PROCUREMENT GUIDANCE - World Bank
PROCUREMENT GUIDANCEContract ManagementGeneral PrinciplesSeptember 2017
Published September, 2017, First EditionCopyright 2016The World Bank1818 H Street NWWashington DC 20433Telephone: 202-473-1000Internet: www.worldbank.orgDisclaimerThis work is a product of the staff of The World Bank. The findings, interpretations, andconclusions expressed in this work do not necessarily reflect the views of The World Bank, itsBoard of Executive Directors, or the governments they represent.Rights and PermissionsThe material in this work is subject to copyright. Because The World Bank encouragesdissemination of its knowledge, this work may be reproduced, in whole or in part, fornoncommercial purposes as long as full attribution to this work is given. Any queries on rightsand licenses, including subsidiary rights, should be addressed to:Office of the PublisherThe World Bank1818 H Street NWWashington, DC 20433USAFax: 202-522-2422Email: pubrights@worldbank.org.
Common abbreviations and defined termsCommon abbreviations and defined termsThis section explains the common abbreviations and defined terms that are used in this guidance.Defined terms are written using capital letters.Abbreviation / termFull terminology / definitionBankIBRD and/or IDA (whether acting on its own account or in itscapacity as administrator of trust funds provided by otherdonors).BorrowerA Borrower or recipient of Investment Project Financing (IPF) andany other entity involved in the implementation of a projectfinanced by IPF CMPContract Management Plan.KPIsKey Performance Indicators, critical measures that are includedin a contract to monitor performance, and to ensure deliverablesare met.PDOProject Development Objectives.Project ProcurementStrategy for Development(PPSD)A Project-level strategy document, prepared by the Borrower,that describes how procurement in IPF operations will supportthe project development objectives and deliver VfM.SMARTSpecific, Measurable, Attributable, Relevant, and Time-bound.Refers to the principle that when KPIs or other contractmeasures are set, they should be SMART so they actually help theBorrower to measure real results, in the most efficient, insightfulmanner.SRMSupplier Relationship Management. A modern procurementtechnique that focuses on building strong business relationshipsbetween critical suppliers and their key clients – generally ofmost benefit when there are situations of mutual dependencybetween buyer and supplier.VfMValue for Money.
ContentsSection I. Introduction . 1Purpose . 1Section II. Overarching Principles. 3Contract Management good practice (including VfM).4Section III. Fit-for-Purpose Contract Management. 5Section IV. Balanced Scorecard Approach .7Balanced Scorecard Structure (example). 7Balanced Scorecard KPIs . 8Section V. Contract Management Challenges, Risks and Potential Mitigations . 11Section VI. Contract Management Plan (CMP) . 19Section VIII. Supplier Relationship Management . 23
Guidance – Contract ManagementSectionIntroductionSection I.I.IntroductionPurposeThis Guidance serves as an introduction for Borrowers on the general principles of ContractManagement, its links to program management, and the connection to broader SupplierRelationship Management (SRM).This Guidance is not a comprehensive “how to” guide for contract management – suchapproaches need to be determined on a contract by contract basis, reflecting the agreedcontract terms.This Guidance should be read with reference to the World Bank Procurement Regulations forIPF Borrowers, the Guidance on Project Procurement Strategy for Development (Long FormDetailed Guidance), and the Guidance on Value for Money. This guidance is non-mandatory. Itprovides advice only and demonstrates good practice. It is subject to the Regulations, whichtake precedence.Effective Contract Management is critical for ensuring the supplier/contractor/consultant,and the Borrower meet their contractual commitments to time, cost, quality and other agreedmatters. It requires systematic and efficient planning, execution, monitoring, and evaluationto ensure that both parties fulfil their contractual obligations with the ultimate goal ofachieving VfM and contractual results. It involves: tracking and monitoring cost, time, quality and deliverables; collaborating to improve performance and promote opportunities for ongoinginnovation e.g. value engineering in appropriate contracts; being clear on roles andsupplier/contractor/consultant; managing relationships with the supplier/contractor/consultant and keystakeholders; managing payments in accordance with agreed terms; being proactive throughout the contract to anticipate problems and issues beforethey arise; and managing problems and issues as they arise, quickly, effectively, fairly, and in atransparent manner.responsibilitiesofbothBorrowerandFrom the Borrower’s perspective, effective Contract Management also: ensures the supplier/contractor/consultant delivers upon its commitments; obtains best Value for Money (VfM) during the life of the contract; manages supply risks for the duration of the contract; continually challenges to drive best value in its contracts; ensures effective contracts that continue to deliver the requirements; demonstrates best procurement practice in the management of contracts; and provides evidence to support any audits.1
