Determinants of effective contract management in South African state-owned enterprises: the case of Transnet SOC Ltd.

Abstract

Contract management is one of the most critical, sensitive, yet very important active monitoring and control tools of a contract between a procuring and disposing entity and the contractor, to ensure delivery of a cost effective and reliable service at an agreed standard, time, price and quality level of goods and services. It is the final stage in the bidding process and marks the beginning of a contractual relationship between all those involved. Contract management, workforce competence and organisational process capability becomes vital in this process. Thus, this study aimed to establish and evaluate the determinants for effective contract management using Transnet SOC Ltd as the unit of analysis. The target population consisted of all the employees involved in contract administration within KwaZulu-Natal Divisions of Transnet SOC Ltd. To obtain data, both probability and non- probability sampling techniques were used, using a structured questionnaire and interviews. For quantitative data, a systematic sampling method was used, whereas for the qualitative data, a purposive sampling technique was employed. The study thus used a mixed methods approach. The sample size for the quantitative analysis was 192, while the qualitative analysis made use of ten interviews held with senior staff members. Quantitative data were captured and analysed on Statistical Package of Social Sciences (SPSS) v22.0 and Analysis of Moment Structures (AMOS) v 24.0 to yield descriptive and inferential statistics. Structural Equation Modelling was then used to provide estimates of the strength of all the hypothesised relationships. The principle of technical saturation was employed to ascertain the adequacy of the sample size for the qualitative aspect of the research. The data was analysed by means of NVivo. Thematic analysis was undertaken to create themes from the interview transcripts. The determinants of contract management that were tested were contract administration; employee competency; information technology; risk management and supplier relations. The key findings from the study were that effective contract management was significantly and positively influenced by contract administration, employee competency and risk management. The hypothesised relationships between information technology and supplier relationship with effective contract management were not supported. It was generally agreed that although procurement policies exist in Transnet SOC Ltd, they need to be adhered to. Red tape and copious amounts of paperwork were cited as some of the key challenges. There was also a general feeling that supplier relationships were not at their best. Although employees were believed to be competent, there appeared to be a lack of adequate support in terms of resources. However, information technology was being harnessed to aid contract management activities. Workshops were recommended for sharing risk incidences and planning for their mitigation. Based on the study findings, it was recommended that there should be clearly laid out contract administration procedures, technology policy and staff development to ensure effective implementation of contract management procedures. Furthermore, the organisation must increase the capacity of the Risk Management Unit to be able to adequately support contract management related risk processes. It was also recommended that the organisation build strong relations with suppliers to facilitate the effective management of contracts. Lastly, a model was developed to enhance effective contract management within SOEs.