Commercial and contract management:

insights and emerging best practice November 2016

If you would like to know more about

the National Audit Office’s Commercial
and Contracting programme of work,
please contact:

Joshua Reddaway
Director, Commercial and Contracting VFM
[email protected]
020 7798 7938

The National Audit Office team for this work consisted of:
Andrew Denney, Iain Forrester, Catriona Sheil, Fedra Vanhuyse,
David Wilson, and Emma Willson, under the direction of
Joshua Reddaway.

The National Audit Office (NAO) scrutinises public spending

for Parliament and is independent of government. The
Comptroller and Auditor General (C&AG), Sir Amyas Morse
KCB, is an Officer of the House of Commons and leads the
NAO. The C&AG certifies the accounts of all government
departments and many other public sector bodies. He has
statutory authority to examine and report to Parliament on
whether departments and the bodies they fund have used
their resources efficiently, effectively, and with economy.
Our studies evaluate the value for money of public spending,
nationally and locally. Our recommendations and reports
on good practice help government improve public services,
and our work led to audited savings of £1.21 billion in 2015.

Design & Production by NAO External Relations

DP Ref: 11318-001

© National Audit Office 2016

Foreword

This interactive publication draws on What is this? As government has reacted to these
scandals, it has also come to appreciate
Who is it for?
In this publication we set out our insights We have aimed our Commercial and
our audits of government contracts on some of the areas where contracts
the need to improve its commercial
capability and the value of managing
contract management – insights and
go wrong, the warning signs that we look emerging best practice at public sector
and engagement with government for, and the examples of emerging good
its contracts properly.
leaders responsible for commercial

to provide practitioners with insights practice we have seen across government.

We draw on many of our previous reports,
In 2013, government turned to our
good practice framework for contract
relationships and contracts, and those
practitioners managing contracts, both in
on the new, emerging higher our engagement with government as it has
sought to improve its commercial capability,
management, originally published in
2008, to assess its management of
the commercial function and more broadly.
How should it be used?
standard for government contracting. and our discussions with practitioners
about the challenges they face. We also
contracts. We developed this framework
with government through workshops with We cover 7 areas of our commercial
set out our framework for auditing practitioners. We believe it still stands relationships framework and highlight
commercial relationships which we intend as a practical guide to the functions that some of the issues we have found for
to increasingly use to explore emerging government must carry out for operational each area. These show what we think are
good practice. The specific questions contracts. But having seen it used over the most important areas for government
we ask will vary for each audit. the past few years, we believe that to think about and are not an exhaustive
although necessary, the framework is not checklist or comprehensive guidance on
Why have we produced this?
sufficient; government needs to develop how to procure and manage contracts.
The public sector now buys more in than a much higher standard if it is to achieve Our thoughts on emerging best practice
it spends on delivering services itself. It is its contracting goals consistently. provide ideas of what might help, as
also buying increasingly complex things in government continues its journey to work
In striving to improve, government
increasingly complex ways. Public sector out how to best contract for what it needs
departments have thus found themselves
requirements, such as transparency, and set the high standards needed.
inventing ‘good practice’, rather than
fairness and achieving value beyond the Revised commercial standards published
looking to implement an existing model.
core contract terms, make this harder. in October 2016 are a positive step on this
Our assessment is that things are
journey – government now needs to ensure
Contracting scandals in 2013 served as improving, but still far from perfect. We
these standards are implemented and
a wake-up call to government. It realised want to challenge government to establish
continue to raise its expectations.
that it had consistently underinvested and meet a much higher standard so it
in its commercial capability and the can achieve its contracting goals. At the Readers may choose to read this document
management of its contracts. While same time, our new audit framework for as a whole, or go straight to our list of the
contractors’ behaviour has sometimes been commercial relationships aims to provide 20 important insights for government to
reprehensible, government should not have some consistency in the way we view think about.
allowed contractors to behave in this way. contracts so that we can enhance our
understanding of what is ‘good practice’
just as government raises its standards.
 Overview

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Why is commercial and What are we doing? How to use The commercial What does our emerging best
Commercial
strategy

1 Commercial
capability
Transition
& termination
7 2

contract management this document relationship lifecycle practice mean for departments Contract
6 3 Market
management
& sourcing

important? – 20 insights and government?

lifecycle

5 4

Contract Contract
management approach

The public The public sector spends £242 billion a year with private and voluntary sector suppliers
sector spends
£242 billion a
year with private
The public sector spends more money on Largest categories of public sector spending 2014-15
and voluntary contracts than it spends on providing services
sector suppliers itself. During 2014‑15 it spent £242 billion (31% of
total government spending) on external suppliers,
Government
relies on compared with £194 billion on staff costs.
suppliers across Suppliers now play a significant role across
a range of areas the public sector. They carry out government
work including complex projects, back-office £734 billion
Government Expenditure
is improving administration and public-facing services.
contract
management on Government’s large contracts include:
three levels
• HM Revenue & Customs’ information,
communication and technology services contract,
known as ‘Aspire’ (£11 billion total contract cost)

• Ministry of Defence’s defence information

infrastructure contract (£4 billion)
30% 26% 31%
• Department for Transport’s contract for the
Benefits Staff costs Contracts
Northern Rail franchise (£2 billion)
£218 billion £194 billion £242 billion (includes £50bn capital)1
• HM Treasury’s outsourced service contract for
National Savings & Investments (£1 billion) 1 A small amount of this capital expenditure is capitalised staff costs and the majority is contracted with delivery partners.
Source: Whole of Government Accounts 2014-15

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Commercial
strategy

1 Commercial
capability
Transition
& termination
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contract management this document relationship lifecycle practice mean for departments Contract
6 3 Market
management
& sourcing

important? – 20 insights and government?

