municipal service contract and administration booklet

Municipal Service Contract Administration

Booklet

L’administration des contrats de services dans les municipalités

Livret

Livret

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ACKNOWLEDGMENT The Steering Committee Members who were so generous in sharing their time and perspective throughout the development of this booklet include:

Dan Cowin, Executive Director, Municipal Finance Officers Association Kim Dooling, President, Ontario Public Buyers Association and Manager, Purchasing and Risk Management, Town of Oakville Andy Koopmans, Executive Director, Association of Municipal Managers Clerks and Treasurers Bob Shelton, President, Ontario Municipal Administrators Association and Chief Administrative Officer, Town of Newmarket J.W. (Joe) Tiernay, Executive Director, Ontario Good Roads Association Graham Watts, Executive Strategic Advisor, Social Housing Services Corporation

Providing advice from an audit perspective was Ron Foster, Auditor General, City of Oshawa, whose careful attention to detail strengthened the final product.

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TABLE OF CONTENTS

ACKNOWLEDGMENT .....................................................................................................1

SCOPE AND DISCLAIMER .............................................................................................5

INTRODUCTION...............................................................................................................6

SCOPE OF THE BOOKLET ....................................................................................................7

STRUCTURING SERVICE CONTRACT ADMINISTRATION..........................................8

BEFORE THE SERVICE CONTRACT STARTS..............................................................9

REVIEW THE CONTRACT......................................................................................................9 RISK MANAGEMENT............................................................................................................9 RESPONSIBILITIES ............................................................................................................10 CONTRACT MANAGEMENT.................................................................................................11 CONTRACT SUPPORT........................................................................................................12 FIELD MANAGEMENT.........................................................................................................13 MEETINGS ........................................................................................................................13 DEPARTMENT PRE-LAUNCH MEETING ................................................................................13 CONTRACTOR PRE-LAUNCH MEETING................................................................................13

ADMINISTERING THE CONTRACT..............................................................................14

PERFORMANCE MONITORING ............................................................................................14 MONITORING METHODS ....................................................................................................15 MONITORING OUTCOMES ..................................................................................................16 DOCUMENTING PERFORMANCE .........................................................................................16 FIELD STAFF/CONTRACT MANAGEMENT COMMUNICATIONS..................................................16 CONTRACT AMENDMENTS.................................................................................................17 SERVICE DELIVERY CONSIDERATIONS...............................................................................18 SLIPPAGE, SCOPE CREEP, AND SCHEDULES......................................................................18 WORK STANDARDS...........................................................................................................18 SERVICE USER SATISFACTION...........................................................................................19 PROBLEMS OR DISPUTES ..................................................................................................19 PROBLEMS WITH CONTRACTOR WORK..............................................................................19 PROBLEMS WITH MUNICIPALITY’S OBLIGATIONS................................................................20 SLOW PAYMENT OR NO PAYMENT .....................................................................................20 ACCESS TO WORK SITE ....................................................................................................20 DELAYS IN REVIEWS AND APPROVALS ...............................................................................20 WORK SCHEDULE CHANGES .............................................................................................20

RELATIONSHIP MANAGEMENT ..................................................................................21

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OTHER CONSIDERATIONS..........................................................................................23

LEGAL AND PROFESSIONAL CONSIDERATIONS ..................................................................23 DEAL WITH STAFF ISSUES.................................................................................................23 COPYRIGHT AND CONFIDENTIALITY ...................................................................................23

CONCLUSION................................................................................................................24

SERVICE CONTRACT ORIENTATION ...................................................................................26 CONTRACT RISKS.............................................................................................................27 RISK MANAGEMENT PLANNING .........................................................................................28 DEPARTMENT OR STAFF MEETING (INITIAL) AGENDA.........................................................29 DEPARTMENT OR STAFF MEETING (FOLLOW-UP) AGENDA.................................................30 CONTRACTOR MEETING (INITIAL) AGENDA ........................................................................31 CONTRACTOR MEETING (FOLLOW-UP) AGENDA ................................................................32 SOME PRACTICAL GOALS IN CONTRACT MANAGEMENT.....................................................33 DOCUMENTS CHECKLIST...................................................................................................34 OBSERVATION RECORD ....................................................................................................35 COMPLAINT LOG...............................................................................................................36 DISCREPANCY REPORT.....................................................................................................37 CONSIDERATIONS IN KEEPING A FIELD DIARY....................................................................38

SUGGESTED RESOURCES..........................................................................................39

GLOSSARY....................................................................................................................40

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SCOPE AND DISCLAIMER This booklet presents practical suggestions on how to better administer municipal service contracts. It is not intended to be used in connection with the negotiation and drafting of contracts, which is outside the scope of this document. The Ministry of Municipal Affairs and Housing believes that the “Municipal Service Contract Administration” booklet may be helpful to municipal users. However, the booklet deals in a generalized way with complex matters and may not apply or take into account particular or local facts and circumstances. As well, the booklet reflects laws and practices that are subject to change. Municipalities are responsible for making local decisions, including compliance with any common law, applicable statutes or regulations. The booklet should not be relied upon exclusively. It is not a substitute for specialized legal or professional advice in connection with any particular matter. The authors recommend that users obtain independent legal, human resource or other professional advice at an early stage in connection with the drafting, management and interpretation of contracts. Legal advice is often appropriate, for example, with respect to risk management, enforcement, compliance and many other matters mentioned in this booklet. The user is solely responsible for any use or application of “Municipal Service Contract Administration”. Although the “Municipal Service Contract Administration” booklet has been carefully prepared, the Ministry does not accept any legal responsibility for the contents of “Municipal Service Contract Administration” or for any consequences, including direct or indirect liability, arising from its use. The authors recognize there are many appropriate practices developed by municipalities over the years that may differ from the suggestions made in this document. These, too, are valuable insights into the practice of contract administration. Ultimately, sharing information and building on practices already tried may be one of the best ways to advance the municipal sector. Users of this booklet are invited to redesign, reword, or revamp material in the toolkit to fit their needs.