Guidance – Contract ManagementWhile Contract Management is typically positioned within a Procurement and/or ProjectManagement/Delivery function in a Borrower’s organization - it has significant upstream anddownstream effects to an organization’s broader operations and finance groups (Figure I). Inaddition to managing individual contracts, many Borrower organizations have programs ofmultiple contracts that also need to be managed in a joined-up manner. Therefore, a robust,integrated Contract Management program can be used to increase contract standardizationand visibility across the entire Borrower organization – ensuring no contract expiresunintentionally, and is managed appropriate to deliver VfM (securing supply and value for theBorrower, in a planned and coherent manner on an ongoing basis).Figure I – Borrower Programmatic Contract Management Overview2
Guidance – Contract ManagementSectionOverarchingPrinciplesSection II.II.OverarchingPrinciplesEffective Contract Management enables Borrowers to holistically manage contracts fromplanning, through to execution and beyond. The key value Contract Management provides isthe ability to look at the end-to-end lifecycle of a given contract. Contract Managementdirectly impacts a Borrowers delivery of services to its citizens, the cost, degree of compliance,and reporting of results. Contract Management primarily focuses on creating, executing andmanaging contracts across three (3) key implementation phases: Plan contract Execute contract; and Manage contract.The “Plan” phase enables the successful execution of contracts. During the “Execute” phase,Borrowers engage the supplier/contractor/consultant following an agreed procurementprocess. Lastly, in the “Manage” phase, Borrowers monitor and managesupplier/contractor/consultant performance to ensure that contractual commitments madeare actually delivered, and that benefits are optimized (monitoring, may also include Banksupervisory activities). Figure II below outlines the contract management framework with thethree (3) phases with defined capabilities and associated functions.Contract Management Framework Overview Contract Management is an essential element of the World Bank’s fit for purposeprocurement approachIt helps ensure that contracts deliver the intended project outcomes andprocurement objectivesA Contract Management Framework therefore enables increased operationalefficiency and effectiveness, through improved compliance, awareness, visibilityand control over contractsA Contract Management Framework consists of three major components thatallow contracts to be considered through the full delivery cycleContract Management bilityFunctionsUnderstand procurement needsIdentify ownership, approval and metricsDefine processes, standard terms and templatesPlan for risk mitigationSelect contract templatePrepare contract draftUndertake bidding, negotiation, etcFinalize and execute contract1. Plan ContractEnsures organization readiness to execute itscontracts successfully 2. Execute ContractEnsures timely and effective contract delivery 3. Manage ContractEnsures maximized benefit through continuousimprovement Maintain contract management system Maintain compliance (compliance set up andcompliance reporting) Update contract and schedules as necessary toformalize agreed changesFigure II – Contract Management Lifecycle Framework3
Guidance – Contract ManagementContract Management good practice (including VfM)Figure III below highlights good contract management practice that Borrowers may wish toconsider as part of developing a Contract Management program across either a specificproject, or across multiple activities. Specifically, figure III highlights good internationalpractice that organizations with high performing Contract Management programs havetypically employed.Figure III – Contract Management Leading Practices4
Guidance – Contract eContractManagementSection III.ContractManagementTo determine the optimum, fit-for-purpose approach to Contract Management, the Borrowershould utilize the following tools in the PPSD Guidance: Supply positioning – to inform how critical the procurement is to the Borrower/overallproject, and therefore to inform how much resource/effort the Borrower should spendon contract management; and Supplier preferencing – to inform the Borrower about focused/committed thesupplier/contractor/consultant is likely to be in practice in delivering the contract,resolving unanticipated problems, and working with the Borrower in a collaborativemanner.In particular, the supply positioning model (see PPSD) provides a useful guide to inform theBorrower how best to establish the approach and frequency of contract managementmeetings - see figure IV below:Figure IV – Supplier Positioning interlink with Contract Management approachAs illustrated in figure IV above, the Borrowers contract management approach and effortshould link to the degree of criticality of the procurement to the project financed by the WorldBank and/or others. However, the Borrowers contract management approach must also beproportional (based on supplier positioning matrix and nature, size, complexity, risk and value).Critical contracts, or those with greater degrees of unknowns (e.g. performance basedcontracts, design build operate contracts etc.) will require more active contract management,including the setting of key performance indicators (KPIs). Whereas lower risk contracts, orthose with very clearly defined requirements will require less active contract management.5
