Opinion: Managing your contracts wisely

By: Warren Clark


Three useful points to making the document work for you

Opinion: Managing your contracts wisely
Warren Clark

 

NatRoad helps members put in place written contracts on a fee-for service basis. We also assist in helping members understand the contracts that are presented to them as part of a tender process or often on a "take it or leave it basis".

 We also help members where there are disputes under contracts, often helping members refer these issues to external lawyers.

Getting contracts in writing has become more important now that from May 1, the Victorian government has introduced laws which include, set penalties for failure to provide an owner driver with the Victorian Owner Drivers’ Information Booklet, the applicable rates and cost schedule, a written contract and either the minimum period of notice of termination or payment in lieu of notice.

But getting value out of your contracts requires more than just a written agreement that is put into a bottom drawer and forgotten or only dusted off if there is a dispute. Most contracts set out deliverables and required service standards. It’s important to put in place a monitoring plan that ensures you meet the outlined obligations.

Contract monitoring requires a disciplined approach as you should compare actual performance against the deliverables set out in the contract, particularly as many large companies are now requiring contractors to meet ongoing key performance indicators (KPIs). There are three ways that we suggest you deal with the process of contract management.

1. Communicate with the people who will perform the services

It is likely that the staff in the best position to monitor contract performance are not the same as those who were responsible writing or negotiating the contract terms.

The staff who will be performing the services should be briefed on the contract. This can be done in a number of ways, for example through "toolbox" talks where the conditions of the contract are explained in simple terms.

The elements you need to communicate are the contract’s contents and requirements e.g. time slots, key dates and milestones, what metrics will be used to measure performance during the contract term and how frequently these should be assessed and reported and in what form those reports should be made. 

2. Make monitoring part of daily activities

There are a lot of pressures in running a road transport business. Contract monitoring may not seem like a priority on a day to day basis, but it is important given the consequences of even small potential breaches in many contracts. 

For example, we have seen contracts where if a time slot is missed, the subcontractor under the contract is required to redeliver the goods at their cost and they don’t get paid for the missed delivery. Putting contract monitoring into your daily schedule assists, even via investment in contract management software where there are a large number of different contracts to manage.

3. What does success look like?

The way you approach the issue of whether you have performed the contract’s terms and met any expressed KPIs will give you a good indication of your monetary return from undertaking the task.


 

Read Warren Clark's advice on industry Awards, here


Make sure you know what criteria to look at; for example, timeliness of invoices. 

Does missing an invoice deadline by one day mean that the contractor/customer has a right to shift payment to a new payment cycle? What have been the time frames for deliveries, for loading and unloading and the average waiting time at the delivery point? 

Keeping records about these issues is essential to determining whether the contract is a boon or a bane for your business.

For a review of your existing contract, or drafting a new standard contract, call one of NatRoad’s member services advisers on 02 6295 3000.

Warren Clark is NatRoad’s chief executive officer

 

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