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INTRODUCTION Service contract administration is about good management under time pressures and budget limitations, and it is about staying focussed on important work. It helps to:

• Identify who does what functions • Encourage constructive problem solving • Ensure contract performance standards are delivered • Identify and rectify poor performance at an early stage • Learn from past experience and improve future experience, and • Improve user and public satisfaction.

The “Municipal Service Contract Administration” booklet is intended to assist municipal staff in a practical way as they deliver high-value services to build strong communities. It provides general information on administering a service contract and tools to assist with carrying out some important administrative functions. For the purpose of this booklet, a service contract is defined as a contract that calls for a contractor’s labour, time or effort to perform a service; the provision of goods is incidental to the main purpose of the contract. Today, municipalities have contracts for a variety of services, including information technology, human resource, fleet maintenance, snow removal, grass cutting and other related services such as banking, billing, and legal services. The Municipal Service Contract Administration booklet was developed because:

• Increasingly, municipal employees are viewed as leaders in their communities. They are to, and indeed are required to effectively provide good stewardship and administration over public resources.

• Results from the Municipal Management Needs Assessment (2006) identified a need for improvement in the area of service contract administration, and

• Municipalities deliver a wide range of complex services and are looking for sound yet flexible approaches.

Municipal service contract administration can present interesting challenges. To meet these challenges, this booklet suggests a systematic service contract administration approach that may result in benefits including the ability to:

• Take a more integrated, corporate approach to service contract review, compliance, and performance management

• Improve the quality of service and customer focus • Help ensure service contracts stay on track

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• Better monitor and document the completion of tasks, share results and better manage resources, and

• Centrally manage, at a high-level, progress across multiple projects. Without a systematic approach, an over-expenditure of human and financial resources, poor quality work, and limited ability to assess the value-added may be the result. On a practical level, systematic service contract administration practices may, for example, help to:

• Coordinate municipal arena schedules (or other facilities) in the service contract with times to permit access for facilities maintenance workers

• Assist with identifying indicators to help determine whether information technology maintenance work reflects contract standards, and

• Ensure that payments for work performed meet the requirements in the contract payment schedule.

Scope of the Booklet The Service Contract Management Cycle model below is composed of several basic stages (see Figure 1). The stages from “Prepare and Issue Call for Bids” to “Final Contract Sign-off” are not addressed in this booklet. The focus of this booklet is the “Manage Service Delivery” and “Evaluate Service Delivery” stages, that is, the practical administrative issues associated with signed service contracts. The negotiation and drafting of contracts is outside the scope of this booklet.

Figure 1 Service Contract Management Cycle

For the purpose of this booklet service contract administration begins with a contract. The contractor works with the contract to provide the agreed service at the standard, schedule, and price described in the contract. Appropriate and timely performance monitoring and documentation, and maintaining a business relationship are important contributors to successful service contract administration. The booklet also contains a toolkit with several simple and practical resources. These resources can be redesigned, reworded or revamped to fit the user’s needs. The booklet also includes a glossary with commonly used words and a list of suggested resources.

Prepare and Issue Call for

Evaluate bids. Obtain council approval to award contract. Finalize contract.

Contract signed-off

Manage Service Delivery

Evaluate Service Delivery

Prepare and Issue new Call for Bids

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STRUCTURING SERVICE CONTRACT ADMINISTRATION The structure and placement of the service contract administration function in a municipality can be very flexible and take many forms. Some of the things an effective structure may do are:

• Satisfy the senior administrator’s requirement for general program control • Suit the level of expertise of the departments involved, and • Meet the senior administrator’s aims for effective and objective

administration. Lessons learned through effective service contract administration may also benefit future procurement processes1 and other policy and process reviews.

1 Ontario municipalities are required to have procurement policies as specified in the Municipal Act, 2001. Additional information on preparing and issuing bids etc., may be found in the procurement policies and related by-laws for each municipality.

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BEFORE THE SERVICE CONTRACT STARTS Once a contract is signed-off, but before beginning delivery of the contracted service, staff involved in the contract administration may wish to take time to review the contract, develop a risk management plan, assign roles and responsibilities, meet with staff impacted by the service delivery, and meet with the contractor to help with a smooth start-up.

Review the Contract A service contract generally includes terms about a contractor’s labour, time or effort to perform a service. The provision of goods is usually an incidental part of the service contract, from the practical perspective. Those responsible for service contract administration are encouraged to review and discuss each signed contract before the service begins. Again, the contract is a primary document. A review may help those involved to know and respect the roles of the parties to the contract, among other things. In carrying out a review of a signed contract many factors may be considered. The importance of each point will depend on the type of contract, and the municipality’s view about services and standards, any practical and legal risks and other considerations that may be relevant. Key matters often addressed in a service contract include:

• Description of the contract work • List of deliverables • Description of the standard or quality agreed upon • Identification of who does what • Specific timelines for task completion • Location where the work will be performed, and • Form and timing of contractor compensation.

The toolkit contains a Service Contract Orientation tool which may be helpful when staff is becoming more familiar with items that are often included in contracts.

Risk Management Risk management in contract administration can be seen as a process of identifying, analyzing, and responding to risk factors throughout the life of the contract. Its functions can include:

• Identifying possible risk • Managing risk • Providing a rational basis for improved decision-making regarding risk,

and • Planning appropriate responses to the possible outcome of risks.

