Good practice contract management framework†
- OGC, NAO
1 This good practice framework for contract management (the framework) was developed in parallel with the National Audit Office report on Central government’s management of service contracts, which was published in December 2008 (HC 65, Session 2008-09) and is available at www.nao.org.uk. The framework was used during the fieldwork stage of the report to benchmark central government’s contract management performance against good practice.
2 The National Audit Office found that while there are examples of good practice, central government’s management of service contracts is not consistently delivering value for money. The report estimated that better contract management could potentially generate savings of between £160 million and £290 million a year across the organisations surveyed through reduced contract expenditure. As well as financial savings, better contract management could bring improvements in the quantity and/or quality of services, the avoidance of service failure, and better management of risk.
3 The framework is a good practice guide for managing a broad range of contracts. It is particularly relevant for contracts where services are delivered over a long period of time (five years plus) where customers need to ensure that service levels and value for money are maintained over the duration of the contract. The framework will provide the foundation for the Office of Government Commerce’s revised guidance on contract management. The Office of Government Commerce will also develop supplementary guidance, specifically appropriate to the most complex forms of contract, during 2009.
4 The framework covers the stage where a contract has been signed and the service is up and running. It does not cover the tendering/contract award stage or some of the specific issues that arise when a contract expires or is terminated, for example, relating to the disposal of equipment or handover to a new supplier. Guidance on these areas, and on issues such as contract management skills, is available on the Office of Government Commerce’s website – www.ogc.gov.uk.
5 The framework complements guidance provided by the Operational Taskforce within Partnerships UK for the management of PFI contracts during their operational phase. The framework does not, however, cover all the issues which may arise in relation to PFI contracts, which involve an added degree of complexity, for example in their arrangements for refinancing, managing contract variations, risk allocation and contract termination. Further guidance for managers of PFI contracts is available on the Partnerships UK website – http://www.partnershipsuk.org.uk/PUK-OTF.aspx.
6 The framework comprises:
- Section 1 which outlines the activities that organisations should consider when planning and delivering contract management;
- Section 2 which discusses how to evaluate the risk and value opportunities inherent in contracts; and
- Section 3 which illustrates how the activities from Section 1 and the evaluation from Section 2 can be brought together to develop contract management plans and priorities.
7 The National Audit Office employed two experienced procurement professionals to develop the initial framework. The framework was then tested at four workshops with representatives from government departments and other public bodies, specialist procurement organisations, IT suppliers and facilities management suppliers. The framework was refined in the light of feedback from the workshops. Further discussions were then held with the Office of Government Commerce, the Chartered Institute of Purchasing and Supply, and Partnerships UK to finalise the framework.