The bidder must be given the opportunity to provide evidence that they have taken sufficient and appropriate remedial action i.e. they have ‘self-cleansed’. If you are satisfied that the evidence they have given is sufficient to demonstrate reliability, you should not exclude the bidder from the procurement procedure on those grounds.

The bidder must satisfy that it has: 

• paid, or undertaken to pay, compensation for any damage caused by the criminal offence or misconduct;
• provided detailed facts and circumstances by collaborating with the investigating authorities; and
• taken appropriate concrete technical, organisational and personnel measures to prevent further criminal offences or misconduct.

In the case of tax and social security breaches, the bidder should not be excluded if they have fulfilled their obligations by paying or have entered into a binding agreement with the view to paying monies, due or the obligation to repay otherwise ceases. 

When considering any self-cleansing measures, organisations must consider all relevant factors.  This includes the gravity and particular circumstances of the criminal offence or misconduct.

If you believe the bidder’s remedial action is insufficient to demonstrate reliability, you must provide them with a statement outlining the reasons for the decision. This must be provided in writing as soon as is reasonably practical to allow the bidder to understand why the self-cleansing measures they have taken are insufficient.

Questions relating to exclusion grounds are contained in the SPD.  You must use the SPD for all Route 3 procurements.  More information on the SPD and the Standardised Statements is contained in the SPD station.

A document containing a set of "standardised statements" has been developed to support you in explaining the exclusion criteria to bidders.  Within the standardised statement document, is information that can be added to your contract notice in section II.2.14 (Additional Information) The Standardised Statements document can be found at the bottom of the page. 

Please note that if you use the online SPD module on PCS, there is no need to add information on the Exclusion Grounds to the Contract Notice as they are automatically added to the module.

Buyers must ask if a bidder has been convicted by final judgement of one of the criminal offences contained in the relevant regulations.

This includes:

• Participation in a criminal organisation
• Corruption
• Bribery and certain types of fraud
• Terrorist offences or offences linked to terrorist activities
• Money laundering or terrorist financing
• Child labour and other forms of trafficking in human beings

Buyers must ask if a bidder has taken part in blacklisting activities. 

Blacklisting is the practice of systematically denying individuals employment  who would otherwise be able to be employed.  

Blacklisting is done 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 totally unacceptable.

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

The Scottish Government treats tax and social security obligations seriously.

Organisations must exclude bidders where they have been subject to a binding decision (judicial or administrative) which found a breach of legal obligations to pay tax or social security contributions.  A judicial decision is one which is made by a court or tribunal. An administrative decision is one which is made by the relevant tax authority in the UK or in the country where the bidder is established.

Organisations may exclude a bidder where the bidder has breached its tax or social security obligations and the decision has been reached by means other than a binding decision (judicial or administrative).

Buyers can request the following examples of evidence to understand a bidder’s breach in tax or social security obligations:

• credit references, i.e. details of any outstanding tax debt
• company accounts, depending on the size of the tax debt the bidder may be obliged to include this in their accounts
• an admission by a bidder to an Occasion of Non-Compliance (OONC)
• an admission by a bidder of the failure of an avoidance scheme which they were involved in and was, or should have been, notified under Disclosure of Tax Avoidance Scheme (DOTAS)

In the case of tax and social security breaches, the bidder should not be excluded if they have fulfilled their obligations by paying or have entered into a binding agreement with the view to paying the money due or the obligation to repay otherwise ceases. 

Note – these examples relate to the UK tax regime, and there will be equivalents in other countries, which should be considered when relevant. 

One of several discretionary grounds for exclusion relates to social, environmental and employment law obligations. These obligations include any relevant legislation, as well as relevant collective agreements and specific international agreements.

As these laws are wide ranging, you can focus on a specific area of law that bidders must take into account when making their self-declaration in respect of exclusion grounds. For example, breaches of employment and equality legislation. 

Bidders may be excluded where your organisation can demonstrate that the bidder has breached any of these obligations. This exclusion ground is discretionary and it is therefore for your organisation to decide if exclusion is appropriate.

When determining whether to exclude a bidder on this basis, you should be proportionate in your decision, taking into account the size of the contracts, the relevance of the breach, and its impact on the operational and reputational risk to the delivery of the contract and reputational risk to the organisation. 

