Transforming Contract Management

If McLeod Governance was given a dollar for every time we have found a control deficiency in how organisations seek to organise their contract management activities we would be worry not for wealth.

So it was within that context that we read a recent United Kingdom National Audit Office report on the transformation of contract management in the United Kingdom Ministry of Justice and Home Office.

Our eye was immediately caught by one of the summary statistics that welcomes you to the report:

Unknown – the total annual cost of managing contracts in the Departments. Unknown due to incomplete capture of costs including the time of various staff involved

The report used a framework that they have previously adopted to assess contract management:

  • Governance – Whether there is clear accountability for contracted services’ performance, and systems to identify and resolve issues and opportunities quickly, at proper levels.
  • Integration – Whether the departments consider contract management enough during contract negotiation, and departmental and contractor staff understand their respective responsibilities.
  • Capability – Whether the departments have enough skilled people to appropriately manage their contracts.
  • Visibility – Whether the departments have enough reliable information on the costs, performance and risks of contracts, and use this effectively.

So how did the Ministry and the Home Office perform based on these criteria?

In terms of governance:

Both Departments have had difficulties with the governance of contract management, most notably in identifying and escalating problems to senior management within the Departments, and with overall assurance and oversight regimes of the Department.

In terms of integration:

Both departments have given insufficient attention to managing contracts during the contract procurement stage.

In terms of capability:

The Ministry of Justice and Home Office, as with many government departments, are struggling to recruit and retain experienced contract management staff.

Across government, the civil service has not valued commercial and commissioning skills, with few senior civil servant positions in this area … Contract management has carried low status, compared with procurement, and limited understanding of best practice and professional standards.

 In terms of visibility:
Both departments have made useful improvements, although taking different approaches. The Ministry has started to redesign the information it collates and analyses, developing better information on all contracts. In comparison, the Home Office made immediate changes to produce a ‘heat map’.
 The report concludes:

The root cause of the weaknesses in contract management is failure over many years to establish contract management as a distinct and respected specialism with a strong ethos and well-defined responsibilities. Our accompanying report confirms this to be the position across government. Contract management roles have carried lower status and profile than posts on major policy development or projects, and in procurement teams.

We consider this a dangerous position for outsourced services. Good value for money depends on contract managers making the planned savings and efficiencies that project and procurement teams only negotiate and set up. Stronger contract management is a natural and essential extension to existing initiatives to improve project management.

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