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Proper risk management may reduce the likelihood of a problem occurring, and may reduce the magnitude of impact should one occur. The following (see Figure 2) is an example of a process for analyzing risk.

Figure 2

Six Steps in Risk Management

Steps in Risk Management

Comment

1. Identify Risks List possible risks, for example, things that could affect the contract work, identified through the contract review.

2. Analyse Risks Estimate the impact of the risks. For example, matters such as estimated duration or cost, may be considered.

3. Prioritize All risks are not equal. Try to prioritize the risks, for example, by identifying those with both potential for a high impact on service delivery and a high probability of occurrence.

4. Mitigate Risks Consider if advance or other action to reduce risk impact is possible and appropriate.

5. Plan for Emergencies

For significant risks, consider having an emergency or contingency plan in place. Some contract managers identify tasks to help manage a risk, then develop these into a contingency plan2 and put it aside. Should a problem occur, they consider use of the action plan to reduce the negative impact.

6. Measure and Control

Where necessary, try to track the effects of the risk and manage it to a successful conclusion.

For additional information see the toolkit for Contract Risks and Risk Management Planning. Consider how the two tools overlap.

Responsibilities3 Preparing for contract administration often includes reviewing:

• Responsibilities of staff and communication channels • What should be monitored, the methods to use, how frequently and by

whom, and • The process for making changes within or outside the contract.

2 As part of risk management, contract managers often have a contingency plan to help ensure service continues if there are contract problems. Options may or may not involve a new contract. Municipalities can consider the practicality, for example, of negotiating with unsuccessful bidders, other current contractors or other municipalities, or delivering the service in-house.

3 The description of contract management, contract administration and field management responsibilities is used with written permission from Kelly Le Roux, ed. Service Contracting: A Local Government Guide, 2nd edition, (International City/County Management Association, 2007), 152 – 154.

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The staff involved in contract administration may have a wide range of titles and skills. For each contract, the responsibilities assigned to specific individuals may vary. Three types of responsibilities are typically part of administering a service contract: contract management, contract support and field management.

Contract Management The approach and attitude of those who manage contracts can have a powerful impact on encouraging the use and acceptance of the contract by all staff. This acceptance may help lead to successful contract outcomes in terms of delivering excellent results and building successful long term relationships with the contractor. General contract management functions, which often overlap, may include: Coordination

• Coordinate the activities of staff involved, and • Review and act upon requests of all parties involved in a contract,

working closely with the contractor and with interested municipal departments

Organization • Participate in reviewing what to evaluate, the criteria, rating systems,

surveys and other monitoring methods • Meet with staff directly involved with the contract and train them on

their responsibilities • Establish and implement procedures for review of contract problems or

disputes • Work with staff to prepare risk management plans, and • Prepare and update the corporate procedures for administering service

contracts, and make suggestions for policy change. Evaluation

• Review the acceptability of reports or other deliverables provided by the contractor

• Review and make recommendations about contractor payment requests, including about approving or rejecting them

• Monitor the performance of the contractor working closely with municipal field staff

• Evaluate the effectiveness of the field staff involved in achieving the aims of the contract

• Establish inspection schedules for performance monitoring as specified in the contract

• Plan and manage surveys of citizens and departmental clients • Analyze information collected during the contract term to identify ways

to improve the effectiveness and efficiency of the service

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Implementation • Make recommendations about improvements with the current contractor,

and • Make recommendations about changes or improvements that might be

negotiated through amendments to current contracts or through future contracts.

Mediation • Try to resolve conflicts when such conflicts cannot be resolved by those

directly involved or by others • Build and maintain constructive relationships, and • Negotiate and make recommendations related to requests to amend the

scope of work. Enforcement

• Communicate about the conflict with the contractor, other involved staff and departments, and

• Consider what actions may be available if those serious service problems arise.

Contract Support Contract management and support responsibilities are sometimes carried out by the same staff. The contract support function involves providing administrative support to the field staff as well as administrative oversight for service contracts in a department or across several departments. The general roles of contract support staff often include:

• Direct, monitor and review field staff performance in connection with the contract

• Assess contractor performance with the field staff • Help ensure timely submission of required reports from the contractor and

field staff • Monitor contractor expenditures for compliance with expenditure forecasts

and budget • Review the contractor’s payment requests and the field staff’s payment

recommendations, process approved payment requests expeditiously and forward requests that have not been approved to the contract management staff for review and settlement

• Track payment requests as they travel through the accounts payable system to help the municipality meet the agreed payment schedule

• Assist field staff in reviewing any contractor requests for changes, making recommendations, and forwarding them to the contract management staff

• Maintain the master contract file and work to keep insurance certificates, bonds, licences and other contract-related documents current

• Monitor contractor for potential compliance issues connected with business plans, human resource or other requirements, and

• Help prepare risk management plans.

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Field Management Municipal field staff is the primary link with the contractor and reports to the contract management staff. Field staff is generally alert to identify problems in early stages. Responsibilities may include:

• Check the qualifications of the contractor’s personnel against contract requirements

• Conduct inspections of the contractor’s work to help ensure that it is carried out as required

• Report on contractor performance • Monitor the contractor’s quality control program • Review payment request to help ensure the items and hours charged

match the contract prices and accurately reflect the service received • Alert other contract administration staff to developing problems • Help to develop risk management plans, and • Advise the contract management staff of potential for improvements to

present or future contract work.

Meetings Some municipalities have two meetings before the contract work begins ― one with the departments involved and one with the contractor. Such meetings may help clarify the procedures to be used during the performance of the contract work and enable those involved to better understand various perspectives and expectations.

Department Pre-launch Meeting Some municipalities have a meeting which is attended by all staff from any department involved with the work under a contract where:

• Department staff have an opportunity to provide input on internal issues related to the contract, and

• Contract administration staff are given time to adjust plans in response to departmental input before a pre-performance meeting with the contractor.