Further information can be found in the Public Contact (Scotland) Regulations 2015 57 (2). 

Where a bidder is bankrupt or subject to insolvency proceedings, you can choose whether to exclude them from the procurement exercise.

Potential evidence you could request to evaluate the situation include:

• copies of accounts verifying they have sufficient liquidity to perform the contract
• the bidder's business plan outlining steps they will take to address concerns, or
• references from other recent customers.

When considering whether to exclude such a bidder you should consider contract delivery potential risks, such as:

• the impact this may have on the sub-contracting supply chain;
• the scale of the contract;
•  the potential consequences of the contract failing.

Additionally, you should take into account the potential benefits of awarding a contract to such a bidder. These can include:

• providing opportunities to contribute to increased employment in communities;
• the wellbeing of local and regional communities ;
• helping unlock the innovation or economic potential with local businesses.

Bidders may be excluded if they are guilty of grave professional misconduct, which renders its integrity questionable.

Further information can be found in The Public Contracts (Scotland) Regulations 2015, 58 (8) (c)

When determining whether to exclude a bidder on this basis, your organisation should be proportionate in its decision, taking into account the size of the contract, the relevance of the breach, and its impact on the operational and reputational risk to the delivery of the contract and reputational risk to the organisation. 

Bidders may be excluded if a conflict of interest exists that cannot be effectively remedied by other less intrusive measures, and that may impact the procurement process. 

Further information can be found in The Public Contracts (Scotland) Regulations 2015, 58 (8) (e)

When determining whether to exclude a bidder on this basis, your organisation should be proportionate in its decision, taking into account the size of the contract, the relevance of the breach, and its impact on the operational and reputational risk to the delivery of the contract and reputational risk to the organisation. 

Bidders may be excluded if a distortion of competition arises from

• the bidder entering into agreements with other bidders to distort competition
• the prior involvement of the bidder in the preparation of the tender which cannot be remedied by other, less intrusive measures. 

Further information can be found in The Public Contracts (Scotland) Regulations 2015, 58 (8) (d) (f)

When determining whether to exclude a bidder on this basis, your organisation should be proportionate in its decision, taking into account the size of the contract, the relevance of the breach, and its impact on the operational and reputational risk to the delivery of the contract and reputational risk to the organisation.

Bidders may be excluded if they are found to have:

• seriously misrepresented the supply of information (when this information would be used to confirm there are no grounds for their exclusion from the procurement exercise, and therefore the bidder meets the selection criteria) or withheld information;

the bidder has:

• unduly influenced the decision making process
• obtained confidential information which may give them undue advantages in the procurement procedure
• negligently provided misleading information that may have a material influence on decisions

Further information can be found in The Public Contracts (Scotland) Regulations 2015, 58 (8)(h)(i)

Bidders may be excluded if they have shown significant or persistent deficiencies in the performance of a substantive requirement under a prior public contractor or a prior concession contract which led to early termination of that prior contract, damages or other comparable sanctions.

Further information can be found in section 9 of The Public Contracts (Scotland) Regulations 2015 58(8)(g)

When determining whether to exclude a bidder on this basis your organisation should be proportionate in its decision, taking into account the size of the contract, the relevance of the breach, and its impact on the operational and reputational risk to the delivery of the contract and reputational risk to the organisation. 

Organisations must consider how, in conducting a procurement, they can facilitate the involvement of small and medium enterprises, third sector bodies and supported businesses in that process. This can include the use of sub-contractors to support the delivery of the contract.

Organisations can, at their discretion, require verification of whether there are any grounds for the exclusion of any sub-contractor involved in the delivery. Where this information is sought the SPD must be used.

Where this verification shows that there are mandatory grounds for the exclusion of a sub-contractor, the organisation must require that they are replaced. 

You should keep in mind that this only applies to sub-contractors upon who the main bidder is not relying on to meet the selection criteria of the contract.

Where there are discretionary grounds for the exclusion of a sub-contractor, the organisation can choose whether it should be substituted. Organisations must decide whether to apply discretionary exclusion grounds to sub-contractors involved in the contract delivery on a case by case basis, taking into account the various circumstances of the contract.

Exclusion grounds apply to a person who is:

• a member of the administrative, management or supervisory body of the bidder or
• has powers of representation, decision or control regarding such bidder

In the Standardised Statement document, along with the selection statements, you can find two exclusion ground statements:

• one for the Contract Notice for below threshold procurements and
• one for the above threshold Contract Notice.

