High-risk contract management – tips from Ian Elliott of PWC

supply risk

As well as featuring  the Ministry of Justice electronic monitoring over-billing story recently (here and here), there were some more general points from that day which seem well worth picking up.

An example came from the presentation by Ian Elliott, the PWC Forensic Audit partner who led the team that was involved in reviewing the Serco and G4S tagging contracts, and the wider review the department undertook of other contracts held with those suppliers.

Elliott provided the recent Ministry of Justice staff event with a checklist of the factors that were considered when decisions were made about which contracts should be examined in more detail. It struck me that the list formed a good guide for anyone thinking about where to put more contract management effort, or where to look if there was any suspicion of bad behaviour from suppliers.

So here’s the list, with thanks and credit to MoJ, Elliott and PWC. Some are very obvious points, others more subtle, but see for yourself. And you might want to prioritise contracts with the following characteristics:

  • Strategic importance to the buying organisation
  • High value
  • Known or past record of supplier issues
  • Multiple contract extensions
  • Long contract periods
  • Single source situation
  • Lack of competition in contract award
  • Impacted by recent internal policy / strategy changes
  • Frequent contract variations
  • High staff rotation (users, contract managers etc)
  • Limited contract governance or management in place

Actually, here’s a thought for all senior procurement practitioners reading this. Why not identify the three contracts in your organisation that tick the greatest proportion of those boxes, and invest a few thousand pounds of consulting or interim fees, or allocate a few weeks’ time for a couple of bright young things in your team to look at them? You could commission what we call in the business a “good old poke around” those contracts.

Look in detail at billing. At prices, benchmarking, price changes through the contract. At the metrics, KPIs and SLAs. At any data provided by the supplier –particularly if that feeds into their remuneration in any way. At corporate hospitality or long term ‘personal’ relationships between the parties.

It might just prove to be an interesting exercise.

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First Voice

  1. Peter Kobryn:

    Very useful succinct checklist – tnank you

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