an effective Demand Management strategy.  Many are driven by change in the organisation’s culture and outlook, and to how goods and services are specified and requested.

When robustly implemented across all goods and services, Demand Management drives public sector organisations to make the most efficient and effective use of procured external resources to meet the operational requirements.

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

When used as a priming process for Strategic Sourcing, Demand Management can establish organisation requirements to be sourced to a very specific level.  This can avoid the development of a sourcing strategy that meets over-specified operational requirements.

As a routine part of an organisation operation Demand Management can ensure the greatest possible levels of resource are directed at front line services in the public sector.

Forecasting Demand

You should consider forecasting demand  fluctuation management initially at the Shaping the Requirement Stage.  These 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
  • material shortages resulting in additional recovery costs and/or service breakdown
  • excess, inadequate or inappropriately positioned resource
  • reputational damage as a result of service breakdown
  • detrimental impact on the end user

You can manage your costs better, and have help your suppliers have the correct levels of resources in place, by using effective demand management forecasting. Also give the supply base the opportunity to manage their costs by positioning resource and material 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
  • Information from other buying organisations, trade bodies and business support organisations e.g. Federation of Small Businesses and Chambers of Commerce etc.

You should try to reduce future demand and costs by using strategies such as:

  • fully or partially transition to recycled goods instead of buying new
  • reduce transactional cost by improving your purchase to pay system
  • supplier(s) reducing mutual cost through innovation.  This should have been previously written into the contract / agreement with the supplier

To operate effectively your suppliers must understand and manage demand.  It can use this knowledge to set its resources and processes proportionately.  This will ensure their service delivery is efficient and cost effective.

By understanding your historical demand you can work with your suppliers to improve efficiency and reduce costs.

To forecast future demand you must consider a combination of:

  • historical demand,
  • market forces and
  • the Organisation business plan/strategic direction.

Forecasting will never be 100% accurate However these elements should provide enough information to develop forecasts which are accurate enough to accommodate demand fluctuations. 

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

Risk Management:

A key element of Contract and Supplier Management is the proactive identification and management of risk. More information can be found in Risk Management.

Fraud Prevention, Detection, Monitoring and Handling

More guidance on fraud is provided on the Scottish Government Website.


Weak links between the finance, commercial, and contract management functions provides an opportunity for fraud and/or overbilling.  This could be as a result of error and inefficiency or by deliberate intent.

Better scrutiny of payments, and a sound understanding of the contract, will quickly identify both overbilling and fraudulent activity, and allow the appropriate action to be taken.  You should not rely on your supplier to interpret the contract


Supplier Health Check

Contracts are awarded following a thorough evaluation process which looks at some standard elements. Your Organisation’s Contract Managers/Contract Management Officers should perform periodic supplier ‘health checks’.  They should undertake these checks throughout the life of the contract to ensure standards  are maintained. These checks could include:

  • Financial Status,
  • CIS Registration,
  • 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 depends on the type of contract, e.g. strategic and bottleneck contracts will be checked more frequently than collaborative and routine contracts.

Innovation/Value Add

Good Contract and Supplier Management processes should encourage both supplier and organisational innovation. Suppliers often have innovative ideas.  These ideas can improve both their own and their customers’ service, however, they are frequently blocked to progress these ideas.

Your Organisation should want to be a customer of choice i.e. into which suppliers will invest and bring innovation. 

Quickfire Guide

Quickfire Guide

How to Promote Innovation

You should promote supplier innovation and added-value activity to flourish:

  • Embrace your suppliers as an extension of your business. Learn from their ideas and build open and trusting relationships where innovation will thrive.

  • Establish a culture of trust and encourage ideas from suppliers, as they often know your business better than some of your own team.

  • Define and share your Organisation's definition of supplier innovation. This way suppliers can understand your internal process, where they fit in and your expectations of them.

  • Share as much information as you can with your top suppliers. The earlier suppliers can see your product / services roadmap, the sooner they can provide ideas to improve it.

  • Implement a consistent governance framework. If a supplier’s idea has potential, assign an internal owner to investigate and develop this ensuring there is accountability and development continuity.

  • Innovation does not have to be ‘ground breaking’. Even minor service or process adjustments can bring cost and/or efficiency gains.

  • Encourage collaboration within the teams, and let them know there will be some ideas will be more successful than others, but all ideas will be considered. Publicise and reward innovative contributors appropriately.

  • Publicise supplier innovation success stories. A brief email outlining real supplier initiated added-value and the mutual benefits will encourage others to do the same.

