Administration & Monitoring

While the service provider tends focus on how services are delivered, the ministry focuses on what is delivered. During the administration and monitoring phase:

The service provider:

• Delivers the contracted services; and
• Reports on the services delivered and issues or concerns.

The Contract Manager:

• Ensures work is completed in accordance with the contract;
• Ensures work is proceeding satisfactorily;
• Deals with any issues, as they arise; and
• Ensures that the service provider is paid.

While the methods used to monitor contract performance may vary with the nature of the services, monitoring should be carried out collaboratively with the service provider.

The contract manager monitors the contract and ensures consistent communications between the service provider and the ministry. See Contract Manager to understand the responsibilities and duties of the contract manager. If ministry or service provider staff were not involved with the initiation or negotiation of the contract they will need to familiarize themselves with the contract terms.

Contract Reviews

Reviews are an important part of the contract management process. Their intent is to compare what actually happened to that which was anticipated or expected to happen. Reviews provide a learning opportunity towards improved service delivery, help determine if the expected benefits are being achieved, and help demonstrate accountability for funds expended.

Reviews can occur at different stages in the procurement process and even after the contract has been completed. Deciding what and when to review should be part of the procurement plan. The type and depth of the review will depend on the nature, scope, value, level of risk and complexity of the contract.

Reviews should be agreed to up front with the service provider and outlined in the contract.

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Ministry Actions to Contract Reviews

• Ensure the services are being delivered as set out in the contract. This could include review of reporting, performing onsite inspections, interviewing key stakeholder, surveying clients, or performing audits;
• Check the accuracy of interim billings for fees and expenses;
• Hold contract review meetings on a regular basis. These should be collaborative and focused on service delivery and financial aspects;
• Provide time to discuss opportunities for improvements;
• Encourage feedback between the ministry and service provider in relation to what is working and what may need improvement; and
• Document contract performance for the contract file.

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Both the ministry and the service provider must be prepared to share and receive constructive criticism that helps to establish collaborative and mutually respectful relationships in which both parties have an opportunity to learn and implement better deliverables.

Review recommendations should be actionable; some recommendations may require changes to service delivery processes. Implementation of recommendations should be taken into consideration by both parties to support continuous quality improvements and a learning environment.

Attendees in contract reviews commonly include:

• The service provider;
• The Contract Manager;
• Ministry service delivery staff; and
• Ministry procurement and financial staff, such as a Procurement and Contract Specialist and Financial Officer.

The frequency of review meetings will vary from contract to contract. Frequency should be determined based on the:

• Type of service;
• Term of the contract;
• Complexity of the contract;
• Status of any contract issues; and
• History with the service provider.

Where the contract is low-risk, has no current issues, and the ministry has a long standing effective history with the service provider, annual reviews may be appropriate.

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Ministry Actions to Collaborative Reviews

Collaborative reviews may include:

• Highlights of the last review with the agency;
• Contracted service deliverables status for the review period;
• Status of contracted outcomes; budget and financial updates, staffing updates, reviews of reporting requirements, and stakeholder feedback;
• Issues and challenges over the last review period;
• A copy of the agency’s accreditation report (if applicable);
• Opportunities for innovation;
• Any recommended program changes for next year arising from outcomes and feedback mechanisms;
• Improvements in key performance indicators/standards;
• Opportunities for cost or efficiency gains;
• Ministry’s contract management performance;
• Agency’s contract performance; and
• Quality of relationships with supplier and key stakeholders.

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Continuous quality improvement is a shared responsibility of both the ministry and service providers. It can include feedback, innovation, and knowledge sharing. Benefits for clients, ministry, and the service provider may result from such efforts.

Continuous quality improvement happens throughout the lifecycle of the contract and is consistent with accreditation and accredited standards which requires service providers to analyze outcomes and innovate services within existing contracts. When the ministry shares its learnings with service providers and service providers share gained insights, all parties benefit.

The results of continuous improvement include:

• Higher quality service;
• Improved efficiency;
• Increased access for clients; and
• More effective

Continuous Quality Improvements could include:

• Refinements to intensity and duration of programs;
• Modalities of treatment;
• Individual versus group work; and
• New behavioural management techniques.