Such meetings often have a goal of helping to smooth internal operations. See the toolkit for more information on developing a Department or Staff Meeting (Initial) Agenda, and a Department or Staff Meeting (Follow-up) Agenda.

Contractor Pre-launch Meeting In practice, orientation meetings are often held following the departmental meeting and prior to beginning the contract work. Meetings of this kind often include the municipal staff involved with the contract, staff from the departments impacted by the contract work, the contractor, and the contractor’s staff person who is responsible for monitoring service delivery. For more information on developing a Contractor Meeting (Initial) Agenda and a Contractor Meeting (Follow-up) Agenda see the toolkit.

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ADMINISTERING THE CONTRACT

When the contract service begins, municipal staff assigned to the contract often spends time with the contractor to resolve any start-up issues. This approach may help build a strong relationship based on cooperation and mutual respect. Such a relationship may later help the contractor and municipal staff to reach a mutually satisfactory resolution to any contract performance issue should it arise. When the municipal staff and the contractor already have a professional relationship in place, these preliminary meetings often focus on changes in the work environment since the previous contract work was carried out. Generally, the role of municipal staff throughout service delivery monitoring and documenting contractor performance is an important one, and is very time consuming. Some of the time used for contract administration may be devoted to resolving what may appear to be insignificant problems. However, this may in some instances be proper use of staff time because small problems unattended can easily escalate into major ones. The staff involved in contract administration can try to be prepared to tackle all problems, regardless of the size or source, to help enable the contract to succeed.

Performance Monitoring Monitoring the contractor’s performance provides information needed to help ensure that contracted services purchased are being delivered. It may also strengthen accountability, help improve performance, stimulate productivity and creativity, and inform the budget process. Monitoring also has the potential to:

• Deliver greater value for money and cost control • Reduce the likelihood of crisis management • Increase the likelihood of early identification and resolution of poor

contractor performance and other problems • Help to ensure controls over performance, costs and standards in the

contract are operating well, and • Improve evaluation of work described by the contract in comparison with

work actually done and identify changes that could benefit future contracts.

Excessive contractor performance measurement, however, can have a negative impact. It may inhibit creativity and encourage innovation in cost-cutting. Accordingly, a municipality can consider whether less intense monitoring can be used and would be appropriate. For more information on how to help minimize impacts on contractor performance see the toolkit for Some Practical Goals in Contract Management.

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Monitoring Methods There is a variety of options for monitoring contractor performance. Common approaches include direct monitoring, follow-up monitoring, monitoring by exception, scheduled and random monitoring. Monitoring outcomes may involve one or more approaches. The terms and conditions of a contract may also impact how contractor performance is monitored. If monitoring shows that follow up actions or changes seem appropriate, the municipality may consider its available options. For example, there may be options to dismiss a contractor and to use a different service provider or to decide against renewing the contract. Direct Monitoring Directly monitoring the contractor’s work while the work is being performed can be onerous on the municipality and on the contractor. This approach is generally used during start-up and sometimes during the contract term to help ensure the work meets the contract procedures and standards. Direct monitoring has the potential to create tension between the contractor’s employees and the observer, so the attitude of municipal staff matters greatly. Follow-up Monitoring Follow-up monitoring is used frequently. The focus is on gathering information on how the contractor is meeting contract standards, schedule requirements, work quantity and quality, and the condition of the work area, i.e., materials stored properly, neatly, cleanly and safely. Monitoring by Exception Monitoring by exception is often used when the municipality decides:

• Work performed is easy to measure and conducted primarily on the contractor’s site

• There is a trade standard by which the contractor’s proficiency may be evaluated, and

• Users continuously evaluate the performance as a matter of practice. Scheduled Monitoring Scheduled monitoring may occur during or after work performance. The contractor is notified in advance of a performance review so the service is often an example of the best the contractor can deliver. Results may indicate if the contractor understands the demands of the contract and whether a review of the contract requirements with the field staff is necessary. Random Monitoring Random monitoring is an inspection taking place without the contractor’s prior knowledge. This approach may particularly encourage the contractor to maintain acceptable standards for the entire contract period.

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Monitoring Outcomes Outcomes measures assess how well a program has achieved results. The key question may be: Has the program made a difference? Contract managers can consider, if the contract allows it, carefully structuring outcome indicators so as to not create barriers to innovation, and similarly carefully structuring performance expectations to try to lessen risk of creating incentives that place the contractor at odds with client. The Municipal Performance Measurement Program is one source of performance monitoring indicators for a municipal setting.

Documenting Performance Record-keeping practices can be very important in contract management. The following lists record-keeping practices that some municipalities have found helpful.

Field staff/contract management communications Written communication related to the contract received by the field staff is sometimes copied then forwarded to the contract management staff and kept in the master file for the contract. The reciprocal also is found: written material covered by the contract management staff relating to contractor performance is often copied to the field staff for information and reference, and kept in the master file for the contract. Documents Roster Some municipalities use a checklist to keep track of documents the contract manager considers important. These have included, for example, licenses, certificates, bonds and insurance, various reports and other deliverables required of the contractor during the term of the contract, or other items. A checklist can be prepared at the beginning of the contract and updated regularly to help ensure all items are current. See the toolkit for a list of some items that might appear on a Documents Roster. Observation Record Observation records document observations of contractor performance whenever service delivery is observed. See the toolkit for the general themes that may appear in an Observation Record. Complaint Log The complaint log documents the receipt and action taken on complaints. A separate form is customarily used for each complaint. The municipality may already have a standard form that can be used, or adapted for use, for the term of the contract. See the toolkit for the type of information that may appear in a Complaint Log.