  • Consider innovation as a standard KPI and ensure innovation is on the agenda at performance reviews.

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.

Review Meetings

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

  • focus on end to end performance,
  • identify issues and opportunities and
  • put the appropriate action plans in place.

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

You should hold at least one review annually for suppliers identified under the segmentation process as requiring ‘medium level’ supplier management.  Hold two review meetings for ‘high level’ suppliers.

A Review Meeting Template is available here, and a meeting agenda example is laid out below:

Quickfire Guide

Quickfire Guide

Example Performance Review Meeting Agenda

This agenda can be amended to suit your personal preferences:

Agenda Item


Introduction and Opening Remarks

Introduce attendees.  Recognise special or new guests.  Provide any opening remarks that are pertinent to this meeting such as current events, organisational changes, etc.

Review of Action Items

Each Performance Management Review meeting will produce some follow up action items for your supplier, your Organisation or both.  These should be documented and followed up at the next Performance Management Review meeting.

Supplier Performance


Performance against SLA/KPIs/Scorecards should be reviewed and discussed, and any performance concerns raised.  This will be a quick review if all deliverables are being achieved.  Any "below plan" performance will demand more discussion and most likely recovery action plans.  These plans should be managed operationally and reviewed at the next Performance Review meeting.

Customer Performance


The supplier can raise any customer performance issues.  For example these may be impacting their ability to fulfill their contractual obligations.

Key Improvement Areas/Opportunities


All opportunities for improvement should be explored.  Once identified, action plans should be agreed.  Areas to be explored should include: current performance issues, cost, process, Sustainable Procurement, Corporate and Social Responsibility, innovation/value add.

Supplier Presentation

The supplier should provide a business overview, including example financial information, strategy, overarching objectives, etc.

Meeting Summary and Review of Action Items

Round up of meeting and confirm next meeting date.


Optional Benchmarking

Benchmarking costs against the suppliers’ competitors is a recognised way to avoid cost ‘creep’ and ensure best value. Benchmarking can be done throughout the life of the contract.  It can be used for:

  • Ensuring existing incumbent suppliers remain competitive in the market
  • Keeping up-to-date with market rates
  • A negotiation tool for cost reductions.

Step One – What to Benchmark

  • You decide which spend category(s) you wish to perform the benchmarking exercise for.

  • Complete a spend analysis on what you have purchased in that area for at least the last 12 months (by line item).

  • Sort the data from the highest to lowest spend and then highlight the top 80 percent of the spend. This will normally be no more than 20 percent of the number of line items and should capture the majority of your spend.

You now have a manageable amount of data to go out into the market place with.

This will not cover every aspect of the potential scope of supply.  You may need to add items such as bottle-neck and specialised items. The aim is to gain an estimation of the market rates.

You should inform your existing supplier that you are planning to perform a benchmarking exercise before you go out to the market place.

Step Two – Going to the Market

Having selected the items you want to benchmark, you can now approach the market to understand the current costs.

Benchmarking is generally an informal process.  The Management Information Hub is a good source of information, as is the internet in general. You can also contact a number of suppliers directly.

It is important to ensure that the recipients of any requests understand it is a benchmarking exercise.  It is not a business opportunity. The request should be simple enough for the suppliers to provide information without having to spend a great deal of time doing so.

Step Three – Results Analysis

You can now compare the results of your benchmarking exercise.  For example, enter all costs into a spreadsheet to determine the price difference between your existing supplier and the  market rates. You can now determine where the incumbent supplier sits against the best, worst and average market rates.

Step Four – What Next?

If you are happy with where the incumbent supplier’s pricing fits in comparison to market rates, this shows the supplier is competitive and no further action need be taken.

If you are not happy then invite your supplier to a meeting.  Give them the opportunity to explain why they are not competitive against the current market rates.  You must not divulge the competitors’ names or pricing information.

If the supplier is willing to accept their prices are not in line with market rates then this will be a cost reduction for you. If however, the supplier is unwilling to negotiate a reduction, initiate your escalation process and include as an agenda item at the next Review Meeting.

Route 2

Why Embed Contract & Supplier Management?

Persuading stakeholders to implement change can be difficult.  This is particularly true if there are no absolute, cast iron guarantees to support the proposal. Therefore you must consider how to show the potential benefits of an embedded Contract & Supplier Management (C&SM) model.

The guidance below and the linked templates should help you build the necessary business case / justification.

C&SM Benefits

Industry leaders claim a 5% minimum cost saving will be achieved by increased and embedded focus on C&SM.