Ministry Actions to Continuous Quality Improvement

• Build an open and transparent environment that supports continuous improvement;
• Ministry and service providers should continuously look for and be open to improvements;
• Service improvement conversations should be held between the contract manager and service providers on a regular basis;
• Make room for mistakes or failure. In the event of unsuccessful innovations, the service provider may revert services to the original approach or modify the innovation; and
• Service improvements that change the intent or otherwise modify the contract may trigger the solicitation process. See: What May Trigger the Solicitation Process?

During the term of a contract, circumstances may arise which require a change to the contractual arrangement. These changes may take the form of amendments (sometimes called modifications). A contract amendment should not substantially change the nature and intent of the original contract (CPPM 6.3.3.E9). The scope of work and deliverables should remain significantly the same. The rationale for the amendment must be documented in the contract file.

Substantial changes which would indicate the need for a new contract could include:

• A large increase to the contract’s value;
• The addition of a new service; or
• Where a solicitation occurred, the addition of a condition which may have allowed for the acceptance of other offers or proposals for consideration.

An amendment may include:

• An adjustment to service levels;
• An increase to fees due to a negotiated labour cost increase; or
• An extension to the contract term, where an unforeseen event has delayed the delivery of services.

A contract renewal may occur if the contract has an Option to Renew clause. If an option to renew clause is not included in the contract, and the contract is expiring, the contract will end upon the expiry date (For more information, see Solicitation Documents Preparation). If the services are still required a new contract can be initiated. This may or may not require the initiation of a solicitation process. (For more information, see What May Trigger the Solicitation Process?)

Amendments, modifications, and renewals may require contract negotiation.

Termination of a contract occurs when a contract is cancelled or stopped before the contract end date. This is different than when a contract reaches its end date and the services do not continue through an amendment or new contract.

Processes must be followed when terminating a contract. It is recommended that legal advice be obtained for all contract terminations; however some consideration may be given to complexity, contract value, history of contracting with the ministry, and length of time the service provider has provided services. Ministry staff may contact MCFPGPB@gov.bc.ca for advice before taking steps to terminate a contract.

Contracts may be terminated for several reasons but are usually terminated by mutual agreement between the ministry and the service provider. Termination often results from the services no longer being required or the service provider ceasing to operate or moving outside of the service area. However, termination can be due to non‑compliance with the contract.

Termination clauses are stated in the contract. Where termination is mutual, a written agreement to terminate the contract must be signed by both parties. Where non-compliance is involved, terminating a contract begins with a review of the relationship between the ministry and service provider from the day the contract was signed.

Where service standards or performance has been below the standards outlined in the contract, the ministry must provide proof that feedback has been provided to the service provider attempting to rectify the situation. Feedback should to be clear and provided to the service provider in writing.

The test of fairness and reasonableness must be met in terms of timelines that enable the service provider to remedy or correct the ministry’s concerns regarding provision of the services. In situations of continued non-compliance, it may be necessary to issue a letter of termination.

Even though contract terminations occur, service to clients may need to continue. It is important to do thorough service transition planning to reduce the risk of interruption of service to clients. Contract terminations are also subject to regular contract close out procedures, such as Post Contract Evaluation and Records Management.

Contract Payments

The funding provided for the provision of the services is outlined in Schedule B – Payment. Service providers depend on payments that are timely and accurate in order to provide the services. Ministry staff must keep a summary of all payments made to the service provider under the contract, either by using a contract summary sheet or equivalent electronic record (CPPM 6.3.6b1). The MCFD Financial Policy and Procedure Manual outlines related policies.

Service providers who do not reside in Canada may have additional financial requirements, including tax and exchange rate implications. For more information, see Service Providers External to Canada.

Fiscal Year End

The B.C. Government and the ministry follow a fiscal year for accounting purposes which is from April 1 to March 31. The ministry has specific policies surrounding year end procedures.

A key policy is that any goods or services purchased in a fiscal year must be paid for within the same fiscal year. Ministry specific guidelines are outlined in the MCFD Financial Policy and Procedures Manual.

MCFD financial services issues specific year end instructions to staff each year, which includes directives and deadlines for staff to follow; staff may pass these instructions on to service providers, as applicable.

Travel by Service Providers

Service providers are only entitled to travel expenses as specified in their contract. If travel is specified in the contract, the service provider submits invoices which detail these expenses, along with original receipts, where possible.

Service providers on travel status for business being performed on the ministry’s behalf are entitled to use a Corporate Supply Arrangement (CSA) and government rates for expenses such as accommodations, airfare and vehicle rentals. A letter on government letterhead can be provided to the service provider as proof of their eligibility for government rates, if required. See CPPM 10.3.15 and procedure requirements C.10.