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Contract Contract
management approach

The public Government relies on suppliers across a range of areas

sector spends
£242 billion a The £242 billion that the public sector spends through contracts comprises:
year with private
and voluntary
£192 billion on good and services
sector suppliers
Health Other central government Other central Local government Public corporations Capital
Government departments and government entities and

£50
relies on arm’s‑length bodies devolved spending
suppliers across
a range of areas COUNCIL

Government
is improving
contract
management on
billion
three levels £61 billion £43 billion £12 billion £69 billion £7 billion Capital spending is not separated
out by sector in the Whole of
Government Accounts

Source: Whole of Government Accounts 2014-15

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Why is commercial and What are we doing? How to use The commercial What does our emerging best
Commercial
strategy

1 Commercial
capability
Transition
& termination
7 2

contract management this document relationship lifecycle practice mean for departments Contract
6 3 Market
management
& sourcing

important? – 20 insights and government?

lifecycle

2 of 2
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Contract Contract
management approach

The public Government relies on suppliers across a range of areas continued

sector spends
£242 billion a
Central government contract spend categories 2014-15
year with private
and voluntary ICT
sector suppliers Facilities
Professional Services
Government Defence
relies on Construction
suppliers across Industrial Services
Legal Aid
a range of areas
Engineering Goods
Consultancy and Contingent Labour
Government World Programmes
is improving Welfare to Work
contract Energy and Fuels
management on Learning and Development
three levels Office Solutions
Clinical and Medical
Communications
Logistics
Travel
Operational Goods
Fleet
Social Care
Research
Print and Print Management
Personnel Related
Waste Management
Emergency and Rescue
Uncategorised
0 1 2 3 4 5 6 7
Type of procurement spend £bn (2014-15)

Source: Cabinet Office Spend Analytic (Bravo)

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Why is commercial and What are we doing? How to use The commercial What does our emerging best
Commercial
strategy

1 Commercial
capability
Transition
& termination
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contract management this document relationship lifecycle practice mean for departments Contract
6 3 Market
management
& sourcing

important? – 20 insights and government?

lifecycle

5 4

Contract Contract
management approach

The public Government is improving contract management on three levels

sector spends
£242 billion a
year with private
Given the importance of contracting, Commercial and contract management areas of focus
and voluntary government needs to get it right. Since 2013,
sector suppliers it has invested in understanding and improving
commercial and contract management.
Government
relies on At a government level, this has included developing
suppliers across a stronger commercial function and re-defining Government level Organisational level Contract level
a range of areas Government Commercial
(The focus for this report)
the profession. Government has also improved Each department sets detailed
Function has sought to We are only just starting to see
commercial and contract management at a contract commercial policies for its own
Government redefine procurement as a
organisations, and procures the impact of changes at a
is improving level, with the centre of government giving more new commercial profession
and manages its own contracts. government and organisational
contract support in terms of skills, expertise and guidance. and to improve commercial
Since 2013, many departments level in our audits of individual
We and the Committee of Public Accounts have capability across government.
management on have focused on understanding contracts. This report focuses on
It has developed commercial the issues we still see arising in
three levels acknowledged that government has made progress and better managing their
standards and guidance for individual contracts and projects,
organisational capabilities. The
in improving contract management in recent years. departments and professional which can be resolved at a
larger spending departments,
The Cabinet Office recently launched new Commercial competency standards for
in particular, have improved contract level.
commercial experts. It has sought
Operating Standards which apply across the whole of the governance of both their
to improve accountability and
departments’ businesses. But government still needs contracts and portfolios. They
transparency of contracts across
have also invested in new
to do more to ensure that government contracting is government and begun to build
contract management IT systems,
effective, meets public service standards and provides strategic relationships with it’s
new organisational structures
larger suppliers.
better value for money for the taxpayer. and introduced new ways to
prioritise resources.

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Why is commercial and What are we doing? How to use The commercial What does our emerging best
Commercial
strategy

1 Commercial
capability
Transition
& termination
7 2

contract management this document relationship lifecycle practice mean for departments Contract
6 3 Market
management
& sourcing

important? – 20 insights and government?

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5 4

Contract Contract
management approach

Identifying Identifying emerging best practice for individual contracts throughout the commercial lifecycle
emerging
best practice
for individual
Over the last 15 years we have assessed This publication Commercial and contract management: insights and emerging best practice,
contracts more than 140 contracts or portfolios identifies what we have seen work well and less well across contracts. It builds on our previous
throughout the reports and discussions with government to provide our thoughts on emerging best practice on
of contracts in detail. Through this
commercial 20 issues across seven areas that we believe need to be improved. We illustrate emerging best
lifecycle
work, and broader discussions with
practice where we have seen something work, or have identified suggestions on how to make
government, we have identified a things work better. Each of our 20 insights section shows:
We used number of recurring issues.
contracts and • what we have seen and heard through illustrative case studies based on our previous work;
workshops
• some emerging best practice and our insights on the way forward;
Our 26 most • some of the audit questions for assessing the value for money of commercial relationships; and
recent reports
on commercial • links to some of the wider guidance that may support government.
and contracting
issues
Fit of Commercial and contract management: insights and emerging best practice with our wider work

Contract level What do we look at? What should government do? What have we found?

NAO contract relationship For example: NAO Good practice Commercial and contract
audit framework contract management framework management – insights and This document
emerging best practice
Through a set of audit questions, Outlines contract management
helps evaluate management activities. Includes how to evaluate Draws on our work across
of commercial relations on a risk and opportunities and develop government to identify what we
consistent basis to decide whether contract management plans. have found and the emerging best
they lead to value for money. practice for individual contracts.