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Discrepancy Report A discrepancy report describes and documents a concern about a contract problem, such as a problem with a work standard in a contract. Customarily, reports are prepared by the field or contract support staff and approved by the contract management staff. Some municipalities include them with requests for corrective action made to contractors. Some municipalities ask contractors to submit a corrective action plan if the municipality thinks a discrepancy is serious. Such requests often ask:

• Why the discrepancy occurred • What will be done to correct the situation, and • What steps will be taken to prevent similar occurrences in the future.

See the toolkit for a description of the type of information that may appear in a Discrepancy Report. Field Diary In practice, field notes forming the field diary often include detailed information on matters related to the contract. Field notes are sometimes used as, or in connection with, formal documentation about the contract. Accuracy will likely be important. Those who keep field diaries often keep a separate diary for each individual contract. For more information about keeping a field diary, see Considerations in Keeping a Field Diary in the toolkit. Citizen and Client Surveys Surveys may be effective ways to monitor services to citizens or to clients. Citizen surveys can be difficult to construct. However, citizen surveys may be a valuable means of capturing performance information. Surveys of municipal clients may be easier to construct, conduct and evaluate than citizen surveys. Client surveys usually address to what degree users are satisfied with a specific service. Any survey requires a sound understanding of survey questionnaire construction techniques, sampling, and statistics and data analysis. Contract managers may wish to consider engaging an independent survey firm to carry out surveys. Summary Evaluation Report A brief evaluation of performance is generally completed shortly after start-up and followed by additional reports at regular intervals. Summary evaluation reports are often prepared by contract management staff using information from all available sources during the evaluation period.

Contract Amendments Even the most carefully crafted contracts may not address some aspects of service delivery. In some cases a municipality - or a contractor - may think that changes are appropriate or justified, and accordingly consider contract

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amendments. In addition, some contracts provide for change orders, or other ways to allow for changes in service without amending the contract. Although contract amendments and change orders are generally beyond the scope of this publication, and a decision when they are needed is up to the parties, it is noted there may be cases where municipalities or other parties may decide to initiate negotiations with respect to a change order, or for a new or amended contract. Often progress reports on work under contract include a brief description of changes made, relevant approvals, results from implementation of the change and how related costs, if any, were assigned.

Service Delivery Considerations Service delivery issues can arise in many forms and at any time. It can be helpful to identify issues early and take action to mitigate detrimental effects as soon as possible.

Slippage, Scope Creep, and Schedules Slippage, scope creep, and schedule issues can become difficult and expensive challenges. Slippage problems may be related to quality, cost and/or rate of work. In some cases the municipality may think the contractor is not meeting contract standards. The municipality may want to encourage the contractor to correct the problem, whereas the contractor may have other views such as a claim the municipality contributed to the problem. Although no outcome can be certain with conflicts of this kind, positive results may be realized when field staff is vigilant in identifying problems early. Scope creep occurs when the scope of the contract work is expanded or shifted without proper authorization. For example, a contractor may attempt to charge a municipality for additional work without proper authorization. The work may or may not be within the scope of the contract, and may or may not need special approval. Again, positive results may be realized when field staff is vigilant in identifying problems early. Field staff may regularly and frequently monitor schedules to minimize possible lapses in service, and help meet the goal that services are delivered in the agreed quality, when and where promised.

Work Standards Frequently service contracts specify the amount of work to be performed during a specific time period. Many municipalities consider regular monitoring of productivity a best practice. If productivity falls below the contract standards

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municipal staff can consider quick action to help prevent further decline and to try to boost productivity.

Service User Satisfaction It may be important to determine how and when users may receive satisfactory service. Some municipalities use in-house evaluation tools and processes such as surveys, interviews or other mechanisms, as part of the contract administration.

Problems or Disputes Developing and maintaining constructive, effective communication with the contractor may help to avoid contract problems or disputes. To work to make the contract a success for all involved, municipal staff, particularly the field staff, often tries to prevent problems from escalating into formal disputes. Accurate and adequate documentation may be vitally important in the event of a dispute.

Problems with Contractor Work When a contractor may not be meeting contract standards, or other contract issues arise, there can be problems for everyone including the municipality. The problems can include the quality of work, as well as legal or other potential concerns or consequences. Both municipality and contractor may have a role when contract problems arise. Municipal staff can consider their options, for example, when apparent discrepancies arise between work and stated contract requirements. They may include communicating verbally and/or in writing with the contractor to help clarify understandings. In dealing with problems municipal staff can also consider the pros and cons of not assigning blame and instead concentrating on reaching resolution. There are many issues to consider in cases of poor work, and each individual situation should be carefully examined. The following is one model of a process for managing poor work: Step1: Municipal field staff, working directly with the contractor’s on-

site supervisor, tries to solve the problem. If this is unsuccessful, proceed to Step 2.

Step 2: Municipal staff asks the contractor to address the problem. If this is unsuccessful, it may be time to proceed to Step 3.

Step 3: Municipal staff and contractor meet to discuss the problem and plan a resolution. If the problem persists, proceed to Step 4.

Step 4: The municipal contract management staff decides whether to take formal action under the contract.

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Timely and accurate documentation would generally be important during each step of this process, as would be keeping appropriate municipal staff informed of progress.

Problems with Municipality’s Obligations A municipality’s failure to meet its contractual obligations may affect the quality of the contractor’s work, besides of course risking legal or other potential consequences. Slow payment, denial of access to work, delay in reviews and approvals, work schedule changes, and conflict between the contractor and the contract administration staff are some of the issues most likely to lead to difficulties between the municipality and the contractor. There could also be future practical problems for the municipality. If contract difficulties lead to a municipality developing a negative reputation with contractors, the municipality may find it more difficult to attract qualified bidders, or receive bids with built-in costs to offset a perceived risk of doing business with the municipality.