Another approach is to consider the risks and missed opportunities of not focusing on C&SM, for example:

  • the cost of incident resolution activity / service failure
  • poor supplier engagement / flexibility
  • ineffective cost control
  • confused / cumbersome communication channels
  • uncertainty
  • risk or reputational damage
  • risk to service continuity
  • lack of accurate Management Information (MI)
  • missed (mutually beneficial) innovation / cost reduction opportunities
  • missed employee development opportunities
  • risk of substantial modifications to contracts
  • Consequently, C&SM is unlikely to be effective unless the parties move from a transactional to a relational model.  This could actively encourage and develop close working relationships and resulting mutual benefit(s).

The success of the relationship between an organisation and suppliers/service providers depends on the extent to which there is:

  • mutual respect and trust
  • a joint understanding of the roles played and challenges faced by each partner
  • openness and excellent communications; and
  • a joint approach to managing delivery.

You need to build the relationship outside of the traditional constraints of a performance-based contract. A ‘we are in this together’ approach should be fostered.  This will encourage open communication and to maximise service and cost efficiencies.

How to Implement an Embedded C&SM Model

To succeed, build on small success: when a pattern of small successes has been achieved, proposing a more ambitious  C&SM plan becomes  less daunting.  This is because you have proven results to refer to.

Instead of leaping into the unknown, it  becomes the expansion of an already successful process. Initial small successes are a recognised option to create awareness and buy-in for the larger initiative.  Small projects are likely to be the best way to gain the support necessary for  broader, organisation-wide embedded C&SM model adoption.

The selection of small project(s) is important.  It should be contracts or services  not in crisis and which have scope for improvement. It is even better if it is a contract or service where stakeholders have voiced concerns or expressed a desire to seek improvements.

Once the contract/service has been agreed, a small cross-functional team should be created under a nominated contract manager who will own and manage the small project.

As laid out in more detail throughout the C&SM guidance, the nominated cross- functional team should:

  • Engage with the nominated supplier and have them create a reciprocal team
  • Ensure clarity of roles and responsibilities within both the supplier and the Organisation
  • Agree desired outcomes, such as:
    • leveraging client and supplier expertise to drive cost and efficiency gains
    • improved Management Information (M.I.)
    • agreed KPIs and a formalised system of managing and monitoring supplier performance against the contract
    • identification of innovation / opportunities (within scope, not material change)
    • aggressive, but realistic timescales to ensure to ensure focus is maintained and commitments are delivered

Once the desired outcomes are agreed, your nominated  contract manager should ensure  maintained focus within both organisations until they have been achieved and delivered. The results should be used to demonstrate the untapped potential open to a focused C&SM approach.

The Business Template contains some ideas you may wish to include and should help lay out the business case. Your Organisation may have a standard template to use.

Who Has Responsibility for Contract & Supplier Management

Managing the supplier contractual relationship  requires a discrete set of responsibilities and activities.  As a result this should be the responsibility of a nominated member of staff. An organisation should consider how to ensure that:

  • roles and responsibilities are clear;
  • the relationship is championed at senior levels in the Organisation and supplier organisations;
  • information sharing is encouraged;
  • concerns about relationships, from either party, can be discussed frankly;
  • the relationship allows for long-term strategic issues as well as  day-to-day delivery issues to be considered; and

These considerations be built into the commodity/service specification and/or the terms and conditions of the contract.

Your Contract Manager must be engaged early in the process.  This will ensure they engage early with stakeholders and determine the appropriate contract service level requirements and Key Performance Indicators . Service level and KPI requirements should have been included in the tender documentation.

Care and Support Services

For Care and Support Services processes must not duplicate those of the Care Inspectorate.

The care manager is the role which has overall resposnibility for ensuring tha tthe totality of care and support for an individual is acheiving the desired outcomes.


Resource Planning

Determining the resource required to manage the contract portfolio / supplier base is not an exact science. Very often it is subjective.

Any organisation planning to transition Contract and Supplier Management responsibilities to an embedded C&SM team, must estimate the resource required.  You must invest time too realistically and pragmatically plan required resources.

Some resource planning options are laid out below.

Estimating Work Required

Resource planning for a new C&SM team often depends upon the judgment of an experienced manager.  You should provide enough information for an experienced manager to make an initial estimation of the extent of work required i.e. to manage the volume of Leverage, Routine, Strategic and Bottleneck suppliers.

A decision may be made to start with a small selection of critical or problematic suppliers.  Then you may gradually incorporate more contracts/suppliers with additional resource coming on board as appropriate.