In early 2016, we published an overview of commercial and contracting in government outlining our focus for the next few years: government’s commercial capability; managing contracted‑out service delivery; accountability
and transparency; managing markets for public services; government as one customer; and new commercial models. This overview focused on overarching government and organisational level issues rather than the contract
focus we take with our insight and emerging best practice.

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Why is commercial and What are we doing? How to use The commercial What does our emerging best
Commercial
strategy

1 Commercial
capability
Transition
& termination
7 2

contract management this document relationship lifecycle practice mean for departments Contract
6 3 Market
management
& sourcing

important? – 20 insights and government?

lifecycle

5 4

Contract Contract
management approach

Identifying We used contracts and workshops

emerging
best practice
for individual
Our evidence base for emerging best practice Number of reports examined for each department Contract type
contracts drew on our wider back catalogue which Ministry of Defence 19
6
throughout the includes more than 140 related reports 31
commercial Department for Transport 16 6
lifecycle
since 2000 across a range of departments. 34
We focused particularly on our most recent Department of Health 14 14

We used 26 reports covering nine central government Home Office 10

52
contracts and departments. Our reports have most often
workshops Ministry of Justice 7
focused on service contracts, but include Infrastructure
Department for Work
Our 26 most infrastructure and IT contracts, and considered & Pensions
6
IT
recent reports contracts at different stages in their lifecycle. HM Revenue & Customs 6 Service
on commercial Service/Infrastructure
and contracting We also consulted widely with public sector practitioners. Department for Education 4 Service/IT
issues This included seven workshops with commercial staff Department for Culture, Service/IT/Infrastructure
3
across central government; discussions with local Media & Sport

government representatives, suppliers and operational HM Treasury 2 Stage examined

teams; and discussions with wider stakeholders Department of Energy
2 36
across the commercial sector. & Climate Change

Cabinet Office 2 21

Department for Environment,

1 86
Food & Rural Affairs

UK Trade & Investment 1

Cross-government 19
Post termination
Non-departmental 31 During contract
0 5 10 15 20 25 30 35 Prior to contract signature

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Why is commercial and What are we doing? How to use The commercial What does our emerging best
Commercial
strategy

1 Commercial
capability
Transition
& termination
7 2

contract management this document relationship lifecycle practice mean for departments Contract
6 3 Market
management
& sourcing

important? – 20 insights and government?

lifecycle

5 4

Contract Contract
management approach

Identifying Our 26 most recent reports on commercial and contracting issues

emerging
best practice
for individual
contracts
throughout the
commercial
lifecycle Market Market Market Market Transition Transition
Commercial Commercial
Commercial Commercial
Commercial
management Commercial
Commercial Contract
management Commercial Contract
Contract
management Contract
Contract
management Contract Contract
Contract
Contract Contract
Contract
strategy capability
strategy capability
strategy capability
strategy approach management
capability
approach management
approach
lifecycle approach& termination
management
lifecycle & termination
management
lifecycle
& sourcing & sourcing & sourcing & sourcing

We used
contracts and
workshops Universal Credit: progress update (2014) Contracted-out health and disability General Practice Extraction Service (2016) E-Borders and successor programmes (2015)
assessments (2016)
The Work Programme (2016) Electronic monitoring contracts (2013) The rural broadband programme (2013)
Our 26 most High Speed 2 (2016)
Investigation into the UKTI specialist
Military flying training (2015) Hinchingbrooke Health Care NHS Trust (2012)
recent reports services contract (2016)
on commercial Shared service centres (2016) InterCity West Coast (2012) Out-of-hours GP services in England (2014)
Transforming Rehabilitation (2016)
and contracting Procuring new trains (2014)
issues

Market Market Transition Transition Transition

Commercial
Contract
management Contract
Contract
management Contract
Contract
Contract Contract
Contract Contract
capability
approach management
approach management
approach
lifecycle & termination
management
lifecycle & termination
lifecycle & termination
& sourcing & sourcing

A more detailed summary

can be found here.
Civil Service Learning’s contract with Capita Yarl’s Wood Immigration Removal Centre Reform of the rail franchising programme
(2015) (2016) (2015)

The Emergency Services Network (2016) COMPASS contracts for the provision of Language services contract (2014)
accommodation for asylum seekers (2014)
Army 2020 (2014) Managing and replacing the Aspire contract
UnitingCare Partnership (2015) (2014, 2016)
Open-book accounting and supply‑chain
assurance (2015)

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Why is commercial and What are we doing? How to use The commercial What does our emerging best
Commercial
strategy

1 Commercial
capability
Transition
& termination
7 2

contract management this document relationship lifecycle practice mean for departments Contract
6 3 Market
management
& sourcing

important? – 20 insights and government?

lifecycle

1 of 2
5 4

Contract Contract
management approach

back to last page viewed

How to use How to use this document sub-navigation
this document overview page
This interactive document sets out our insights What this overview provides for practitioners
A standardised
format and thoughts on emerging best practice 1 Highlights rather than an exhaustive checklist. We do not
across 20 areas relating to the contract cover everything practitioners need to consider when setting up
and commercial management of individual and managing contracts, only those issues we persistently see
cause problems.
contracts. It is designed for those working
within commercial and contract management.
2 A focus on commercial issues rather than project management.
The 20 insights are outlined here. Contracts often form an integral part of a wider project or programme.
Getting things wrong within a programme can impact on a contract
and vice versa. Here we focus on the commercial and contract
management issues.

3 An NAO perspective. Although we consulted stakeholders for

feedback on our findings and to identify good practice, our insights
aligns with Cabinet Office guidance such as organisational commercial
standards, are our own.

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Why is commercial and What are we doing? How to use The commercial What does our emerging best
Commercial
strategy

1 Commercial
capability
Transition
& termination
7 2

contract management this document relationship lifecycle practice mean for departments Contract
6 3 Market
management
& sourcing

important? – 20 insights and government?