Slow Payment or No Payment When the municipality fails to pay a contractor in a timely manner, one result can be increased costs to the contractor, another results can be a negative reputation for the municipality which can increase bid prices. Avoiding or minimizing delays in payment is often a concern for contract management staff.

Access to Work Site Public use of municipal facilities can coincide with contractual access such as scheduled maintenance like cleaning, painting or grass cutting etc. Best practices will generally include working to ensure appropriate or scheduled access for contractors, and consideration of ways to advise contractors at an early stage if there are access problems.

Delays in Reviews and Approvals The municipality should be mindful of any schedule for reviews and approvals in a contract. Delays in approvals, among other things, can be costly to the contractor especially when the next phase of performance cannot start until the review is complete.

Work Schedule Changes Contracts sometimes allow for work schedule changes, and they may occur frequently in a municipal environment. However, with some basic planning they may be few and the effects may be minimized. Best practices can include advising contractors well in advance of any planned changes in the work schedule, to allow time for the contractor to plan for effective use of the workforce.

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RELATIONSHIP MANAGEMENT Relationship management is about understanding the needs of contractors and satisfying those needs while building trust between all parties. To help achieve effective business relationships, municipal staff can consider the following: Build a network At times, staff may be assigned to a contract in a service area without having an existing business network in place. In these situations, effective business relationships can be developed by the municipal staff initiating a network that will support the fulfillment of the contractual goals from the municipal perspective as well as from the vendor perspective. Share information and knowledge Generally, it may be helpful to start with a goal of sharing information, noting there are complications which may affect that goal. In order to help build resilient business relationships it is usually important to ensure good access to contract management information, documentation, and key issues. At the same time, there will likely be requirements or concerns with respect to confidentiality, conflict of interest, privacy, and freedom of information, among other information matters. There may be some information that cannot be shared, and some information that must be shared. Value contractor’s work Staff managing contracts can become dependent on their business relationships when the contribution of others is required to accomplish a task or reach a goal. Therefore, it is a consideration that the value of the contribution is acknowledged, and that all contractors be viewed as important. Identify areas for improvement With a commitment to achieving an excellent outcome, it is important to check that perceptions, decisions, and actions will help result in delivery of the best-value service. To that end, consider welcoming suggestions about how to do things differently and actively seek out suggestions for improvement. Develop a positive work environment and relationships Business relationships that are built with a positive outlook support everyone in seeking opportunities for success and for celebrating good performance. Staff administering contracts may hone their skills to create positive business relationships and eliminate or reduce behaviour that could contribute to poor relationships. Some of these skills are:

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Skills to Create Positive Relationships Tactics that may Result in Poor Relationships

Timely information sharing and giving accurate and appropriate feedback throughout the process

Withhold information and constructive feedback; lack of fairness and consistency

Create trust through actions and words, Suspicious and low trust of others Creative conflict resolution and problem solving Commitment to win conflicts; get something

for nothing Welcoming change Resisting change Valuing interdependence Over-valuing rogue behaviour

Use Judgement Sound contract administration is held together by people, not by forms, surveys, diaries or other monitoring tools. It often depends more on the skills of the contract monitors than on particular monitoring methods or forms used. Communicating in a non-threatening manner may increase the likelihood that a contractor will be inclined to respond openly. This can establish a foundation for the relationship that may hold firm when the contractor and staff disagree. Staff involved in any aspect of contract administration will generally work to accurately observe and record performance, but also may consider how to work with contractors to help maintain acceptable performance and remedy poor work. Although most contractors cooperate readily with the municipal staff to resolve problems this is not always the case. The municipal staff may find it useful to recognize the different styles and needs of contractors and be flexible in how they apply the tools of contract administration in order to encourage the best possible performance from each contractor. Contract monitoring can be one of the most labour-intensive aspects of contract administration and funds and personnel are generally carefully rationed and put to best use. A service with infrequent inspection under a previous experienced contractor often needs more attention when delivered by a new contractor. Contract administration staff balances the time and money required to monitor a contract against the potential for disruption of important service delivery. If the risks are low, a municipality may think less intensive monitoring is adequate. Each contract and each contractor is different. There is no single right way to monitor a contract.

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OTHER CONSIDERATIONS

Legal and Professional Considerations As noted at the beginning of this booklet, advice is often appropriate in the contract context, for example, with respect to risk management, enforcement, compliance and many other matters mentioned in this booklet. It is recommended that users obtain independent legal, human resource or other professional advice in connection with the drafting, management and interpretation of contracts.

Deal with Staff Issues Being clear about relationships and dealing with people issues as they arise is usually considered an important part of contract administration. Generally the longer the contract term, the more critical these people issues become. Municipalities may consider taking the time to articulate a clear distinction between municipal staff and contractor staff and to respect the distinction throughout the term of the contract, time well spent. The relationship between the municipal staff and contractor staff usually changes for each contract depending on the type of service under contract. Whatever the relationship, important issues often include labour relations, legal, project management, cost and efficiency.

Copyright and Confidentiality In the contract context, questions about copyright, confidentiality, privacy, and freedom of information are frequent. As a starting point staff may wish to familiarize themselves with the relevant provisions in the agreement, as they might with other terms in the contract.

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CONCLUSION The overall purpose of service contract administration is to acquire in an accountable manner, in compliance with the municipality’s own internal policies and procedures and the terms of the contract, the services that meet the needs of the community and municipal staff while providing the best overall value. The signed contract is the starting point for successful contract administration. A review of the contract helps to plan the work involved in the contract administration. Developing and communicating a risk management plan and having processes for monitoring and documenting performance can help establish a sound foundation on which to proceed with the contracted service delivery. Information gathered through contract management can also inform development of future contracts. It may be helpful to make people and relationships a priority in service contract administration. A common goal for municipal staff could be stated as: To work with the contractor to develop and maintain an environment in which the contractor can succeed in delivering high-quality public services on time at, or below, the agreed-upon cost.