In the case of a Route 3 procurement, please make sure that you copy over the statement for an above threshold Contract Notice exclusion statement to the textbox in the Contract Notice under II.2.14 Additional Information. This will make sure that you have informed the bidders that you will apply mandatory and discretionary exclusion grounds in the procurement exercise.

Please note that if you are using the online SPD module in PCS, there is no need to include this in the contract notice.

The mandatory exclusion grounds (regulation 58(1) and (3) of the Public Contracts (Scotland) Regulations 2015) must be applied to all procurements, and you can also choose to apply the discretionary exclusion grounds.

Exclusion statements should be put under II.2.14 Additional Information of the Social and other Specific Services Contract Notice or detailed in the online SPD Module on PCS if it is being used.

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

• An obligation on the supplier to continue service performance during the transition period.   During transition these services must stay at the same quality level and continue to comply with all contract  obligations.
• The provision of parallel services for a certain period.  This term can be extended as necessary to resolve issues before the final changeover.
• A supplier obligation  to maintain the same supplier team during the transition period.
• Confidentiality on any communications regarding the termination of the relationship.

Data privacy and security are critical. The exit strategy should consider provision for:

• The transfer of all data belonging to your Organisation, including any customer information.
• An acceptable method for the supplier to destroy and remove your Organisation’s proprietary information.
• The supplier destroying and removing sensitive information from all media.  The supplier must ensure no information is disclosed to other individuals or organisations.
• The return or transfer of each party’s assets.

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

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

• Will not penalise your Organisation for an early exit. This is especially important if the termination is due to the supplier’s failure to perform the contract.
• Specifies when compensation should be paid and how much.  This  includes compensation for any continuing base services and transition activities.
• Specifies the return of any pre-paid fees for services which have not been supplied.

An exit strategy should cover personnel issues, such as:

• Ensuring supplier personnel and key resources remain on the project and committed during the transition.  This ensures relevant knowledge and expertise is retained during transition.
• Defining the exit-strategy team and its roles
• The treatment of employees and any obligations to inform or consult under TUPE.

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

Unreasonable grounds for refusing a change might include:

• demanding unreasonable charges for the change;

• imposing unreasonable conditions for undertaking the change; or

• refusing to include the change under the agreement.  This could be despite the subject matter being reasonably related to, or connected with, the services.

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

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 likely impact of a change). Ideally, the impact report will present a full description of the change, including how the change is to be implemented and, where relevant, detail:

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

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

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

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

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

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

It is possible for an Organisation to terminate a contract during its term.  These circumstances are covered in the Exit Strategy Station.

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

Decide which spend category(s) you wish to perform the benchmarking exercise for.  

1. Complete a spend analysis on what you have purchased in that area for at least the last 12 months (by line item);
2. Sort the data from the highest to lowest spend;
3. Highlight the top 80 percent of the spend.

This 80 percent will normally be no more than 20 percent of the number of line items.. You now have a manageable amount of data to go out into the market place with.

This does not cover every aspect of the potential scope of supply.  In certain circumstances additional items may need to be added, such as bottle-neck and specialised items.  The aim is to gain an estimation of the market rates.

The incumbent supplier should be made aware that you are planning to perform a benchmarking exercise before you go out to the market place.

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

Benchmarking is generally an informal process and the Management Information Hub is a good source of information, as is the internet. You can also contact a number of suppliers directly.  However it is important to ensure that these suppliers who receive requests for information understand that you are conducting a benchmarking exercise and that this is not a business opportunity. The request should be simple enough for the suppliers to provide the information without having to spend a great deal of time doing so.

You are now ready to compare the results of your benchmarking exercise. To compare the results you could, for example, enter all prices into a spreadsheet and determine the price difference between the incumbent supplier's prices and the prevailing market rates. By doing this you can determine where the incumbent supplier(s) sit against the best, worst and average market rates.

If you are happy with where the incumbent supplier’s pricing sits then the supplier is competitive and no further action needs be taken.

If you are not comfortable with where the incumbent supplier’s pricing fits, invite them to a meeting. Give them the opportunity to explain why they are not competitive against the current market rates. On no account should you divulge the competitors' names or pricing information.