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2 of 2
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Contract Contract
management approach

How to use How to use this document continued

this document

A standardised Tips on using NAO methodology for auditing commercial relationships

format this document

Good practice framed around

the contract lifecycle – We Commercial
use our commercial relationship strategy
lifecycle to structure our thinking.
We recognise many of the issues
raised will overlap different stages
1 Commercial
capability
Transition
of the framework. & termination
7 2
We adopt a standard format set
out here. Key
Terminology – The public judgements
sector does not always use for commercial
commercial and contracting terms 6 relationships 3 Market
consistently. We use ‘commercial
and contract management’ to management
Contract & sourcing
encompass all activities across lifecycle
the contract lifecycle. Our
glossary is here. 5 4
This document is not to be used
as a checklist for assessing
commercial and contract Contract
Contract
management performance. management approach

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Why is commercial and What are we doing? How to use The commercial What does our emerging best
Commercial
strategy

1 Commercial
capability
Transition
& termination
7 2

contract management this document relationship lifecycle practice mean for departments Contract
6 3 Market
management
& sourcing

important? – 20 insights and government?

lifecycle

5 4

Contract Contract
management approach

back to last page viewed

How to use A standardised format
this document
1 Commercial strategy 1 Commercial strategy 1 Commercial strategy

INSIGHT 1 INSIGHT 2 Navigation Home INSIGHT 1 INSIGHT 2 Navigation Home INSIGHT 1 INSIGHT 2 Navigation Home
Make time to develop strategy Make time to develop strategy Make time to develop strategy

A standardised
Properly develop strategy Commercial
strategy
Properly develop strategy Commercial
strategy
Properly develop strategy Commercial
strategy

1 Commercial 1 Commercial
capability 1 Commercial
capability
capability Transition Transition
Transition & termination & termination
& termination
7 2 7 2 7 2

6 3 6 3 Market
6 3 Market
Market management management
management Contract & sourcing Contract & sourcing
Contract & sourcing lifecycle lifecycle
lifecycle

5 4 5 4 5 4

Overview > Warning indicators > Emerging best practice > Case studies > Supporting information Contract
management
Contract
approach
Overview > Warning indicators > Emerging best practice > Case studies > Supporting information Contract
management
Contract
approach

Overview > Warning indicators > Emerging best practice > Case studies > Supporting information Contract
management
Contract
approach

format 1 Make time to develop strategy – If time is not invested early in developing a strategy, the foundation for success will not be in place On understanding the relationship between 
programme and commercial planning
On the time for
commercial planning
NAO audit framework ? Examples of relevant guidance ?
We believe that many, and pehaps most, of the problems we see across commercial and contracting activities result from a failure to plan how best to achieve
NAO good practice contract management framework
operational requirements through commercial arrangements. In other words, departments jump to buying without developing a full commercial strategy. Our 2014 report on procuring new trains recommended that the The Department for Work & Pensions’
Case Supporting Commercial strategy
The government needs to plan so it can understand and articulate what it wants, and how to achieve this. Planning forms the basis for core activities such as Department for Transport improve its planning of major procurements. Work Programme (2014 report), a scheme to help 1.1 There is a planned transition from tendering/contract award to
studies information
developing an approach to the market, the service specification and contractual approach; sets the tone for contractual relations; and identifies risks. Government We also highlighted a need to better understand project requirements long‑term unemployed people to find and keep jobs, contract management. The cost of contract management is
requirements for a strategic outline business case include developing a commercial case. If this is not done well, the lack of a clear direction for the programme will before fixing a timetable and starting the tender process. We found that was introduced quickly with limited time for commercial included in the business case and budgets.
lead to challenges for commercial planning. a lack of clarity over the wider strategy undermined the department’s planning. During the early months, suppliers continued
1. Is there an overarching commercial strategy, with a
1.3 There are well defined processes and a clear contract
commercial strategy and led to a perceived gap between the to establish their operations and were unable to clear rationale and linkage to organisational strategy,
management plan, with a focus on outputs and a ‘whole life’
Warning indicators ? Emerging best practice Department’s stated commercial strategy and how it acted. Greater fulfil minimum service standards. We found that the and which targets VFM? approach to performance.
clarity would help the industry make plans and reduce costs. contractual performance measures set up by the 1.1 Is there a clear and consistently held view of what the contract is Government’s guide to assessing business cases sets out expectations
Department were flawed, because of a lack of planning producing, the type of commercial relationship desired, the basic
The shared service programme (2016 report) planned to bring for business cases, including the strategic and commercial case. The
A lack of clarity, for example Take time Engage Consider Use and initial performance expectations being set too high. contract structure and how it will be managed?
between programme and back‑office services together across many departments into two shared commercial case should answer whether “the proposed solution can
commercial approaches, about centres. We found that when it launched the programme in 2013, the be effectively delivered through a workable commercial deal or deals?”.
1.2 Has there been an assessment of strategic drivers, including policy
what is wanted, leading to Cabinet Office did not develop an integrated programme business As such, the proposed solution, and how it may be impacted by
drivers, and the internal and external environment?
differing interpretations case that consolidated the cases for each shared service centre and all commercial considerations needs to be clear.
and tension. potential customer departments. The lack of an integrated programme 1.3 Has the commercial strategy been based upon the assessment
strategy meant that there was no clear overall commercial strategy, of strategic drivers and the internal and external environment?
Insufficient engagement with responsibility for different aspects held by different departments.
with users and the market This contributed to delays and relationship issues between departments
to understand what can be Start planning before the procurement To understand possibilities and risks, Based on the information gathered Use the agreed strategy to shape the later in the programme, which ultimately meant that the contracts had
delivered and, for example, how options are put together, and update engage with: through engaging with markets, approach, contract and relationship. to be renegotiated.
contracts should be shaped. plans continually through the lifetime users and stakeholders consider all Be clear about what the contract is
of a contract. The time needed to • the market, to discuss appetite,
the commercial options and decide and is not trying to achieve.
feasibility and options;
develop commercial strategies will which option best fits the business

Insufficient time allowed to

vary, but it is often necessary to • operational and business teams, objectives. The options appraisal
allow a year or more for the more to understand early on what is should be documented. See properly
develop thinking based on complex contracts. wanted and what would work. develop strategy for what to consider.
these discussions.

