Video transcript

Contract lifecycle
DOUGLAS MACBETH: This Contract Lifecycle diagram shows the overall project life cycle, and
is intended to show the spread and extent of the considerations needed from many different
people. [Diagram shows seven interlocking jigsaw pieces which make up a circle] The diagram
is used as the organisational principle of the free-to-download e-book, which provides more
detail and discussion of each stage. It is not necessary to read all of this book, but it's there
for anyone who wants to take the subject further.
Here, we will have a high-level discussion of the different stages. The other source indicated,
from the free-to-access UK government website, provides more detail, but it really starts from
what, in this diagram, is termed Stage Four. Let us look at each stage in turn.
Stage One-- there has to be a business or policy reason to consider supplying some goods or
services. This need has to be recognised, and the details of what would constitute
satisfaction of that need has to be designed and specified.
Stage Two is highly strategic since it determines if it is possible or desirable to do this
activity in your own organisation, or whether you need to go to the marketplace to buy this
capability and capacity. In many organisations, 80% to 90% of their spend is with outside
suppliers or vendors.
Stage Three-- a sourcing process is needed if the decision is to go to the market to buy and,
therefore, contract this service. In the public sector, the choices are defined by rules and
procedures to demonstrate fairness and to reduce the scope for corruption or political
interference more than in the private sector, but the thinking is very similar. Contract
negotiation, agreement, and award are the outcomes of this stage.
Stage Four-- once a contract is agreed, then both buyer and supplier organisations have to
put agreements, plans, and processes in place to deliver on the contractual promises made on
both sides. Often, this means a new team takes over the responsibility to manage this part of
the lifecycle.

University of Southampton 2015

Page 1 of 2

Contract Management

Video transcript

Stage Five-- contract monitoring and improvement is needed since it is here that, without
clear management, the value you negotiated can be reduced by between 5% and 15%
typically.
Stage Six-- near the end of the contract, we have to decide is the need still there, perhaps
with some changes required, or if the need is now satisfied, and the contract can end? We
might need to go back to the beginning again to start the overall process afresh.
Stage Seven is similar to all end of projects. There is a need to capture what has been learned
and how we can continue to improve performance and processes.

University of Southampton 2015

Page 2 of 2

Contract Management