Purpose of the lesson

Develop and apply a contract-management process that monitors supplier deliverables against agreed quality, quantity, place and time requirements and supports controlled payment approval.

Practical outcome

By the end of this lesson, you must be able to:

• Extract measurable requirements from a contract or SLA.
• Develop a contract-management process.
• Allocate monitoring responsibilities.
• Collect and validate performance evidence.
• Evaluate deliverables against agreed criteria.
• Calculate and report performance results.
• Identify exceptions and potential claims.
• Define and apply a payment-approval process.
• Maintain accurate contract records.

1. Gather the contract documents

Obtain:

• Signed contract
• Service-level agreement
• Specifications
• Pricing schedule
• Purchase orders
• Delivery or service schedule
• Contract implementation plan
• Approved amendments
• Supplier invoices
• Delivery notes
• Inspection and acceptance records
• Performance reports
• Customer complaints
• Claims and credit notes
• Previous meeting minutes
• Applicable organisational procedures

Confirm that you are using the latest approved versions.

2. Create a contract summary

Extract the essential information from the contract.

Do not interpret the contract from memory. Record the actual approved requirements and relevant clause references.

3. Develop the contract-management process

Create a controlled workflow.

Confirm contract requirements
          ↓
Assign responsibilities
          ↓
Schedule deliverables and reviews
          ↓
Collect performance evidence
          ↓
Compare performance with criteria
          ↓
Record results and exceptions
          ↓
Approve, query or adjust payment
          ↓
Implement corrective action
          ↓
Report and retain records

Your process should define:

• What must be monitored
• How it will be measured
• Who will collect the information
• How often monitoring will occur
• What evidence is acceptable
• Who may approve performance and payment
• How exceptions will be escalated
• Where records will be stored

4. Prepare a deliverables register

List every recurring and once-off deliverable.

Include milestone dates, reporting obligations and customer or operational acceptance requirements.

5. Define performance criteria

Assess contract performance against four core dimensions.

Quality

Confirm whether the goods or services meet:

• Specifications
• Inspection requirements
• Defect tolerances
• Workmanship standards
• Regulatory requirements
• Packaging standards
• Customer acceptance criteria

A quality measure may be:

Quality acceptance rate = Accepted units ÷ Inspected units × 100

Quantity

Confirm whether the supplier delivered:

• The ordered quantity
• The correct unit of measure
• Complete orders
• No unauthorised excess quantities
• No unresolved short deliveries

Use:

Quantity variance = Actual quantity − Contracted or ordered quantity

Place

Verify that delivery or service occurred at:

• The correct facility
• The agreed delivery point
• The correct customer location
• The authorised service site
• The correct receiving bay or department

Time

Compare:

• Scheduled date and time
• Actual date and time
• Response time
• Resolution time
• Milestone completion
• Report-submission deadlines

Use:

On-time performance = Deliverables completed on time ÷ Total deliverables × 100

6. Prepare the performance scorecard

Convert contractual requirements into measurable indicators.

Use the calculation method and target stated in the contract or SLA.

7. Collect and verify evidence

Use objective evidence such as:

• Signed delivery notes
• Proof of delivery
• Inspection reports
• System timestamps
• Inventory records
• Incident logs
• Service tickets
• Customer acceptance records
• Photographs
• Approved reports
• Invoice and purchase-order records

Verify that each record:

• Relates to the correct contract and period.
• Identifies the relevant deliverable.
• Is complete and legible.
• Comes from a reliable source.
• Has the required authorisation.
• Has not been counted more than once.

8. Evaluate the deliverables

For each deliverable:

1. Identify the contractual requirement.
2. Obtain the supporting evidence.
3. Compare actual performance with the target.
4. Calculate the variance.
5. classify the result as compliant, partially compliant or non-compliant.
6. Record the effect of any failure.
7. Determine whether corrective action, escalation or a claim is required.
8. Confirm whether payment may proceed.

Deliverable evaluation

9. Record contract exceptions

Create an exception register for:

• Late or missed delivery
• Short or excess quantity
• Defective goods
• Incorrect location
• Incomplete service
• Missing documentation
• Unauthorised price
• Missed reporting deadline
• Repeated customer complaint
• Failure to complete corrective action

Notify the supplier and relevant internal parties according to the escalation procedure.

