Have you reviewed your high risk and value contracts?

22 August 2017

NHS Trusts are among organisations in the UK with the most diverse and high value contract portfolios. Larger Trusts often manage significant volumes of suppliers with total contract portfolio values of hundreds of millions of pounds. Contracts continue to be a target area for achieving savings, however, despite the recent emphasis on year-on-year savings and drive for greater efficiencies, achieving savings from contracts can be challenging.

In his report on Operational Productivity and Performance in English NHS acute hospitals in early 2016, Lord Carter found that trusts typically recognised a third of the savings opportunities put in front of them and already had plans in place for delivering them. A further third were aware of but had no plans in place and the final third were completely new to them. Our view is that savings from contracts are more likely to be in the second and final third. This is because most Trusts struggle to obtain full visibility and understanding of:

  • the size of their contract portfolio;
  • which contracts leak value; and
  • which contracts to prioritise for the purpose of achieving savings.

Where contracts are complex, have been in place for several years, or the scope and terms have been revised, it is not unusual to find billing errors that make up a significant part of the contract value often through overpayments. The risk to Trusts is that they may not be getting the products and services they originally bought; and as a result could be leaving a lot of money on the table.

Leading organisations within the NHS, and other sectors that have faced similar challenges, are addressing these issues by carrying out specialist contract compliance audits. These audits allow organisations to determine whether:

  • they are paying suppliers according to agreed-upon terms and conditions;
  • suppliers are holding up their side of the bargain;
  • there are mechanisms to track service delivery against the contracts;
  • there are sufficient preventative and detective controls to ensure compliance with contracts; and
  • contracts really are delivering value for money.

How can contract compliance audits help and what are the key benefits? Download our full report to find out.