Holdbacks

In the case of professional services contracts, it may be appropriate to holdback a percentage of the professional fees pending satisfactory completion of the services. Holdbacks must clearly be laid out in the contract.

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Examples:

• Final payment will be made when the services to be delivered are received and accepted by the ministry; or
• The final balance of the contract value will be paid when the report is completed and accepted by the ministry.

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Common Administrative Costs

An administrative cost is an expense incurred in controlling and directing an organization, but not directly identified with operations. The salaries of senior executives and costs of general services, such as accounting, fall under this heading. Administrative costs are related to the organization as a whole as opposed to expenses related to individual program costs.

The administrative costs for delivering a social program in BC vary from year to year across programs and contracting ministries. Determining a standard approach for administrative costs frees up resources normally spent calculating and negotiating. More efficient and effective contract management processes may permit the service provider to deliver more services to clients for the same dollar amount. Ensuring consistency in administrative costs, such as establishing a standard or fixed rate, can potentially simplify contract costing and contract financial reporting.

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Example:

For contracts which contain administrative supports, Administrative Cost Negotiation Guideline 10% is of the total value of the contract.

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 The following provisions apply to the guideline:

• In exceptional circumstances, the ministry may agree to increase the 10% baseline for some organizations. Increase above the 10% guideline must not exceed 15%.
• There are exceptional circumstances where administrative costs may not apply to the agency or may be significantly lower than the 10% guideline. An example is individual client specific contracts. In such cases, the guideline of 10% does not apply and a negotiated lower rate will apply.
• If either the ministry or the service provider suggests an amount that deviates from the 10% guideline, the onus lies on that party to present the rationale. Acceptance is at the discretion of the ministry.
• Funding for administrative costs associated with a contract for services is intended to support the governance and administrative infrastructure of the agency. The agency utilizes the funding to ensure high-quality human resources, strategic planning, financial management and reporting, legal, health and safety, and quality assurance practices are implemented across the organization. Administrative costs are incurred by agency leadership, senior management (that do not supervise direct program staff) and administrative staff responsible for providing these functions, and related infrastructure or expenses that specifically support these functions.

The following program/service costs should not be included in administrative costs:

• Program supervisor wages and benefits;
• Program staff wages and benefits including program administrative staff costs;
• Program vehicles (e.g., operating maintenance costs such as insurance, maintenance, fuel, and staff mileage);
• Other program travel costs;
• Program supplies, equipment, and materials, including program application of accreditation;
• Program related corporate memberships (related to programs delivered under contract);
• Program administrative support: Costs directly and solely attributable to programs/services (e.g., telephone, internet, IT/IM costs, and advertising);
• Program/client activity costs (e.g., recreation and pro-social activities, food, and activity materials);
• Client care expenses (residential), such as purchase of clothing or personal care items;
• Program specific recruitment and staff training;
• Program facility costs (rent, utilities, maintenance, insurance, etc.), janitorial, security/alarm monitoring; or
• Other program-specific costs/expenses.

The following are included in administrative costs:

• Auditing costs: Annual audit;
• Legal fees: Legal program/services related to the program/services delivered under the contract;
• Bank fees: Bank program/service charges;
• Head office administrative operating expenses: Including non-program specific supplies, equipment and materials;
• Non-Program facilities costs;
• Consultant fees: Consulting fees related to administration and management of program/services delivered under the contract;
• Information technology/information management: Including Internet, phone, software, backup, etc.;
• Wages and benefits for administrative staff: Including executive director and other managers who do not supervise front line staff;
• Administrative personnel wages and benefits:
• Administrative and accounting staff: Office managers, accounting personnel, and clerical support staff, including temporary administrative staff;
• Human resources personnel: Staff who primarily perform payroll, hiring, recruitment and negotiations functions;
• Note: Where direct supervisors of front line staff also perform administrative duties, an allocation of time and cost may be necessary. In smaller organizations particularly, executive directors and other managers may be providing direct supervision of line staff. In this case, an allocation of time and cost may be necessary to adjust for the mix of program/service and administrative duties.
• Training and travel: Specific to administrative personnel for administrative functions;
• Meeting expenses: Board of Directors' meetings, Annual General Meeting and other administration related meetings;
• Conferences: Related to program/services delivered under contract;
• Vehicles: Portion of vehicle expense related to administration;
• General liability insurance: Includes Directors liability and theft, etc.;
• Accreditation: Related to the management functions of gaining and maintaining accreditation; and
• Human resource activities related to administrative staff: Such as advertising; hiring; relocation; recruitment; screening; Criminal Record check reviews, ongoing personnel file management, etc. (These activities are not included if related directly to program delivery.)