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Municipal Service Contract Administration

Toolkit

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Service Contract Orientation

Contract Preamble, Date, Term Contract preamble may include explanatory information

Scope or Description of Work Payment

Payment provisions, for example a schedule of payments, amounts, etc. Individuals Involved with the Contract

Provisions may, for example, identify key individuals and roles, vendor or municipal contract managers, a vendor management team, contact persons, etc.

General Terms Assessment or review of performance

Changes to work or deliverables

Inspections, site visits or attendance, monitoring results measurement, etc.

Schedules of meetings and persons in attendance

Notices and communications

Municipal premises or facilities

Insurance, liability, indemnity

Audit of records related to the contract

General financial and security

Operation and maintenance

Conflict and dispute resolution

Confidentiality, privacy, freedom of information

Copyright and intellectual property

Records retention

Please note this document should not be relied upon as a substitute for specialized legal or professional advice in connection with any particular matter. The user is solely responsible for any use or application of this document.

This tool may help readers familiarize themselves generally with topics that may be found in service contracts. Individual items may or may not be present depending on the contract. Please note that where there is an actual service contract in place, as a starting point for service contract management, staff would generally review the provisions in that contract.

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Contract Risks Practical risk categories in connection with service contract work include:

• Technical issues or feasibility • Political or market changes • Financial and economic • Human behaviour • Project organization • Scope and schedule.

Specific problems often arise, for example, in relation to:

• How work is described • Changes to work • Informal or unstated arrangements or responsibilities • Payments • People doing the work • Credit arrangements • Currency fluctuations • Software and technology • Subcontractors


This tool is intended to provide some general areas for consideration when thinking about possible sources of risk with a municipal service contract. The listing is not complete. Each service contract requires separate assessment to address its unique circumstances.

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Risk Management Planning Contract Identifier_______________________ Identify and Comment on Potential Risks

After risks are identified, comments or details may be added for them, for example, why it could be a risk, who identified it, the likelihood of it occurring, the potential impact should it occur, potential cost analysis, or any other information considered relevant.

Describe Risks and Triggering Factors

Description of the risk, the circumstances likely to trigger an occurrence of the risk, and any other related information.

Analyze and Prioritize Risks

Identification of areas of impact (for example, who or what could be impacted by a risk), a description of the potential impact of the risk on each of the areas identified, or consideration of matters such as when and for how long a risk would most likely occur.

Risk Minimization Planning

Carry out practical planning with the goal of addressing and lessening risk. Factors might include among others:

• Cost and resource requirements and a cost benefit analysis • Timeframe and assessment of risk response anticipating likely

results • Use of a risk champion for identified risks • Target dates for risk resolution • Tracking status, response actions and results achieved for various

risks


This tool lists items for consideration when planning how to manage risks associated with a signed contract. The items are not a complete risk assessment, and using or filling out this document will not constitute a risk management plan. However, the various entries may be helpful in suggesting tracking, controlling or planning strategies to address some of the risks.

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Department or Staff Meeting (Initial) Agenda Contract Identifier_______________________

Part 1: Meeting Details • Date: • Time: • Attendees: • Other:

Part 2: Meeting Practical Considerations • Goal of an open discussion. • Allot times for agenda items. • Start the meeting at the scheduled time and the meeting on time, if not

early. • Other:

Part 3: Meeting Agenda Items and Recording of Details

• Planned items and speakers • Plan for recording of details considered relevant such as the

understanding of key issues, next steps items, etc.

Examples of items often discussed include: overview of the contract; staff roles in relation to the contract; forms and procedures; questions about procedures; suggestions for changes, for example, to internal forms or procedures.

Part 4: Discuss Next Steps

Consideration of next steps, next meeting date, confirmation of assignment of action items, person(s) assigned tasks, the action due date, etc.


This tool lists items for consideration when planning an agenda for a meeting in connection with a signed contract. It is not intended for use as a form, because the matters listed are suggestions only, and cannot be complete or accurate for actual local use.

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Department or Staff Meeting (Follow-up) Agenda

Contract Identifier_________________________


Part 2: Meeting Practical Considerations • Goal of an open discussion. • Allot times for agenda items. • Start and end times for the meeting. • Other:




Examples of items often discussed include: long-term issues; service level trends; industry trends; new requirements or changes; client satisfaction.





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Contractor Meeting (Initial) Agenda

Contract Identifier_______________________






Examples of items often included or discussed are: introduction of participants and description of their roles; contract documents; municipal and contractor responsibilities; performance expectations and monitoring plans; quality control plans; complaint and dispute procedures; payments; contact information.

Other examples are: long-term issues; service level trends; industry trends; new requirements or changes; client satisfaction.





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Contractor Meeting (Follow-up) Agenda

Contract title, number or Identifier_______






Examples of items often included or discussed are: a discussion of immediate or long term issues from the perspective of all parties; service level trends; industry trends; performance evaluations; client satisfaction; contractor satisfaction; changes and new items.





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Some Practical Goals in Contract Management

1. Start with the contract.

2. Frequently monitor performance measures.

3. Be prepared to learn, change and adapt.

4. Consider a collaborative rather than adversarial relationship with contractors where appropriate.

5. Parties understand and respect the balance of benefits and responsibilities in managing the contract.

6. An integrated, corporate approach to service contract review, compliance and performance management.

7. Risks are minimized and addressed.

8. Continuous work on improving the quality of service and customer focus.

9. Consideration if knowledge gained may be useful for future contracts. Please note this document should not be relied upon as a substitute for specialized legal or professional advice in connection with any particular matter. The user is solely responsible for any use or application of this document.

