In a recent article titled ‘NEW National Audit Office guidance for supplier operating standards that could change everything’, we took a look at the most recent update of the Government Commercial Function’s (GCF) eight ‘Commercial Operating Standards’ and discussed their significance for both public and private sector clients.
The NAO’s own recent report ‘Commercial and contract management: insights and emerging best practice’ is one on which we have written several articles because of its clear insights. It is this report that references the latest iteration of these commercial operating standards and asks the question ‘Is this enough? Is the development of a clear and concise list of foundational standards enough to change the way we operate?’.
The answer from the NAO was ‘no’. However, the NAO complimented the work that has been done to date by the GCF. They indicated that it was a good start, a healthy commitment to change, but more needs to be done to enact actual change across the public sector to create a best practice strategy that impacts the success rate of complex service delivery projects.
The NAO report talks of improved management, support and guidance in recent years, but also states that the “government still needs to do more to ensure that government contracting is effective, meets public service standards and provides better value for money for the taxpayer”.
Credit where credit is due though. The NAO has made a point of highlighting good practices and lessons learned from the positive experience that both public and private sector clients can benefit from. This is something quite rare in an environment where direction is all too often gained from learnings gathered after failed relationships are reported on.
To offer a little context, the NAO report is the latest in an exercise that has, to date, been running for over 15 years to assess how government contracts can be improved upon. In that time commercial standards and guidance have been developed, professional competency standards for commercial experts have been rolled out, consultations and discussions with public sector senior practitioners and local authority representatives, suppliers and stakeholders have been conducted, and workshops with commercial staff have been run, all to offer greater insight.
Also included in the gamut of sources assisting the NAO with its conclusions were over 140 reports across six contract types – infrastructure, IT, service, service/infrastructure, service/IT, service/IT/infrastructure – at each stage of its lifecycle. These stages include prior to contract signature, during contract and post termination. The largest number of reports were from the Ministry of Defence, closely followed by the Department for Transport and the Department of Health. And the largest proportion of these contracts was for services-based deliverables.
The NAO report focuses on the most recent 26 reports, each of which received special mention because of the lessons they offered up. As they are relevant for context, we felt we should mention some of them to see the key conclusions the NAO has raised.
The Background: The Department for Work & Pensions (DWP) set out to reform the benefits system, but early setbacks increased costs and brought into question whether value for money will ever be achieved.
Lessons: The DWP have developed and refined its ‘test and learn’ approach, focusing on more planned and realistic programmes carried out over a more manageable schedule. This should improve design and readiness of services and reduce risks.
The Work Programme
The Background: The DWP is responsible for the Work Programme, the government’s scheme to help the long-term unemployed to find and keep jobs. The aim is to get people into jobs and off benefits. Significant issues were identified with overpayment of contractors.
Lessons: Contract clarity is key to project success. Contracts need to guide, they need to offer recourse for non-delivery on expectations, and they are fundamental to establishing value for money in any relationship.
High Speed 2
The Background: HS2 is a project to create a high-speed rail link between London, Manchester and Leeds via Birmingham, but it is facing time and cost pressures and the 2026 opening date for phase 1 of the project is at risk of slipping.
Lessons: To learn from experiences on HS1 to create more manageable schedules, and failing that, to review where scope can be changed in such a way as to reduce time and cost pressures without significantly impacting on the benefit cost ratio for the project.
Shared Service Centres
The Background: A project to transfer back-office functions from up to central government 14 departments to two shared service centres to achieve cost savings and free up resources to provide better front-line services.
Lessons: Leadership, collaboration, effective monitoring and management of risks and a business case with clear buy-in from all stakeholders to ensure alignment of aspirations of departments to the programme’s objectives.
Contracted Out Health and Disability Assessments
The Background: In the three years to 2018 the DWP is expected to spend £1.6bn on seven million outsourced health and disability assessments to determine claimants’ capabilities against set criteria. However, providers have struggled to meet performance targets, and the aim was to determine the value for money of these outsourced contracts.