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Guidance – Contract achSection IV.ScorecardApproachBorrower’s may wish to consider applying a balanced scorecard approach as part of theircontract management plan. A balanced scorecard involves both quantitative, as well asqualitative measures. A balanced scorecard is a modern management technique to monitor,track, visualize, rate and benchmark the supplier/contractor/consultant performance, seeFigures V, VI and VII below:Figure V – Balanced Scorecard Key FeaturesBalanced Scorecard Structure (example)Figure VI – Balance Scorecard Structure example7
Guidance – Contract ManagementBalanced Scorecard KPIsKPIs are measures of contract performance that are aligned to the key outcomes that theprocurement approach has been designed to deliver. The KPIs should be “SMART” indicators(Specific, Measurable, Attributable, Relevant, and Time-bound). They should also be directlylinked to the Project Development Objectives (PDO), and the Procurement Objectives - thiswill help ensure contract delivery is fully aligned with the desired outcomes. The KPIs shouldbe included in the Contract Management Plan (CMP), and if they link to incentivemechanisms/payment decisions, they will need to be agreed and included as part of thecontract before it is signed. To effectively manage a contract, it is best practice for theBorrower to develop a CMP with KPIs, and milestone events (critical stages that will be usedto measure and judge progress – usually linked to payments). The Borrower should monitorthe performance and progress of contracts, in accordance with the CMP, and provide timelyreports to the Bank on progress (as agreed by the Bank). Figure VII below details example KPIsa Borrower may wish to consider as part of a balanced scorecard approach:Key Performance AreaKPI Description1. Deliverya. On-TimeDeliveryProvide contractually obligateddeliverables and outcomes onagreed dates On time delivery of contractually obligateddeliverables as per mutually agreed plansb. Documentationof DeliverablesInformation is managed (shared,stored and communicated) in linewith expectations defined incontract or as agreed between thepartiesSuccessfully meets contractualrequirements relating to agreedSLAs.Information is managed (shared,stored and communicated) in linewith expectations defined incontract or as agreed between thepartiesProduct/service meets qualityacceptance criteria Teams are made up of memberswith expertise relevant to ourbusiness including input fromSubject Matter Resource (SMR) Deliverables uploaded to knowledge systemaccording to agreed timeframe.Supporting/ working documents uploaded(Templates, weekly status reports, minutes ofmeetings, training manual, project progress etc.)Number of SLA breaches, based on contractuallyagreed limits (e.g. service/hardware calls arecompleted on time)Deliverables uploaded to knowledge systemaccording to agreed timeframe.Supporting/ working documents uploaded(Templates, weekly status reports, minutes ofmeetings, training manual, project progress etc.)Number of deliveries that have met acceptancecriteria (e.g. Number of defects, functionality ofapplication, User Interface )Number of people proposed, rejected or replaceddue to performance issues or not meeting theexpectationsNumber of key project resources leaving andjoining for the contracted servicesRating received by service recipients / businessusers2. Supporta. SLAPerformanceb. SLADocumentation3. Qualitya. DeliveryQualityb. SupplierPersonnel4. Partnership& InnovationKPI Measurement c. CustomerSatisfactionLevel of satisfaction received from service recipients / business usersa. RelationshipCommitted to building and maintaining effective relationshipswith senior executives. b. Flexibility &ResponsivenessDemonstrates willingness andability to respond to nonforecasted demand and ensuretimely response to sourcingrequirementsImproved processes, products andservices that are credible andimplementable (quick wins). Newc. ContinuousImprovement andInnovation Number of no shows of supplier senior executivesin steering committee meetings etc.Number of dedicated supplier accountmanagement visitsNumber of requests met without raising CRsTimely response to sourcing and ad-hocrequirements "Number of improvement and innovationrecommendations that are acceptedAdherence to supplier development plan8