Unearned Revenue

Unearned revenue refers to contract payments for which funds have been dispersed to the service provider, but the services have not been fully provided in the period specified in the contract. The Financial Administration Act defines these funds as a debt to government. The ministry has a legal responsibility under Section 37 of the Financial Administration Act to identify and recover unearned revenue.

Unearned revenue does not include a Surplus derived through efficiencies or funds remaining after delivery of all services in accordance with the contract.

The ministry Service Agreement outlines the ability for the ministry, in consultation with the service provider, and at its discretion, to do any or all of the following in the recovery of unearned revenue:

• Recover the amount owed as a debt in accordance with the Financial Administration Act;
• Reduce future payments to the service provider until the amount owed is recovered; and/or
• Propose a modification to the applicable services or payments, provided the effect of any such modifications occur within the current fiscal year.

The identification of unearned revenue is managed through a combined analysis of service level requirements, service output reporting, and financial statement information. The starting point is typically a review of the hours or services delivered measured against the target established in the contract.

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Example:

If the contract specified 1,000 hours of service and only 800 were delivered, then the initial unearned revenue assessment begins with the 200 hours of service. This is the beginning of the assessment and conversation with the service provider.

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Ministry staff will work with the service provider to assess if there are other reasons for the potential unearned or any other discrepancy, and make a determination of unearned revenue or otherwise based on further investigation or shared information. A supporting financial statement cost analysis confirms the calculation of the staffing and other operational funds for return to the ministry as unearned revenue. For more information, see Financial Reporting.

Limiting advance payments and careful monitoring throughout the lifecycle of the contract decreases the opportunities for unearned revenue. For more information, see Contract Monitoring.

Surplus

Surplus is defined as the amount of revenue that exceeds the expenditures. A surplus often occurs when expenses are less than the income received. An accumulated surplus represents the amount by which all assets (financial and non-financial) exceed liabilities.

A service provider can have surplus revenue as a result of efficiencies or can have funds remaining after delivering all services in accordance with the contract. This is not unearned revenue.

The contract manager must ensure the reasons for significant surplus are determined, and may renegotiate where the contract deliverables and surplus is likely to continue.

With a longer term contract operating surplus in one year may offset operating Deficit another year; however, the application of the five per cent guideline applies to the net accumulated surplus. Contracts which yield a consistent pattern of surpluses at five per cent or greater, year after year, should be renegotiated in terms of cost and/or service output targets to maximize utilization of funding.

Significant surplus is defined as 5% or more of the total annualized contract value.

Deficit

Deficit is the opposite of Surplus. An accumulated deficit is an excess of liabilities over assets at the end of a given period. The ministry is not responsible for service provider deficits.

Ministries must identify and manage any asset maintenance, risk and liability issues arising from their contracting activities. Assets being replaced due to being damaged, lost or stolen must be reported. See CPPM Loss Reporting.

Service providers are responsible for the management of their own assets. The service provider must comply with any policy and procedures provided by the ministry for acceptable use, protection of, and access to assets provided by the province to the service provider for the purposes of delivery of services under contract.

Records management requirements are outlined in the contract. The Contractor’s Information Management Guidelines clarify which documents created under the contract are owned by the ministry and the standards of management for those documents while in the service provider’s custody.  Records under the ministry’s control are subject to Freedom of Information and Protection of Privacy Act; while records under the service provider’s control are subject to the Personal Information Protection Act (PIPA).

When a contract expires or is terminated, ministry records in the custody of the service provider must be returned to the ministry or disposed of according to the contract.

For additional information and guidelines on the disposition of government records in the custody of service providers please refer to the Contractor’s Information Management Guidelines.

Disclosure of Contract Information

The Freedom of Information and Protection of Privacy Act governs policy related to the disclosure of any contract information. The Freedom of Information and Protection of Privacy Policy and Procedures Manual contains policy and guidance on the subject. In addition, each ministry has a Director/Manager of Information and Privacy who can provide direction and advice.

The disclosure of personal information relating to clients is strictly controlled.

For more information on access to government information, see Reporting or contact MCFPGPB@gov.bc.ca