Common Contract Pitfalls In Public Sector Projects (And How To Avoid Them)

When contracting for services, both parties want the relationship to work out well, but this doesn’t always happen. So why do contractual relationships sometimes go sideways, and how can this be avoided?

1. Scope

Procurement projects begin with identifying what is needed and then defining the scope to meet that need. Although fundamental to any procurement project, this is often the first point of failure – where the description does not match or only vaguely describes what the buyer needs.

An example of this problem is the federal government’s Phoenix Pay project, where the payroll function was outsourced. The Auditor General of Canada wrote a report on this project that included a review of sample data, where they found that 62% percent of the employees were paid incorrectly, despite the millions paid to the contractor.

Some of the common issues you can encounter when defining scope include:

1. Timelines drive the project, making shortcuts necessary at every stage of the project (i.e. planning, selecting the contractor, negotiating the contract, and the monitoring / governance mechanisms).
2. The buyer is unaware of what’s available in the marketplace that best meets the need, resulting in an incomplete or incorrect scope description.
3. Not everyone who will be impacted by the contract is identified and included (e.g. the Phoenix Pay project focused on just payroll rather than fully considering human resources and union impacts).
4. A disconnect exists between the need and the new processes (e.g. the Phoenix Pay project’s system managed pay issues in real time whereas many pay entries are made retroactively).
5. Consideration is given to only common situations, with little or no thought about the anomalies (e.g. the Phoenix Pay system did not adequately address their complex shift rules).

The following advice could help you to avoid similar issues:

1. Discuss the consequences of missing the project deadline, and consider contingency plans for each.  For example, could a current contract be extended for a few months to give the time needed to plan, manage the solicitation, and negotiate the contract? Or could the political announcement be tweaked where a contractor would be selected rather than services beginning by the announced date?
2. Question what you think you know about the applicable market or industry by doing research or speaking to colleagues in other jurisdictions. Consider issuing a Request for Information to ask vendors how your needs could best be met.
3. Research your internal needs! Make sure everyone impacted is involved and has an opportunity to provide feedback. This not only will better address everyone’s needs but will also avoid any disconnects between current and future processes.
4. Discuss the unusual situations that may impact your project. Include someone who has been with the organization for a long time, as they may recall unusual needs that others have not yet encountered.

2. Acceptance Criteria / Service Levels

Have you ever had or heard of a contract where the contractor delivered something that did not meet the buyer’s expectations? This often is due to the contractor and buyer having different understandings of what is to be delivered, which may not be evident until partway through the contract. This can result in rework, delayed timelines, cost overruns, and dissatisfaction.

To avoid this miscommunication, be sure that your contracts include acceptance criteria and, if applicable, service level metrics that define the quality of what you’re buying. You can then include clauses in your contract to tie payments into meeting the acceptance criteria and service levels, to compel the contractor fixes any deficiencies without charge, or to apply discounts when service levels aren’t met.

Refer to the articles “Acceptance Criteria for Contracts: Key Elements & Examples” and “Acceptance criteria: examples and best practices” (IT focused) for more information about what to consider when developing your acceptance criteria and service levels.

3. Monitoring Plan

Service and construction contracts require a monitoring plan to ensure that the status and progress is well understood by the buyer. Unfortunately, workloads can sometimes become an issue, where there isn’t time to do everything as planned. This can result in little to no monitoring for some contracts that appear to be going well, as the contract manager spends their time putting out fires on the problematic contracts. Without appropriate monitoring, the contract manager may not know that something has gone wrong until the issue becomes another fire that needs to be put out.

There are two things that you can do to help avoid this problem:

1. When developing the monitoring plan, be realistic; consider the contract manager’s available time, the associated risks if something going wrong, and the contract value. Based on these factors, develop a plan that is manageable while still addressing the key areas that would indicate something is (or is about to be) wrong.
2. Have a backup monitoring plan. If the contract manager does not always have the time needed, develop a backup monitoring plan that can be used when the contract is going well. This plan should be a condensed version of the full plan that focuses on the most critical aspects of the contract. However, consider limiting how long the backup plan can be used, to avoid missing something indicating a problem.

4. Lessons Learned

The most important thing you can do as a contract manager is to document your lessons learned. You are likely not the only one who has encountered the issues you experienced. If you document these issues – including why they occurred, how you dealt with them, and how they can be avoided – you provide an avenue for others to not repeat them. For those of you newer to contracting, read these lessons learned (if they’ve been documented), or talk to more experienced colleagues for advice.

Following this advice won’t avoid all contracting problems, but it will mitigate many of them, making you a more effective contract manager.

Public Procurement In Canada:

Procurement professionals play a pivotal role in the public procurement world. These experts are well-equipped with the knowledge and skills needed to navigate the intricacies of procurement processes. Whether you’re looking to enhance your procurement acumen through procurement management courses or seeking valuable insights through procurement webinars, the landscape for public procurement offers many opportunities to explore.

The Procurement School encompasses a wide range of activities aimed at achieving the best value for taxpayer money. Procurement service providers work closely with public sector procurement consultants to streamline processes, maintain transparency, and uphold ethical standards. This collaborative effort ensures that the procurement landscape remains fair, competitive, and cost-effective.

Obtaining a procurement certification or a purchasing certificate can be a wise decision for those aspiring to excel in public procurement. These certifications validate your expertise and demonstrate your commitment to professionalism in the procurement arena. Procurement professionals are highly regarded for their ability to make informed decisions that benefit both the public and the government agencies they serve.

Public procurement is not just about acquiring goods and services; it’s about contributing to the well-being of communities and the country. The individuals in this field understand the significance of their roles and strive to uphold the highest standards of ethics and accountability.

Whether you’re a seasoned procurement professional or just starting your journey, the public procurement landscape offers a wealth of opportunities for growth and development. From procurement management courses to ongoing procurement webinars, resources are available to help you stay informed and up-to-date with the ever-evolving world of procurement.

Written by: Liz Busch