The National Audit Office (NAO) recently created an insightful report into contract management best practice, combining wisdom gathered from discussions with those who operate these relationships at the coalface. It features analysis from 26 recent reports on projects that ranged from InterCity West Coast and Hinchingbrooke Health Care NHS Trust in 2012, to High Speed Two (HS2) and the General Practice Extraction Service (GPES) in 2016.
The purpose of this NAO report is to highlight and investigate emerging good practices. It offers an overview of historical evidence that infers patterns that could lead to good practice strategies capable of identifying risks earlier and managing them more effectively to ensure greater success in all public sector relationships. At the core of the report was a message that from an appreciation of how others have fared can come lessons that have the capacity to mature into cross public sector best practices in commercial and contract management. However, the lessons identified apply just as much to the private sector.
According to the NAO, for the first time, the public sector now spends more on external suppliers and outsourcing than it does on delivering services itself. This is a monumental milestone. While the Conservative government would certainly claim responsibility for the outsourcing movement, even Labour seems to be getting in on the act these days – with news of Labour-run Haringey Council looking for joint venture partnerships to assist in the controversial regeneration of the Wood Green area.
There are many high value and often complex relationships ongoing across the public sector. More often than not, organisations are looking to juggle the goals of improved services at lower costs while complying with public sector responsibilities for transparency and fairness. Because of this, it can be (and is) challenging, to say the least.
Blame for the often very public mistakes of the past has been placed at the doors of both the private and public sector participants. The NAO report states that ‘…contractors’ behaviour has sometimes been reprehensible…’, but they were also quick to balance this by making it clear that this does not exonerate public sector organisations from their part in the process. The report also makes clear that tighter controls, improved commercial capacity and contract management could have created an environment where such poor behaviour may well have been reduced or even eradicated.
Contract Management Best Practice
In 2008, well before this latest report was initiated, the NAO recognised that there was no accepted contract management good practice standard in the public sector. In collaboration with the Office of Government Commerce (then part of HM Treasury) they created a framework for such a standard. However, it took until 2013, when a number of high-profile public sector contracting ‘scandals’ necessitated the use of the NAO’s framework as a benchmarking tool, before it became the government’s standard reference text for contract management.
In December 2016, the NAO updated their framework into a second edition stating that: “This second edition of the framework thus makes no amendments to the framework itself other than to add this note of caution – failure to meet the contract management standards set out in this framework may well lead to problems, but achieving them may not be enough to achieve value for money. The framework focuses on the activities that organisations should consider when planning and delivering contract management and not their overarching approach to commercial and contract management.”
So, while the framework is still just as relevant and practical as ever, the NAO have announced that the “government needs to develop a much higher standard if it is to achieve its contracting goals consistently”.
The NAO report goes on to explain that the commercial relationships framework may not be exhaustive, but it highlights a number of the most important areas the government should consider when managing their contracts.
In October 2016, the revised Government Commercial Operating Standards were published by the Government Commercial Function and this is something we’ll discuss in more detail in a later article.
The following list represents the 20 insights the NAO highlighted as important for the government to think about, and that we will be writing about in more detail in later articles, grouped into the 7 key lifecycle judgements for commercial relationships.
- Make time to develop strategy
- Properly develop strategy
- Tailor capability to risks and opportunities
- Clarify commercial and operational balance
- Maintain ‘organisational capability’
- Be ‘an attractive client’
- Be ‘an intelligent client’
- Properly evaluate bids
- Keep up competitive tension
- Ensure shared understanding
- Understand risks
- Design performance measures that work
- Manage your own obligations
- Know what your suppliers are doing
- Show what you care about
- Understand suppliers’ motivation
- Plan for uncertainties
- Work towards business as usual requirements
- Think about contract end upfront
- Allow time to consider potential end of contract
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