The purpose of this bulletin is to distribute general guidelines for state agencies to follow in the monitoring of contractors and vendors performing services or supplying commodities to the state under contract.

Every agency should have a system to monitor a contractor's performance towards stated contract goals and objectives, and to evaluate the contractor's performance. The purpose of the system is to determine whether all services or commodities paid for by the state are delivered in accordance with the contract, and in an acceptable manner.

The information set forth below should aid state agencies in establishing a system, or enhancing their current system, for the monitoring of contractor's performance.

The provisions and the requirements of the contract must be specific and stated in clear and unambiguous terms so they are fully understood by the contracting parties. It is important the contract clearly specify what is expected of both the contractor and the state agency, and the method of payment to the contractor. The more clear and specific the contract, the easier it will be to monitor.

The terms of the contract should include, but not be limited to, the scope and purpose of the contract, the description of the services to be performed, the location where the work is to be performed, the standards to be used to measure performance (e.g. units of service, number and nature of clients served, target dates, etc.), the level of expertise that is required to perform the tasks, the cost and the method payment of the contract, the starting date and the contract period, the finished product or the services to be delivered, and the record keeping and reporting requirements, including a right to audit the contractor's records by the state.

State agencies must have procedures for measuring the contractor's performance against the terms of the contract. There are four basic monitoring principles: observe, record, report, and take appropriate action. The following are some general guidelines for monitoring contractor performance.

• State agency employees, assigned the responsibility of monitoring contractor performance, should be familiar with the type of work being performed and with the specific terms of the contract.
  
• The frequency and manner in which the contractor's performance will be monitored should be clearly stated and directly related to the terms of the contract.
  
• Written documentation pertaining to contractor performance, such as progress reports, site visit reports, payment and expenditure data, memoranda of verbal discussions, and written correspondence, should be maintained and reviewed to ensure satisfactory progress.
  
• Periodic visits to the work sites should be made to review work in progress and work completed. Site visit reports should be completed and include the observations of pertinent matters, such as the number and type of persons employed by the contractor, adequacy of the facilities and equipment, and quality of performance, including any deficiencies in the performance of the work, which may have an impact on satisfactory completion of the project.

• The evaluation of the contractor's performance should take into consideration the quantity and quality of the work performed, the timeliness of submission of contract deliverables, the adequacy of cost and performance records and other supporting documentation, and whether the extent of performance, to date, is commensurate with the amount the contractor has been paid.
  
• Performance that is below expectations or established standards should be reported to state agency management immediately. All deficiency reports should be specific and in writing. Management should review deficiency reports and take appropriate action, which may include termination of a contract.
  
• All vouchers presented for payment should be reviewed by the person who is monitoring the contract. No payment should be made unless the work is satisfactory and in accordance with the terms of the contract.

The following examples illustrate methods used by some state agencies in monitoring contracts. These examples incorporate the four basic contract monitoring principles: observe, record, report, and take appropriate action.

1. A state agency contracted with a company to provide janitorial services in its office building. These services included trash removal, cleaning restrooms, dusting furniture, mopping floors, vacuuming carpets, etc. The agency assigned a maintenance worker the responsibility for monitoring contractor performance. This person maintained logs detailing the time spent and the number of people assigned by the contractor. In addition, formal inspections of the work performed by the contractor were recorded. This information was used to verify contractor billings. Any work which was not performed, according to the terms of the contract, was reported immediately. If no corrections were made, payment was withheld.
   
2. A major university center entered into a service contract for the bussing of students. The center was composed of three campuses, each more than four miles from the others. The contract required bus routes between each campus. The university appointed an employee to monitor adherence to prescribed time schedules and also to look for breakdowns, buses off route, passengers left behind, etc. This person was given a vehicle with a two-way radio linking him with the buses and the bus company dispatcher. The bus monitor also conducted periodic meetings with the student bus committee to discuss bus service problems and complaints.
   
   Each bus driver was required to prepare a route sheet, which listed the number of passengers carried for each trip. The route sheets had to be turned in to the university bussing office the next morning. If a sheet was not received, it was considered that no service was performed by that bus, and the company was not paid for the service. The route sheet had to also indicate late arrivals, early departures, breakdowns, etc., as these were also deducted from payments due the bus company. In addition, the route sheets were compared to documented observations made by the bus monitor to verify their accuracy.
   
3. A state agency had a $10 million service contract for toxic waste clean-up near a residential area. Because of the significant value of the contract, and the sensitive nature of the work performed, the agency assigned a full-time monitor. This individual had an engineering background and was familiar with the type of work being performed. His responsibilities included verifying the number and type of people used by the contractor, the type of equipment used, reviewing progress and expenditure reports submitted by the contractor, and determining if work was progressing according to contract specifications and time schedules. The benefit of having a person on-site full-time far outweighed the related cost for this particular contract.

If you have any questions regarding this bulletin, please contact:

Bureau of Contracts
(518) 474-3488