The Resource Planning Tool is taken from a Scottish Public Sector organisation’s successful proposal to transition from a traditional ‘let & forget’ model to a C&SM model (and is indicative only). For the avoidance of doubt, this organisation absorbed the workload into the existing headcount by reallocating/reprioritising responsibilities and eliminating non value-add activity. 

Quantification / Segmentation

Quantification / Segmentation is the most accurate methodology of estimating the resource required to manage the contract / supplier portfolio. It is however, still an ‘estimation’ as many factors can affect the resource requirements, such as:

  • organisational / process maturity
  • employee capability
  • supplier performance / capability / flexibility

Access the Level of C&SM Required

You need to identify where your contract sits. The Strategic Positioning tools found in the Develop Commodity/Service station can assist you in doing this.

Regardless of how formal a commodity/service strategy is, or is not, there is always thought and decision making on:

  • how the contract or agreement will be set up,
  •  who the potential supply base is and
  •  what the desired outcome is.

A straightforward way of assessing the potential level of C&SM required is to consider the:

  • value (both monetary and importance to the organisation) and;
  • risk (also considering diversity of supply base and reputation) of the contract/agreement.

Please find a link below to the Full Balanced Scorecard. Please note that the balanced scorecard can be edited to suit the commodity/service area.

Please find a link below to the Segmentation Tool. The purpose of this exercise segments the contract portfolio into four categories (Leverage, Strategic, Bottleneck, Routine), which will allow an organisation to estimate the extent of work involved in managing each category.

The Resource Calculator Tool below can be used to help you estimate the amount of resource reuired for your contract management needs.

Please find attached a link to the Contract Management Supply Positions Tool. The document helps you to segment your contract portfolio into four categories (Leverage, Strategic, Bottleneck, Routine), which will allow an organisation to record the extent of work involved in managing each category, including frequency of performance review meetings and frequency of Management Information etc.

This tool will provide an estimated resource calculation. There is a natural tendency to over-estimate the work required, and it is important to avoid this trap by being as pragmatic as possible.

Where possible, it would be worthwhile comparing/collaborating with a similar organisation which has a more mature C&SM operation, especially where an organisation lacks the experienced managerial staff required to make informed judgements. this collaboration will allow the organisation to benefit from the experience of the more mature organisation and to factor in distortions such as the learning curve they will experience on the journey towards maturity.

Roles and Responsibilities

Category A, B & C Ownership and Workflow

Organisation’s Board / Senior Management Team

Board / Senior Management sponsorship is a critical element to facilitate the success of the Contract and Supplier Management Initiative. The Board / Senior Management Team should take the ultimate strategic ownership of business critical, strategic supplier(s), and be fully committed to improving the contract performance collaboratively with those suppliers.

Contract Manager/Contract Management Officer

Every contract should be managed by a nominated member of staff (‘contract manager/contract management officer’). In a collaborative setting, organisations should determine which organisation will take the lead in managing the contract. An organisation should ensure that there is clarity about the distinction between:

  • contract management (the responsibility of the organisation);
  • service management (the responsibility of the supplier);and
  • [for Care and Support Services, the role of the care manager (who has overall responsibility for ensuring that the totality of care and support for an individual is achieving the desired outcomes)].

The Contract Manager/Contract Management Officer should have the mind-set to exceed, rather than meet, required goals, deal with a constantly changing set of requirements, and have excellent communication and stakeholder management skills. They should be the principal owner of the supplier relationship and contract performance, and be responsible for business to business relationships, contract management performance and contract management competencies, including:

  • monitoring of contract and supplier performance against KPIs and other specified performance indicators in partnership with contract management contributors and end users.
  • monitoring ‘take-up’ and spend through the Framework or Contract
  • managing any reactive/unplanned issues which arise in relation to the contract(s)
  • communication of performance and efficiency gains as a result of MI analysis
  • drafting and issuing supplier or customer surveys where appropriate
  • chairing and managing performance reviews with the supplier, including End User feedback, and disseminating outcomes
  • managing any major performance issues and complaints
  • facilitating and championing supply chain innovation, continuous improvement initiatives and best practice
  • managing Framework Agreement variations, and disseminating outcomes
  • managing the extension of any optional extension periods (and/or the re-tender process and the supplier Exit Strategy)
  • providing guidance and advice to End Users as necessary
  • MI validation

Stakeholders / End Users

Contribute to contract and supplier management process by:

