Responding to the publication today of the Public Accounts Committee’s report into contract management by government, Walter Akers, a Partner at RSM who specialises in contract risk and procurement commented:
‘The PAC is absolutely right to highlight that the government’s management of contracts must improve more quickly to address concerns about value for money and accountability.
‘Successful commercial outcomes are ultimately a result of good commercial leadership. This is arguably the most important factor for government to get right. Leaders should set the right tone from the top by creating a commercial culture and show an active interest in getting best value from contracts.
‘There has long been a concern that the civil service gives insufficient weight to commercial competence when recruiting for senior positions so a culture change in this area is vital if contract management is to improve.
‘The big budget squeeze is now a reality, and it is here to stay. Government is getting used to living with the conflicting pressures of shrinking budgets against a background of greater demand for services.
‘Based on our experience of advising many public sector bodies, our view is that whilst there is no one definitive silver bullet solution for success, there are factors that government should consider when trying to raise their game and improve the value they derive from contracts and third party providers.
- Recognise that the day job has changed: delivering services yourself is very different to managing third parties to deliver services. A significant amount of service delivery (be it directly or indirectly through outsourced support functions) is actually delivered by third parties through a commercial arrangement. Therefore a crucial step in enhancing value from contracts is to put contract management at the heart of all government’s activities.
- Getting best value from your providers doesn’t stop when you sign the contract. Whilst value can be lost at every stage of a contracts’ life, most often the leakage occurs post award over its operational life. This happens for a myriad of reasons but the root cause is often a misunderstanding of the fact that the pre award procurement phase captures potential value that can only come to fruition through careful post award management of the contract. Signing a good contract is not enough; it must also be managed thereafter.
- Attention to detail: effective commercial governance over contracts is built on robust processes that are supported by good data and a keen eye for the detail.
- Invest in peoples’ commercial skills. Relationships and contracts with third party providers are amongst government’s most valuable assets. Equipping teams with the knowledge and skills to manage those contracts is of crucial importance to success
- Making the change that is needed - the biggest challenge is embedding commercial contract management capability within and across public sector organisations. This is because it requires stakeholders, managers and users of contracts to change the way they engage with each other and with suppliers. This requires all parts of organisations to be committed to commercial practice and principles that are fully aligned with internal policies, procedures and strategies.
‘Experience is showing that there are significant savings and delivery enhancement to be had through better contract management. It may not be enough on its own to relieve the harshness of the current squeeze but every little bit helps.’