Guidance – Contract ManagementKey Performance Area5. Governance& Riska. GovernanceKPI DescriptionKPI Measurementproduct development (services)and innovative ideas for discussionand strategic decision makingAdheres to supplier performance management principles and meetsrequirements for governance 6. Financialb. RiskManagementComplianceUnderstands and adheres to requirements for risk management.Establishes and implementsadequate controls to mitigate risksc. ContractualComplianceSuccessfully meets legalcontractual requirements andstatement of work specificationContractually compliant with thetime and quality for submission ofinvoices b. CostTransparencySupplier provides transparencyinto its cost breakdowns c. Travel SpendAmount spent on travel withand/or Partner Airlines. d. PriceReduction/Discount/ SavingOpportunitiese. PenaltiesPrice reductions/ discounts/savings are consistently applied a. Invoicingf. ChangeRequests/ContractAmendments Financial penalties applied due tonon-compliance to SLA, deliveryschedule, product quality, etc.Number and value of CRs/Contract Amendments initiatedsince the previous scorecard orover the reporting period Number of missed deadlines for inputs (agendaand pre-reads) and outputs (reports)Actions closed from previous review meeting asagreed timelineDisputes resolved amicably as per disputeresolution frameworkRisks are communicated as part of governanceprocess. Risks raised with effective mitigationplans:oProject related risksoSupplier related risksNumber of contractual breaches identifiedOn time submission of invoices with supportingdocuments as agreedNumber of invoice errors identified in the pastperiodCost (invoices, financial proposals) is providedwith a detailed breakdowns of activities, services,products, quantities, etc.Amount spent on travel using qualified and/orPartner Airlines.Number of instances of price reductions/discounts/ savings and the amountIdentified volume discounts and other pricereducing optionsNumber of instances of financial penalties appliedand the amountTotal number of CRs raised/ ContractAmendments, value & scope of each CR /Contract AmendmentFigure VII – Balanced Key Performance Indicators example9
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Guidance – Contract ManagementSection V. Contract Management Challenges,Section V. Contract ManagementRisks and Potential MitigationsRisksChallenges,and PotentialMitigationsWithout effective Contract Management, Borrowers can struggle to deliver projects e.g.Borrowers will need to manage multiple contracts in order to construct a civil engineeringproject to time, quality and cost expectations. Figure VIII highlights typical challenges thatBorrowers may encounter when developing an effective contract management approach:Figure VIII – Contract Management ChallengesTo help avoid and/or to mitigate the risks associated with these Contract Managementchallenges, a risk management plan should be developed by Borrowers. The following are riskfactors and mitigating actions that Borrower may consider for their risk management plan aspart of a PPSD, and to monitor during the duration of the contract:RISK 1 – LACK OF UPFRONT SETTING OF CONTRACT MANAGEMENTREQUIREMENTS:Poor contract preparation and management leads to ongoing substandard delivery of goods,works, non-consulting services of consultants, with increased costs, and other inefficiencies.RISK 1 - Example mitigations:A. Start-up implementation: Current and proposed contracts are reviewed to ensure proper preparation andimplementation, for example:oprocedures, controls and working instructions and documentation;11
Guidance – Contract Managementooooosystems and data access control (administrative, operational, technical,reporting, financial etc.);management performance reports;nomination of contact persons from both the Bo
This Guidance should be read with reference to the World Bank Procurement Regulations for IPF Borrowers, the Guidance on Project Procurement Strategy for Development (Long Form Detailed Guidance), and the Guidance on Value for Money. This guidance is non-mandatory. It provides advice only and demonstrates good practice.
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in the MCC Procurement Guidance Note: MCA Non-PPG Covered (NPC) Purchases that are covered by guidance provided by the Procurement Operations Manual (POM) and Procurement . 1 The MCC Program Procurement Guidelines are based upon the World Bank’s Guidelines: Procurement Under IBRD Loans and IDA Credits and it has been adapted to reflect MCC .
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Procurement Procedures Procurement 2.4 Procurement authority 38 2.5 Modification of individual procurement authority 38 2.5.1 Delegation of procurement authority 38 2.5.2 Delegation of procurement authority to UNFPA officers at headquarters 38 2.5.3 Delegation of procurement authority to field office managers 41
Strategic Procurement for Innovation Vassilis Tsanidis Dr.Jur f. National Expert on Innovation Procurement in the EU A. STRATEGIC PROCUREMENT –2 Innovation Procurement Green/Circular Procurement Social Procurement . 10-11-2020 2 EU Public Procurement Directives (2014/24 , 2014/25)
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