National Audit Office on contract management in Government

Last week, the UK’s National Audit Office (NAO) published two reports covering what has become a hot topic for the UK public sector – contract management. This follows the scandal around over-charging on prisoner monitoring contracts for the Ministry of Justice (MoJ), which saw two large firms (G4S and Serco) falsely claiming fees from the Ministry, and which eventually led to well over £100 million being repaid by the firms to government. We covered those events, including our exclusive report of the MoJ staff conference, and details of how contract management was now being addressed in the department.

The NAO’s first report looks at contract management in general, then in the second, they pick up on progress in MoJ and the Home Office, another department that has had some issues, although not on the scale of the MoJ. Today we’ll look at the general report, then come back to the MoJ / Home Office document in part 2.

Here is a quote from the report that sets the scene on the NAO view and findings.

Government fails to recognise the value of contract management. The purpose of contract management is to use commercial mechanisms to improve services and reduce costs. Too often contract management has been seen as delivering the deal that was agreed when the contract was signed. This has meant that contract management has been seen as a way to avoid things going wrong, rather than unlocking value.

Of course, preventing “things going wrong” is not a bad start – most contract management doesn’t even do that! The MoJ issues would not have happened if contract managers had simply stopped things going wrong. So I wouldn’t decry that goal. But we look at contract management as being all about risk and opportunity, so NAO is correct to highlight both sides of that equation. For most major contracts, both need to be considered.

The quote that has been picked up by most media outlets (few of whom I’m sure have read the entire document) is this.

Traditionally, the procurement profession has had a low status in the civil service, while contract management has been seen as low status within the procurement profession

That is very true. We haven’t even recognised contract management as part of the procurement landscape at times – CIPS for instance has been slow to pick up one this (and is now losing out to the International Association for Contract & Commercial Management because of that).

We don’t want NAO to get too over-confident by giving wholly positive reviews to their reports (although really, this is a very impressive piece of work), so let’s pick them up on one point. Finding number 12 is this:

Government needs to ensure responsibility for the delivery of contracted-out services and the control environment rests with contractors. Government needs to create a situation where it can rely on its contractors even when it is not deploying its best contract managers to oversee them. Senior executives within contractors should accept, through the contract, the personal accountability for delivery that senior responsible owners accept within the civil service.

But then the detail that follows this headline is all about managing “intelligence on strategic suppliers”, transparency and incentives – all actions that the buy-side needs to take. That strikes me as the right way to approach this anyway rather than “relying on contractors”, but there just seems to be slightly contradictory messages there. Sure, responsibility must lie with contractors, but I don’t think the buyer can ever fully rely on its contractors. NAO are making the point that we can’t have our best contract managers on every contract and that is true. But that is where systems, processes, and tools come into play.

Anyway, the overall “Value for Money Conclusion” is that things are improving. However..

“In our view there needs to be widespread change in the culture of the civil service and the way in which contractors are managed. There needs to be more emphasis on a commissioning approach, transparency over the contractors, use of open-book to align incentives and a targeted focus of the government’s commercial capability”.

Then there are two key recommendations for “the centre”. As the report says:

  • The Cabinet Office should set up a cross-government programme to improve contract management, building on the work of the Markets for Government Services (Officials) group. This will help to formalise existing arrangements and help to make improvement plans more sustainable... the programme should be part of the Major Project Authority’s portfolio. The Cabinet Secretary, the Head of the Civil Service and government’s Chief Procurement Officer should champion better contract management, especially to senior managers outside the commercial function.
  • HM Treasury and the Cabinet Office should continue to use commercial capability reviews to ensure reforms are embedded ... The commercial capability reviews should also cover the Crown Commercial Service (CSS). The CCS needs to integrate its contract management processes with these new arrangements within departments. The Cabinet Office should measure the CCS’s success by its ability to meet departments’ needs.

There is a lot to take in through these reports, and as well as part 2 covering the MoJ and Home Office report, we may well return to some of the more specific and interesting areas they cover in the future. But in the meantime, do take a look yourself.


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First Voice

  1. Stephen Heard:

    What ever happened to the concept of Senior Industry Responsible Owner (SIRO but not to be confused with the Senior Information Risk Owner in the NHS! TLA’s don’t you just love them.)

    Anyway my recollection from OGC Buying Solutions day was that the SIRO was someone appointed by the industry, usually from a professional body or umbrella organisation, who worked alongside the public sector Senior Responsible Owner (SRO) to ensure, among other things, that the contract was managed effectively to ensure both risk and opportunity were identified and managed as such.

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