This tool is intended to provide some general suggestions for administering a service contract in a municipal environment.

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Documents Checklist Contract Identifier_______

A listing of each item required or considered useful with the relevant date and any necessary comments.

It may be useful to store the listing at the front of the file holding the collection of documents.

Examples of documents sometimes included in this checklist are letters of credit, certificates (e.g. health, professional, insurance, etc.), licenses (e.g. vehicle operator), evidences of work phase completion, etc.

Please note this document should not be relied upon as a substitute for specialized legal or professional advice in connection with any particular matter. The user is solely responsible for any use or application of this document

Some municipalities prepare a listing of documents or actions that may be required or convenient for administering the contract. The items listed below are suggestions for consideration and may or may not be needed or helpful in of managing a particular contract.

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Observation Record Contract Identifier_______

Type of monitoring used Description of what was observed Other Considerations Action recommended or taken Please note this document should not be relied upon as a substitute for specialized legal or professional advice in connection with any particular matter. The user is solely responsible for any use or application of this document.

This tool lists for consideration some kinds of information often included in the records made when contract service delivery is observed. However, it is up to the user to decide what would be complete for its purposes, as other information also may be included or needed, and the format and content are up to the user.

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Complaint Log Contract Identifier_________________________

Contact Information Complaint Details Description of issue Potential consequences Positions of the municipality, contractor, or others on issues if known Use of complaint information (e.g. customer service management) Other Actions and Outcome

Actions taken, by whom, the status, date of action, outcome if known, other details

Comments Actions recommended or taken


Complaint logs are used to collect and track complaint information. This tool lists for consideration come of the kinds of information often included in a complaint log. However, it is up to the user to decide what would be complete for its purposes, as other information may be included or needed, and the format and content are up to the user.

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Discrepancy Report Contract Identifier_________________________

Description of the discrepancy or problem Date for review or response Contractor response description Other Disposition/action taken Please note this document should not be relied upon as a substitute for specialized legal or professional advice in connection with any particular matter. The user is solely responsible for any use or application of this document.

Discrepancy reports are often used to track or document outcomes or other matters that, from a party’s perspective, may differ from the requirements of a service contract. This tool lists for consideration, some kinds of information often included in a discrepancy report. However, it is up to the user to decide what would be complete for its purposes.

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Considerations in Keeping a Field Diary

Practice relating to manual entries in a field diary.

• Number pages consecutively.

• Write notes in permanent ink.

• Cross out errors and write correct information on the line immediately following the crossed out error; do not cross out errors and write above, or use whiteout or erase entries.

• Enter information into the diary as it occurs.

• Draw a line after the entry of each day. Do not leave a space or skip a line or start a new page with each day or each entry.

• Insert the date and number of any photos related to diary entries. Store photos in the contract master file. If photos are stored on an electronic file, label the electronic file with the same name and code as hard copy files.

• Insert the contract identifier and the date for each entry, at the beginning of each entry, if the diary is used for more than one contract.

Typical entries • If service contract work takes place outdoors, record a weather

description.

• Note unusual circumstances, like equipment malfunction or disruption in utility services.

• Be factual. Make a note of both favourable and unfavourable observations.

• Summarize the content of any important conversations

• Description of details not expected in relation to contract work, e.g., contact with anyone other than those assigned to the contract by the contractor.


Field diaries are often used to track or document, in the field, service delivery under a contract. This tool lists for consideration some of the practices often used or kinds of information often included in a field diary. However, it is up to the user to decide what would be complete for its purposes, as other information also may be included or needed, other methods of keeping field notes, for example, electronic recording methods, also are often used, and the format and content are up to the user.

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Suggested Resources The following resources may be useful supplements to this guide. Procurement By-law, related procedures and protocols from your municipality. Occupational Health and Safety Act. http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90o01_e.htm. Workplace Safety and Insurance Act. http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_97w16_e.htm. Canadian Intellectual Property Office websites at http://strategis.gc.ca/sc_mrksv/cipo/contact/cont-e.html.

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Glossary

Amendment – one way to refer to a change to a contract document. Sometimes an amendment is put in place using a document called an “addendum”. Contract – For the purposes of this booklet, a contract would generally take the form of a written agreement signed by two or more parties. Contractor – Often used to describe the party to a contract primarily responsible for performing the services or work described by the contract. Dispute – A disagreement between the parties to a contract about the provisions of the contract resolved through pre-established administrative procedures; if an acceptable administrative resolution is not achieved, the dispute may be resolved through legal action. Terms or conditions – Wording often used to describe provisions in a contract. Intellectual property – Generic term often used to describe work legally protected by copyright, trademark or patent. Liability – Legal responsibility for something, for example, obligation to pay an amount in connection with a matter. Quality control plan – A plan to help ensure that a service is delivered satisfactorily and that an acceptable level of performance is maintained. Scope of work – A broad description of the reach or range of the services or work in a contract. Senior Administrator – The senior municipal staff person and the primary link between the municipal council and staff, e.g. Chief Administrative Officer, Town Manager, or City Manager. Service contract – A contract that calls for a contractor’s labour, time or effort to perform a service; the provision of goods is incidental to the main purpose of the contract. Slippage – Failure to maintain an expected service level, fulfill a goal, meet a deadline, etc.; loss, decline or delay

Ministry of Municipal Affairs and HousingISBN 978-1-4249-7694-2 (PDF)ISBN 978-1-4249-7525-9 (Print)Queen’s Printer for Ontario, 2008500/ 08/08 Disponible en français

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