Commercial Capability Insights and Emerging Best Practices – NAO Report

By Allan Watton on

The National Audit Office’s report ‘Commercial and contract management: insights and emerging best practice’, published at the end of last year, has been a mine of useful information in support of commercial capability.

It sources some 140 projects alongside interviews, workshops and discussions. These have presented a broad-spectrum perspective of the state of public sector outsourcing today.

The purpose of all this research has been to identify and share commercial capability strengths and challenges that can be learned from, and to offer suggestions on how to do this. The NAO identified 20 common traits and we’re writing a series of seven articles to highlight each group of these, along with our own commentary.

You can read our previous article regarding #1 – #2 on commercial strategy here.

This article looks into the three issues related to commercial capability.

Issue #3 of 20: Tailor commercial capability to risks and opportunities

In an ideal world, all the resources needed for the assured success of any contract would be made available to those in need of them to maximise capacity to take advantage of opportunities and to identify and defend against risks.

However, as we know, in the real world ever more frugal restrictions mean that a dwindling budget must be shared out with far more care, prioritising those areas that are likely to have most impact on the outcomes of the project.

This can be a bit of a juggling act, especially when each contract’s unique properties and demands mean that there is no standard ‘one-size-fits-all’ formal way of determining in advance all that might be needed. There are, however, core principles to follow to assure the right diligence to assess these items are in place.

Warning Indicators

  • A lack of planning to tailor resources to contract risks.
  • Contracts understaffed at key stages as skills and staffing requirements shift throughout the contract.
  • A lack of analysis, such as return on investment, to identify where staff should be placed.

Emerging Best Practice

  1. Organisational perspective

The big picture is an important perspective to take, expanding your view from the project level to the portfolio level in order to spread your resources more efficiently for a broader take on the meaning of success. Such planning needs to be done very early on and maintained as projects evolve and their need for resources ebbs and flows.

  1. Contract staffing model

Your people are your greatest resource is a well-known, though often ignored fact, so allocate them where they will do the most good, ensure that they have the training and authority to swiftly and effectively perform their roles, and plan well in advance.

  1. Contract perspective

Return on investment contributes significantly to the perception of value for money being achieved on a contract. Know what you are spending on your resources, manage your budget carefully, appreciate the costs inherent in risks that go unchecked and the lost value in opportunities missed, and resource your contracts accordingly.

Issue #4 of 20: Clarify commercial and operational balance

Having the right people in the right roles is one important factor in the success or failure of a project, but having all the right people in the right roles working together as a cohesive unit is fundamental. The NAO reports that currently there are too many contracts with “confused responsibilities and poor knowledge transfer” which weakens contract management. Different teams working too independently with too little collaboration is a major problem, and though some government departments are making strides in this area none have yet cracked this complex issue.

Warning Indicators

  • Unclear roles and responsibilities, particularly in terms of the commercial role which can range from ‘adviser’ to ‘owner’.
  • Operational contract managers not having the capacity to understand and perform their role and get the best from the contract.
  • Ineffective and poorly managed handovers and transition of knowledge and skills across the lifecycle as roles change.
  • High levels of turnover of senior staff create challenges for transferring knowledge and expertise.

Emerging Best Practice

  1. Plan

It is clearly important to plan ahead, to think strategically with your resources and how they will work with one another as a well-oiled unit. Develop a written plan of action with each person’s roles and responsibilities identified, explained and communicated. If a particular strategy or arrangement is successful on one project, share this with the wider organisation so it can be reused to save time and improve the odds for project success.

  1. Resource: Give the right people the right levers

Senior management on a contract must be afforded the autonomy and authority they need to achieve expected performance levels, but performance must regularly be monitored to ensure that it is in line with expectations on the project timeline. Resourcing must be adaptive though and where skills are needed they should be available to call upon.

  1. Manage: handovers and interfaces

The transfer of often hard-won knowledge must be a priority, with processes and wisdom clearly documented and enough time afforded for the handover process as one department passes responsibility over to another in a way that will ensure a seamless transfer.

  1. Continuity

When people in positions of authority, or those with valuable project wisdom, leave, there is all too often a hole that’s difficult to fill. Succession planning is a vital part of project consistency and developing effective incentive schemes to encourage staff retention is a part of that. However, loyalty is not something that can be guaranteed, so it is always best to plan for the worst and hope for the best to ensure that key roles are always covered and where issues arise, new talent can quickly pick up where the old left off.

Issue #5 of 20: Maintain ‘organisational capability’

Skilled individuals in the right place with appropriate autonomy and authority is a good start. What must come next is the structure within which they can thrive, good management, clear processes, systems and communication lines both up and down the hierarchy. Each member of the team must understand their role and their importance in the grand scheme of things to recognise the impact of their efforts or lack of. The NAO report suggests that there are certainly elements of organisational capability that are improving, but there are also areas where the public sector is found wanting.

Warning Indicators

  • Insufficient data and information being available to make informed decisions.
  • Poorly established governance leading to unclear roles and responsibilities and ineffective oversight.
  • Poor-quality information and reporting systems and a lack of standardised approaches to using data.

Emerging Best Practice

  1. Governance

Who is to take responsibility for decision-making and the ramifications of those decisions, needs to be established from the outset and monitored and encouraged throughout a contract. Communication, clear, accurate and unfiltered information conveyed to organisational committees with whole of portfolio oversight, and a good succession plan with well documented knowledge and processes are required for good governance to be achieved.

  1. IT Systems

Maximise use of technology to automate and record appropriate processes to ensure greater accuracy and analytical capacity for contract management.

  1. Data and Processes

There is an argument for not reinventing the wheel. If you have an established process for dealing with any aspect of your contract that has proven itself in previous projects, use it again and again. Learning from the lessons of the past and adapting old processes to your new needs will save the time it would take you to fail and learn that lesson anew.

  1. Visibility

Share your knowledge of what works and what does not, as the wisdom you acquire along the way may well save others in your organisation a significant amount of time and money.

Conclusion

Your commercial capability can be enhanced in many ways. First, it’s important to recognise where the weaknesses may lie, where your contract is leaking potential, then plug those holes, take action to give your contract a greater opportunity of success. And finally, share the lessons you learn with others.

Our last article focused on several of the 20 fundamental issues highlighted within NAO’s ‘Commercial and contract management: insights and emerging best practice’ report. These issues are grouped under seven key judgements for commercial relationships. So, for a full and detailed picture of these issues click on the following links to be taken to the relevant article. (They are being completed in order, so if a link does not exist watch out for the additional article over the next few weeks) – Commercial Strategy, Commercial Capability, Marketing Management and Sourcing, Contract Approach, Contract Management, Contract Lifecycle, Transition and Termination.

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