15 16 17

Overview Case studies

Supporting information
Sets out the keys issues we Based on our past work and
have identified. knowledge, with links to the relevant reports.
? NAO audit framework
? Warning indicators Sections from our contract relationship audit
framework which outlines some of the things
Highlights some common problems
to look for.
and risks, drawing from our past reports
and wider discussions. ? Guidance
Links to other relevant guidance from
Emerging best practice government or elsewhere, such as the
Identifies some sensible approaches NAO good practice contract management
and initiatives that we have seen or have been framework. We do not endorse all guidance
told about. But not all of these have been tried or consider it an exhaustive list but have
and tested. Following this best practice does identified it as being relevant to our insights.
not guarantee success in itself.

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 Overview

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Why is commercial and What are we doing? How to use The commercial What does our emerging best
Commercial
strategy

1 Commercial
capability
Transition
& termination
7 2

contract management this document relationship lifecycle practice mean for departments Contract
6 3 Market
management
& sourcing

important? – 20 insights and government?

lifecycle

5 4

Contract Contract
management approach

Framed around our commercial relationship lifecycle, we have identified 20 issues for government to
think about
Commercial strategy Contract management
1 Make time to develop strategy 13 Manage your own obligations

Commercial 2 Properly develop strategy 14 Know what suppliers are doing

strategy
15 Show what you care about
Commercial capability 16 Understand suppliers’ motivation
1 Commercial
capability
Transition 3 Tailor capability to risks and opportunities
& termination
7 2 4 Clarify commercial and operational balance Contract lifecycle
Key 17 Plan for uncertainties
5 Maintain ‘organisational capability’
judgements 18 Work towards business as usual requirements
for commercial
6 relationships 3 Market
Marketing management & sourcing
management 6 Be ‘an attractive client’ Transition & termination
Contract & sourcing
lifecycle Think about contract end up front
7 Be ‘an intelligent client’ 19

5 4 8 Properly evaluate bids 20 Allow time to consider potential end of contract

9 Keep up competitive tension
Contract
Contract
management approach Contract approach
10 Ensure shared understanding
click through to insights
11 Understand risks
Glossary NAO studies Useful links
12 Design performance measures that work

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Why is commercial and What are we doing? How to use The commercial What does our emerging best
Commercial
strategy

1 Commercial
capability
Transition
& termination
7 2

contract management this document relationship lifecycle practice mean for departments Contract
6 3 Market
management
& sourcing

important? – 20 insights and government?

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5 4

Contract Contract
management approach

What does our emerging best practice mean for departments and government?
While focusing on individual
Government themes Organisational themes
contracts, our 20 insights of
emerging best practice bring
out themes that should be
considered more strategically Data-led approach. Since our 2014 contract Governance. Since 2013 we have seen departments
management report, government has improved the data attempt to make significant improvements to their
at a government and it holds about contracts and suppliers. But it has some commercial governance. Throughout our insights, we
organisational level. way to go in establishing benchmarks and sharing information highlight the significant role played by business owners. They have
across departments. Our emerging best practice reinforces the a role to play in developing a strategy continuing through to
need for a data-led approach, including around government being ensuring that the right outcomes are achieved. We have also
a more ‘intelligent client’; knowing in more detail what suppliers highlighted the need for staff to be supported by an organisation
are doing; and gaining a collective, ongoing understanding of the that works. Organisational structures need to be clear and
market and its available options. effective at entity-level to be able to flow down into the processes
for individual contracts.
Trusted advisor role. The Cabinet Office is continuing
to develop the commercial profession. It continues to Portfolio management. Departments segment their
encourage commercial teams to promote best practice contract portfolio according to risk, although the
rather than purely enforce procurement regulations. Emerging best sophistication of their approaches varies. Segmentation
practice on the importance of getting the right commercial strategy needs to be right given its importance to tailoring contract
in place, and how commercial and operational teams can work resources and understanding what suppliers are doing.
together from initial consideration of commercial options through Departments should maintain a comprehensive view of current
to preparing for termination, shows why this needs to be and future contracts so they can actively manage their full
significantly improved. commercial risk.

Skilled commercial profession. We are concerned Supplier relationship management. Government

that government tries to do more than it has the widely recognises the concept of ‘supplier relationship
capability to do. The Cabinet Office’s capability management’, although many departments are still in the
programme is beginning to increase the number of trained early stages of setting up their management processes. Emerging
commercial staff. This should improve commercial and contract best practice on developing a strategy, remaining an attractive
management and help to ensure that there is the right staffing customer and sustaining competition reinforces the need to focus
mix across high-profile contracts. on managing relationships with suppliers.

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1 Make time to develop strategy – If time is not invested early in developing a strategy, the foundation for success will not be in place
We believe that many, and pehaps most, of the problems we see across commercial and contracting activities result from a failure to plan how best to achieve
operational requirements through commercial arrangements. In other words, departments jump to buying without developing a full commercial strategy.
The government needs to plan so it can understand and articulate what it wants, and how to achieve this. Planning forms the basis for core activities such as
developing an approach to the market, the service specification and contractual approach; sets the tone for contractual relations; and identifies risks. Government
requirements for a strategic outline business case include developing a commercial case. If this is not done well, the lack of a clear direction for the programme will
lead to challenges for commercial planning.