Lessons: More in-house skilled contract management capability recruited to work with outsourced providers to achieve better performance and value for money, to identify risks and adapt to counter them. This involves clearer contracts rich with evidence-based targets and closer relationships with providers to ensure they are met.
Investigation into the UKTI Specialist Services Contract
The Background: The UKTI contracted PA Consulting to provide a specialist service that aimed to attract overseas investors to the UK and help UK companies exporting to overseas markets. However, due to contract changes, costs, and what they were paying for becoming unclear, this led to a dispute and, ultimately, the early termination of the agreement.
Lessons: Stronger management and controls on costs built into contracts and greater clarity within the procurement process, more transparency and awareness of the risks of ill-considered change management that weakens contract clarity.
The Background: A review of the ways in which value for money can be achieved across the National Offender Management Service (NOMS) which covers both probation and rehabilitation in the criminal justice system.
Lessons: When risk of change is high and the services to be delivered are complex, a single vision at procurement may be split into more manageable phases to avoid scope creep later on. And regular analysis of progress and real-world environment should guide contractual change to adapt to shifting outcome expectations.
General Practice Extraction Service
The Background: An IT system designed to help NHS organisations to extract patient information from several GP systems across England had experienced significant delays increasing expected costs from £14m to £40m.
Lessons: Clarity of vision, stakeholder buy-in, early market testing, a fit for purpose contract and an Intelligent Client Function (ICF) team to pull it all together under strategic relationship management capacity.
Electronic Monitoring Contracts
The Background: This report was a memorandum for parliament to cover the findings of a forensic audit, carried out by PwC, on the events surrounding the Ministry of Justice’s process in 2013 to retender its electronic monitoring contracts, and the belief that both providers at the time – Serco and G4S were overcharging by amounts estimated at the time to be in excess of tens of millions of pounds.
Lessons: Spending controls must be known, communicated and enforced, strategic supplier performance management must be effective, risks identified early, and management kept informed of all factors that could affect outcomes. Informed supplier intelligence alongside the maintenance of an intelligent supplier/intelligent client relationship are essential.
Military Flying Training
The Background: To streamline the overly complex flying training offering to all armed forces, the Ministry of Defence decided to outsource core training to a single external provider. The aim was to reduce costs and time required to train aircrews. Training delivery organisation Ascent was selected for the task and the United Kingdom Military Flying Training System (UKMFTS) was established.
Lessons: To get the most from your outsourcers you must incentivise them to give of their best and establish a robust monitoring and evaluation process for determining performance against expectations. Always allow for some delivery flexibility, especially when the outcomes or SLAs may change with the passage of time, trends, needs and preferences – can your solution cope with additional demand?
InterCity West Coast
The Background: An analysis into the reasons behind the Department for Transport’s decision to cancel its provisional decision to award the InterCity West Coast franchise to First Group as a result of, among other things, problems with transparency in the procurement process.
Lessons: Firstly and most importantly is to stick rigidly to an appropriate and auditable procurement process so that all subsequent questioned decisions can be explained and justified. Then there is clarity of objectives – both accessed and communicated, strict project management and governance, and engagement with stakeholders.
Procuring New Trains
The Background: The Department for Transport signed with Thameslink and Intercity Express to procure rolling stock with the aim of reducing long-term costs and transferring risk to train service suppliers while increasing capacity to accommodate for increased expected demand.
Lessons: Uncertainty can result in increased costs, a coordinated approach will offer more clarity to all stakeholders, competitive pressure during the procurement process will offer rewards, and collaborative working with suppliers is key to success, as is having the right people in the right roles to oversee the project and its relationships.
The NAO should be commended for its broad-spectrum analysis of the issues, successes and solutions identified in projects, discussions and workshops over the last 15 years that have culminated in their report on emerging best practice. The sheer volume of research that has gone into their conclusions is inspiring, and their conclusions – paraphrased to ‘much has been done, but far more needs to be addressed before the job is done’ – are fundamentally correct in our eyes also.
With ever tightening budgets, increased calls for efficiencies, and a not always clean record on project success, all clients – public and private – could do with spending a little time assessing the NAO’s findings and following the guidance contained within to mitigate risks inherent in all complex delivery supplier relationships.