I am working for an IT Consulting firm. My employer employs me to work for his client in a team lead position.

In my team there is a team member ("A") who reports to me. He works for a different employer. The client outsourced development of the specific interface to A's employer and A is leading the development and delivery of that interface which is used as a webUI for web service communication. The client has positioned the lead role for the entire web application. A is leading one other member who works from offshore (India). 

Work was assigned to him two weeks ago, and there is no substantial progress from his team on that work. We have only one more week left to complete the piece, otherwise this piece will become a bottleneck for other teams and cause delays in delivery from my side. 

When it was assigned, as he is also a lead, I gave him direction and then left him to it. In the first week, however, there was no progress. My manager alerted me about this lack of progress and already talked about delays and reasons from his side and asked me to put special focus on this lead and his team. I realize my manager doesn't trust him and feels this guy is not doing his work properly and not contributing. 

In the second week, I closely observed A and his work. Below are my observations. 

* He attends all business and requirements meetings but he doesn't transfer that knowledge to his team member who works offshore. There are a lot of knowledge gaps in his team about the requirements and work.
* When I ask him to make sure the component he develops suits most of the business scenarios, and do basic unit and sanity tests against those scenarios, he told me that his team doesn’t know any business scenarios. He said that the UI team or myself or somebody else should test against those business scenarios and report issues back to them, and they will fix them. The only reason we (my manager and myself) were involved in the meeting was to give him business knowledge. Hence I have taken time and translated all the business requirements into use cases his team can understand and test.
* After I reviewed the deliverables from his team (he signs off and send those deliverables to me) I found that basic review hasn't happened.
* We have Scrum meeting Every morning, every morning he used to report the inputs from service team not proper, there are issues with the service and hence has send mails to the service owners and waiting for their reply. Lately I observed that he is not reading the input documents sent by service team thoroughly. He just browse the required parts like url of the service, example request format and tries to test the service. He is not going through the document carefully and understand the each parameter required for the service. 2 out of 3 cases every question he asked, the service team replies the answer is already available in the document. Even if answered late I figured out the answer actually available in the document itself.

At the end of the second week, I started getting the same feeling that he isn't contributing much and just delegating work to his offshore team member, then sending deliverables to me. I have discussed this with my manager. My manager suggested I manage him closely.

How can I do this gracefully without giving scope for any negative feelings in the team?