Warning indicators ? Emerging best practice

A lack of clarity, for example Take time Engage Consider Use

between programme and
commercial approaches, about
what is wanted, leading to
differing interpretations
and tension.

Insufficient engagement
with users and the market
to understand what can be Start planning before the procurement To understand possibilities and risks, Based on the information gathered Use the agreed strategy to shape the
delivered and, for example, how options are put together, and update engage with: through engaging with markets, approach, contract and relationship.
contracts should be shaped. plans continually through the lifetime users and stakeholders consider all Be clear about what the contract is
of a contract. The time needed to • the market, to discuss appetite,
the commercial options and decide and is not trying to achieve.
feasibility and options;
develop commercial strategies will which option best fits the business

Insufficient time allowed to

vary, but it is often necessary to • operational and business teams, objectives. The options appraisal
allow a year or more for the more to understand early on what is should be documented. See properly
develop thinking based on complex contracts. wanted and what would work. develop strategy for what to consider.
these discussions.

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On understanding the relationship between  On the time for

programme and commercial planning commercial planning

Case Our 2014 report on procuring new trains recommended that the The Department for Work & Pensions’
studies Department for Transport improve its planning of major procurements. Work Programme (2014 report), a scheme to help
We also highlighted a need to better understand project requirements long-term unemployed people to find and keep jobs,
before fixing a timetable and starting the tender process. We found that was introduced quickly with limited time for commercial
a lack of clarity over the wider strategy undermined the department’s planning. During the early months, suppliers continued
commercial strategy and led to a perceived gap between the to establish their operations and were unable to
Department’s stated commercial strategy and how it acted. Greater fulfil minimum service standards. We found that the
clarity would help the industry make plans and reduce costs. contractual performance measures set up by the
Department were flawed, because of a lack of planning
The shared service programme (2016 report) planned to bring
and initial performance expectations being set too high.
back‑office services together across many departments into two shared
centres. We found that when it launched the programme in 2013, the
Cabinet Office did not develop an integrated programme business
case that consolidated the cases for each shared service centre and all
potential customer departments. The lack of an integrated programme
strategy meant that there was no clear overall commercial strategy,
with responsibility for different aspects held by different departments.
This contributed to delays and relationship issues between departments
later in the programme, which ultimately meant that the contracts had
to be renegotiated.

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Contract
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NAO audit framework ? Examples of relevant guidance ?

NAO good practice contract management framework

Supporting Commercial strategy 1.1 There is a planned transition from tendering/contract award to
information
contract management. The cost of contract management is
included in the business case and budgets.
1. Is there an overarching commercial strategy, with a
1.3 There are well defined processes and a clear contract
clear rationale and linkage to organisational strategy,
management plan, with a focus on outputs and a ‘whole life’
and which targets VFM? approach to performance.
1.1 Is there a clear and consistently held view of what the contract is Government’s guide to assessing business cases sets out expectations
producing, the type of commercial relationship desired, the basic for business cases, including the strategic and commercial case. The
contract structure and how it will be managed? commercial case should answer whether “the proposed solution can
be effectively delivered through a workable commercial deal or deals?”.
1.2 Has there been an assessment of strategic drivers, including policy
As such, the proposed solution, and how it may be impacted by
drivers, and the internal and external environment?
commercial considerations needs to be clear.
1.3 Has the commercial strategy been based upon the assessment
of strategic drivers and the internal and external environment?

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Contract
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2 Properly develop strategy – Underdeveloped commercial strategies will not be achievable

When we are given a ‘commercial strategy’ as part of our audit, we rarely see commercial options fully considered and there is often a lack of realism
of what can be achieved. To avoid setting itself up to fail, government needs to use commercial strategies to outline why and how it is going to conduct
commercial relationships and what it wants to get from these relationships. This will prevent it from relying on generic procurement approaches with little
tailoring to the specifics of the contract. Although we have found examples of where teams have adequately considered trade-offs between priorities, we
often find that ‘strategies’ do not tackle some of the core issues that need to be considered.

Warning indicators ? Emerging best practice Components we have seen in the most convincing commercial strategies include:

Understand Assess Manage

Inadequate consideration of the
available commercial options and
Commercial Business outcomes Capabilities and Commercial Trade-offs Risks and
associated risks, which often leads to 
landscape constraints options appraisal opportunities
the easiest option being chosen.
For example, breadth For example, For example, For example, For example, outline of For example, outline
of market, what what is realistically resource and skills recognised approaches achievable objectives; of how risk is allocated
Lack of realistic commercial they can deliver, achievable in line gaps considering to assess range of use alternative and managed.
options that reflect the available market capacity. with what matters specific technical options, including approaches to
to government. achieve objectives Assessed in a full
capability given resource constraints, skills required. whether policy is
where necessary. review of the required
and the volume of complex achievable or not.
commercial outcomes.
contracts, across government. Assessed in a full
review of the required
commercial outcomes.
Lack of realism about capabilities
and how these can be managed.

Lack of realism about the trade‑offs

Flows into: Negotiation Relationships Procurement Contract
between different outcomes, strategies strategy management
such as innovation and efficiencies, plan
and how they can be managed.