10. Evaluate claims

A claim may arise from:

• Short delivery
• Defective products
• Late performance
• Damage
• Additional authorised cost
• Service-level failure
• Incorrect billing
• Unfulfilled warranty obligation

Before accepting or rejecting a claim:

1. Confirm the contractual requirement.
2. Review the evidence.
3. Verify the dates, quantities and values.
4. Establish responsibility.
5. Apply the contract’s notice procedure.
6. Obtain authorised input where required.
7. Record the decision.
8. Monitor the agreed resolution.

11. Define the payment-approval process

A supplier invoice must be supported by verified performance.

Receive invoice
      ↓
Validate supplier and contract
      ↓
Match contract, purchase order and receipt
      ↓
Confirm quantity, quality, place and time
      ↓
Resolve discrepancies
      ↓
Apply authorised credits or deductions
      ↓
Obtain approval
      ↓
Submit for payment
      ↓
Record and reconcile

Payment-verification controls

Confirm:

• Correct supplier
• Valid contract and purchase order
• Correct invoice number and period
• Agreed price and quantity
• Valid tax and banking information
• Evidence of delivery or service
• Required acceptance
• Applicable credits, deductions or penalties
• Correct approval authority
• No duplicate payment

This verification is commonly supported by matching:

1. Purchase order
2. Goods receipt or service confirmation
3. Supplier invoice

12. Manage payment exceptions

Do not approve an invoice automatically when:

• Goods were not received.
• Quantity differs from the purchase order.
• Quality requirements were not met.
• The price differs from the contract.
• The invoice is duplicated.
• Supporting documents are missing.
• Required approval has not been obtained.
• The payment is disputed.

Record the exception and send it to the authorised contract, procurement, finance or supplier representative for resolution.

Do not withhold an undisputed payment without applying the contract and approved procedures.

13. Conduct performance reviews

Prepare a review agenda covering:

• Deliverables due
• Actual performance
• Quality, quantity, place and time results
• Open exceptions
• Claims and credits
• Corrective actions
• Risks
• Payments
• Improvement opportunities
• Decisions and responsibilities

Record minutes, actions, due dates and responsible parties.

14. Maintain the contract file

Retain:

• Signed contract and SLA
• Approved amendments
• Contract summary
• Deliverables register
• Performance scorecards
• Delivery and inspection evidence
• Exception and claims registers
• Supplier correspondence
• Meeting minutes
• Payment approvals
• Corrective-action records
• Management reports

Apply access, retention and version-control requirements.

Practical task

You are provided with examples of contracts, SLAs, supplier invoices, delivery information and claims.

Complete the following:

1. Review the contract and SLA.
2. Prepare a contract summary.
3. Develop a contract-management process.
4. Create a deliverables register.
5. Define measures for quality, quantity, place and time.
6. Evaluate actual deliverables against the criteria.
7. Calculate and record performance results.
8. Create an exception and claims register.
9. Determine whether each invoice should be approved, queried or adjusted.
10. Develop a controlled payment-approval process.
11. Prepare a supplier-performance report.
12. Submit the complete contract-monitoring record.

Required evidence

Include the following in your Portfolio of Evidence:

• Source contract and SLA
• Contract summary
• Contract-management process
• Deliverables register
• Defined performance measures
• Completed performance scorecard
• Supporting delivery and inspection evidence
• Exception register
• Claims assessment
• Payment-approval workflow
• Invoice-verification records
• Supplier-performance report
• Meeting or communication records
• Completed observation checklist
• Learner declaration of authenticity

Competence checklist

Lesson Summary

To monitor contract and SLA deliverables, extract measurable obligations and record them in a controlled deliverables register. Collect valid evidence and compare actual performance with the agreed quality, quantity, place and time requirements. Record exceptions and claims, communicate them through the approved escalation process and monitor corrective actions. Approve payment only after matching the contract or purchase order, performance evidence and supplier invoice. Maintain a complete contract file and use performance reviews to support compliance and improvement.