If the supplier is willing to accept their prices are not in line with the market rate, this will be a relatively pain free cost reduction for you. If the supplier is unwilling to negotiate a reduction, you should initiate the escalation process.  Include this as an agenda item at the next Review Meeting.

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

• suppliers meet their contractual obligations for the duration of the contract;
• the contract's requirements are successfully delivered. This includes any special contract performance conditions included in the competition documentation and related to the contract subject-matter.  This may cover economic, innovation-related, environmental, social or employment-related conditions.

Anyone engaged in managing suppliers must read and fully understand the contract terms and conditions. This will ensure they are not at a disadvantage should any issues arise.

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

The Full Balance Scorecard is recognised for monitoring and managing contract and supplier performance.

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

For Care & Support Services please also read the 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 service providers.

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

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

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.

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

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

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

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

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

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

Further examples can be found in the Management Information document.

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

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

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

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

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

• performance issues should be addressed immediately, and escalated within the supplier's organisation if not resolved promptly;
• If you find that the supplier is not delivering the agreed level of service, you should raise this with them immediately. For quickness, this can be done by telephone but should be followed up in writing. The supplier should be asked for an action plan to ensure that the required levels of service re-commence in a short time frame. Depending on the severity of the issue, it may also be necessary to hold a face-to-face meeting with the supplier. All discussions/meetings, etc. should be minuted to ensure an audit trail exists. If resolution of the issue is not completed within the timescales agreed then the issue should be escalated (see below) and your Organisation’s procurement contact notified of the problem;
• If the issue(s) raised are not resolved to your satisfaction, they should be escalated within the supplier's organisation. An early face-to-face meeting should be arranged where actions and timescales to remedy the situation should be agreed and implemented. The recovery actions should be monitored on a regular basis to ensure that the agreed recovery/ resolution dates do not slip. All discussions/ agreements should be noted in writing;
• Contract Managers/ Contract Management Officers should ensure the escalation process is clearly defined, understood and communicated to all stakeholders and end users.

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

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

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

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

Incentives could (subject to avoiding substantial modification) include:

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

Conditions of Contract could include:

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

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

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

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

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

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

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.

More guidance on fraud can be found in the Scottish Government website on Fraud.

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.

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

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

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

The frequency of the checks should be in line with the type of contract. For example, strategic and bottleneck contracts will be checked more frequently than collaborative and routine contracts.

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.

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

There are 3 main principles of demand management:

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

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

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

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

With Demand Management you should consider:

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

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

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

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

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

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

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

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

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

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

Demand forecasting should be based on considerations such as:

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

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

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

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

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

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

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

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

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

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

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

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

The Review Meeting Template and a meeting agenda example are available below to assist you in doing this.

The Performance Review Agenda Example (agenda can be amended to suit your personal preferences):

To succeed, build on small success: when a pattern of small successes has been achieved, proposing a more ambitious CSM 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 CSM 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 CSM 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 buyer 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  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 CSM approach.

The Business Case Template, found at the bottom of this page 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.

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

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

Your Contract Manager should 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.

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

The care manager is the role which has overall responsibility for ensuring that the totality of care and support for an individual is achieving the desired outcomes.

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 CSM team, must estimate the resource required. You should 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 CSM 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 and/or problematic suppliers.  Then you may gradually incorporate more contracts/suppliers with additional resource coming on board as appropriate.

The Resource Planning Tool, found at the bottom of this page, is taken from a particular Scottish public sector organisation’s successful proposal to transition from a traditional ‘let & forget’ model to a CSM 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

Contract and Supplier Management Ownership and Approval

Organisation’s Board / Senior Management Team

Board / Senior Management sponsorship is critical to the success of an embedded Contract and Supplier Management approach.

The Board / Senior Management Team should take the ultimate strategic ownership of business critical strategic supplier(s).  They should be fully committed to improving 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)
• 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.  They will, deal with a constantly changing set of requirements.  They need excellent communication and stakeholder management skills. They should be the principal owner of the supplier relationship and contract performance.  They will be responsible for business-to-business relationships, contract management performance and contract management competencies, including:

• monitoring 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.  This includes 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 communicating 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
• contribute  monitoring supplier performance against KPIs and other specified performance indicators
• contributing 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 the Contract Manager
• leading, supporting and championing supply chain initiatives