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On considering options On being realistic about capabilities On being realistic about

trade‑offs and what
can be achieved
Case In our 2015 report on health and disability Our 2015 report on the Home Office’s E-Borders
studies assessments, we recommended that the programme found that the Department had a more Our 2016 report on Transforming
Department for Work & Pensions should realistic strategy for its later programmes but needed Rehabilitation found the Ministry
develop an overarching commercial strategy. to tailor its ambitions and prioritise its capabilities on of Justice objectively tested the
The subsequent Committee of Public Accounts projects with highest value. Programme delays and appetite of prospective bidders
report stressed the importance of considering problems showed the knock‑on effect of not having to accept payment by results
different commercial approaches, particularly a realistic strategy and understanding complexities for outcomes not fully in their
where competition is limited. Otherwise, the (see Figure 6). The commercial strategy adopted – a fixed control, and reflected this in its
Department would not be well placed to deliver price with deadlines that left detailed requirements open payment mechanism.
value for money if market interest fell. While the – caused later programme issues as the risk transfer
The Department for Work &
Department said it felt positive about finding between the Department and supplier did not work
Pensions designed its commercial
multiple bidders, there were some indications as envisaged.
strategy for the Work Programme
this was optimistic given previous experiences.
We reported in 2016 that as part of HM Revenue & (2014 report) to promote better
Customs’ management and replacement of its Aspire outcomes and innovation. It
contract to provide information, communication and reflected lessons from previous
technology services, it had developed a strategy to programmes (2012 report) which
bring services in‑house and improve its technical skills. were introduced quickly and not
The Department also assessed its skills and made based on strong assumptions.
senior technology appointments, filling 18 of 20 relevant
posts permanently. This followed our 2014 findings that
the Department recognised it had insufficient internal
capability to challenge the cost effectiveness and
suitability of its supplier’s technical proposals.

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NAO audit framework ? Examples of relevant guidance ?

NAO good practice contract management framework

Supporting Commercial strategy 10.2 A benefits realisation plan is in place for supplier relationship management; and there is
information
a clear sense of what value is to be generated for both parties.
10.3 There is a focus on capturing innovation from the supplier where necessary or valuable.
1. Is there an overarching commercial
strategy, with a clear rationale and 10.4 Knowledge management issues are addressed, including knowledge capture
linkage to organisational strategy, from suppliers.
and which targets VFM? Green Book supplementary guidance on delivering public value from spending proposals
includes an explanation for proposals that optimise public value by identifying and appraising
1.1 Is there a clear and consistently held view of
a wide range of realistic and achievable options.
what the contract is producing, the type of
commercial relationship desired, the basic Government Commercial Function – Government Commercial Operating Standards Iteration ii
contract structure and how it will be managed? 4.2 Commercial options should be considered early and with the department Commercial
1.2 Has there been an assessment of strategic Function (suggested a minimum of six months prior to any approval date for Strategic
drivers, including policy drivers, and the internal Outline Business Case and Outline Business Case) using business cases (or equivalent)
and external environment? that contain appropriate consideration of commercial and contract management
capability (staffing/resources).
1.3 Has the commercial strategy been based upon
5.1 Early engagement of suppliers.
the assessment of strategic drivers and the
internal and external environment? The Scottish Government’s Procurement Journey – Develop strategy

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lifecycle

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management
Contract
approach

3 Tailor capability to risks and opportunities – Resources must be focused on contracts where they can be used most effectively

We are often asked what commercial and contract management resources should be devoted to individual contracts. Ideally, government would be able
to resource everything it needs, but insufficient overall capacity often means it cannot. Government thus needs to ensure that resources are allocated
where they are needed most and where they can achieve the most impact. This is made harder by the lack of robust benchmarks for determining the
appropriate level of commercial and contract management resources.

Warning indicators ? Emerging best practice

Organisation perspective
A lack of planning Organisational and contract
perspectives need to be Identify how contract fits with wider portfolio of contracts
to tailor resources
to contract risks. considered in establishing a Understand sum of staffing requirements across strategically important contracts
staffing model Consider organisational return on investment and wider
opportunity costs of staffing decisions
Contracts understaffed Set out capability ‘blueprints’ to show how they will meet their commercial needs.
at key stages as skills and (Committee of Public Accounts, update on transforming contract management, 2016)

staffing requirements
shift throughout Contract staffing model
the contract. Developed early, regularly reviewed, unique to contract, differs by contract stage

Contract perspective
A lack of analysis,
such as return on investment, Identify return on investment on staff spending

to identify where staff Consider lifecycle stages independently

should be placed. Tailor resources to risks and opportunities
Allow time to reconsider as necessary

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Contract
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On considering resources against On tailoring resources to each contract stage

future contract risks

Case Our 2016 report contracted-out health and disability The Committee of Public Accounts reported that there was an insufficient focus across
studies assessments found that the Department for Work government on contract management once a deal had been signed (update on transforming
& Pensions had invested heavily in its performance contract management, 2016). More specifically, we found that there were insufficient staff
management team which it increased from 48 people working on the contract at different stages:
to 80 over two years. However, we recommended
the Department tailor its resources to future risks. It • We found most bidders to be positive about their dialogue with the Ministry of Justice when
bidding for transforming rehabilitation (2016 report) contracts but teams had appeared
recognised that having insufficient skills and expertise
stretched in dealing with so many bidders, increasing the risks connected with the process.
remained a major risk.