  • supporting and championing supply chain innovation, continuous improvement initiatives and best practice
  • facilitating the validation of End User feedback on contract and supplier performance
  • inputting to the monitoring of the supplier performance against KPIs and other specified performance indicators
  • inputting to performance reviews with the supplier
  • participating in the annual performance review
  • operational management of compliance, supply, demand and payment at a local level
  • managing supplier relationships relating specifically to operational issues
  • providing contract/supplier performance data to Contract Management Contributors
  • referring supplier performance issues to Contract Manager
  • leading, supporting and championing supply chain initiatives

Any documents you need are listed below

Balanced Scorecard

(file type: docx)

Business Case

(file type: docx)

CAT ABC Ownership

(file type: docx)

Resource Planning Tool

(file type: xlsx)

Segmentation Categories

(file type: docx)

Route 2

You can award the contract once you have followed the stages outlined in the previous stations. You must also obtain  internal approvals your organisation's governance requires.

The contract documentation should be collated and finalised to reflect the successful tenderer’s submission and agreed terms and conditions.

Where required, the documentation must be signed in duplicate by the appropriate authority levels in both the contracting and tenderer's organisations.

You must consider who you need to inform when a contract has been awarded and the information they require.  

For example:

notify stakeholders and users of the contract award, providing them with: timescales; details of the contract; and any migration considerations.

If using PCS-Tender, the Contract Award must be activated on this system. This activation does not generate correspondence to the tenderers. As a result you must issue the Contract Award Notice on Public Contracts Scotland.

If the contract involves cyber risks, and you are using the Cyber Security Procurement Support Tool (CSPST), please ensure you select the successful tenderer in the CSPST tool to allow your organisation to manage overall cyber risks.

Contract Award Notice

The Contract Award Notice is a public announcement of the public procurement exercise outcome.

The publication of a Contract Award Notice is mandatory for ALL regulated procurement exercises i.e. those where the estimated value is £50k or over (excluding VAT).

The Contract Award Notice must be despatched no later than 30 calendar days after the contract or framework agreement award date.  This also applies when a mini competition has been held for a Framework Agreement and the value is £50k or more for goods and services.

Contract Award Notice(s) must be published on the Public Contracts Scotland (PCS) portal. Contract Award Notices published via PCS will contain all of the mandatory information required.

For Dynamic Purchasing Systems, Contract Award Notices do not need to be published for each and every award.  These can be grouped together and published on a quarterly basis within 30 calendar days of quarter end.

The Contract Award Notice should not include any information which would:

  • impede law enforcement or otherwise be contrary to the public interest
  • prejudice the commercial interests of any person or
  • prejudice fair competition between bidders.

Contract Award Notices for Lots

When running a procurement exercise, there may be some circumstances where you wish to award some lots and not others.

For example:

  • Delaying a contract award on a specific lot because of a delay to the standstill period but still awarding the other lots in the procurement exercise.
  • There are no compliant bids on a specific lot and an alternative exercise may be required for this lot but the bids on the other lots are compliant and can still be awarded.

To support this, in Public Contracts Scotland (PCS), from 1 October 2020, you will have the capability to award selected lots through separate award notices.

The new process in PCS will be:

  1. Select your notice and click on “award”
  2. The new page will be displayed with all lots (if any). If there are no lots, the award process stays the same
  3. You will need to deselect lots you don’t want to award and then click  “award”.


There are no changes to the award notice itself and the award process will also stay the same.

Please note, the process to create a stand-alone notice will also not be affected.

Contracts Register

The Public Contract Scotland (PCS) Contracts Register module provides buying organisations a facility to operate a private register of all contracts they have in place.  This public register meets the Procurement Reform Act (Scotland) 2014.

When you publish a PCS award notice an entry is automatically made in your contracts register. Your organisation will need to make the decision whether to make the contracts register publicly viewable or not.

PLEASE NOTE:  if you do not use PCS for producing a contract register, you still must produce a publicly available one.

The PCS contracts register will pull through the contract value from your contract award notice. You should always be as open and transparent as possible when completing this field. This field can be manually amended but all relevant amendments have to be manually duplicated in the Scottish Procurement Information Hub (there is no integration between the two systems for manual amendments).

Even if you withhold the contract value from a contract award notice, this does not provide cover from Freedom Of Information (Scotland) Act 2002 (FOISA). To withhold under FOISA, the information would have to, or be likely to cause substantial prejudice.  Also the public interest in withholding the information would have to outweigh the public interest in its release.

Detailed contracts register user guidance can be found in PCS.