Large-spending departments, such as the Home Office

• The Home Office’s COMPASS contracts for the provision of accommodation for
asylum seekers (2014 report) included areas of risk such as whether suppliers would meet
and Ministry of Justice, have developed approaches
contractual commitments on accommodation quality and maintenance. We recommended
to prioritising contracts. This helps them decide
it should make better use of its compliance teams to ensure suppliers are meeting their
whether the resources allocated to each contract are
contractual commitments and prioritise its resources, particularly its compliance teams, so
proportionate and address capability issues as covered
that it focused on riskier areas.
in the Committee of Public Accounts’ 2014 report on
transforming contract management. The Home • The value for money of the rural broadband programme (2015 report) depended on
Office told  us that it uses a ‘heat map’ to assign scrutinising hundreds of thousands of supplier invoices and carrying out follow-up analysis
contracts across three tiers. This considers, for example, on take-up rates. This needed the Department for Culture, Media and Sport and local
operational importance, business criticality, contract bodies to have the skills and capacity to complete these checks. Some local bodies told us
type and value. The Home Office is flexible in how it uses that they may not have enough staff, creating a risk that planned measures would not be
the model and applies discretion. The Department for effective. We recommended that the Department should consider the long-term need for
Transport told us it has developed a similar model. sufficient financially skilled staff to support compliance activities during the contract. Since
this report, we have found that the Department has strengthened its value-for-money team
which supports local bodies (the Superfast (Rural) Broadband Programme: update 2015).

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Overview  >  Warning indicators  >  Emerging best practice   >  Case studies  >  Supporting information Contract
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Contract
approach

NAO audit framework ? Examples of relevant guidance ?

NAO good practice contract management framework

Supporting Commercial capability Contract manager has appropriate skills with access to relevant
2.3 
information
training and development. Experienced contract managers are
used on key contracts.
2. Does the department have the capability needed
2.7 Balanced contract management teams are brought together, with
to manage the contract and is it developing capability
a range of skills.
for the future?
2.8 Contract management is adequately resourced in proportion to
2.1 Does the department have the necessary capability, skills the importance of the contract.
and systems?
Scottish government framework
2.2 Does the department understand its future needs and is it
Identifies the skills and competencies required by staff involved
working towards meeting them?
in procurement.
2.3 Has the department deployed its capability in a balanced way Government Commercial Function – Government Commercial Operating
across the lifecycle and is commercial capability effectively Standards Iteration ii
integrated with the business?
1.1 Improving commercial capability in departments.
1.2 Changing the grade mix to reflect target operating model.

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lifecycle

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management
Contract
approach

4 Clarify commercial and operational balance – Confused responsibilities and poor knowledge-transfer weaken contract management

Integrating commercial teams with policy, operational and business teams is one of the biggest challenges for public sector contracts. Commercial and
policy, operational and business teams need to work together to develop a clear understanding of the outcomes required and how a contract will deliver
these. Organisations are at different stages in both bringing together these functions and handling the transfer of knowledge and responsibility between
teams. We remain unconvinced that anyone has cracked how to do this fully. At an organisational level, some government departments have tried to
do things differently, with business areas taking more ownership of the process.

Warning indicators ? Emerging best practice

Plan Resource: Give the right people the Manage: handovers Continuity
right levers and interfaces
Unclear roles and responsibilities,
particularly in terms of the commercial
role which can range from ‘adviser’ Plan who should be involved and • Establish a clear overarching • Maintain clear • Monitor continuity and
to ‘owner’. when, thinking ahead about risks and commercial governance framework documentation. add retention incentives
opportunities for each lifecycle stage. for the department with an as required.
appointed senior leader who • Manage handovers
Operational contract managers not • Confirm the role of the commercial is regularly challenged around
from procurement • Establish transition
function and other experts at each to operations; and protocols for when staff in
having the capacity to understand commercial delivery effectiveness.
stage. then the interface senior positions leave.
and perform their role and get
the best from the contract. • Ensure that those involved in between commercial and
• Produce clear documentation contracting have adequate operations.
outlining roles and responsibilities, skills, knowledge and proven
such as a statement of ownership. competency for their roles.
Ineffective and poorly managed
handovers and transition of knowledge • Blueprint resourcing strategy • Make sure that people understand
and skills across the lifecycle as roles achieved. their role and have sufficient training
change. and support.
• Procedures that validate the delivery
of contract management plans. • Draw on commercial and other
High levels of senior staff turnover create business expertise as required.
challenges for transferring knowledge
and expertise. • Give identified owners enough
control and levers to carry out their
role effectively.

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Case studies On aligning commercial and business expertise On disconnect between commercial and
operational activities

On effective transition of knowledge and Recent reports recommended the need to clarify roles In our 2016 report on the Emergency Services
skills across the contract’s lifecycle and responsibilities, such as whether commercial should Network we thought that the commercial arrangements
act as advisers or take more ownership with support from in place created a risk that the emergency services
Our 2016 investigation into the UK Trade & operations. When managing contracts within operational did not have sufficient control over the service they
Investment’s specialist services contract found teams, managers need to be well-equipped and understand  received. They did not have commercial levers over
that its governance of the procurement was weak, the the commercial levers to get the best from contracts. the full service received, limited contact with suppliers
procurement team had a poor understanding of the bid We have seen some good practice: across the end-to-end service, and no direct recourse
and requirement, and there was no effective handover to to suppliers for poor service. This reduces the benefits
the contract management team. UKTI ultimately decided National Offender Management Service – available from the new services.
to terminate the contract on the basis that it no longer Transforming Rehabilitation (2016 report)
considered the contract to represent value for money. We found in 2009 that the Department for Education’s
We found that operational contract managers are supported building schools for the future programme had a
The Department for Transport cancelled its franchise by analytical, finance and data assurance specialists that give shortage of the commercial and project management
competition for InterCity West Coast (2012 report), an improved view on contract performance. This is backed skills needed by local authorities to implement the
following technical concerns about the procurement up by operational assurance teams, which assess contract programme. Projects were delayed because of a lack of
process. We found no one person oversaw the compliance, data quality and service quality, including links capacity, reliance on consultants and continuity issues.
whole process, or could see patterns of emerging with other agencies. Inadequate attention was given to operational activities
problems, partly because of inconsistency in such as community consultation. We highlighted a
Department for Work & Pensions – Contracted-out health
committee membership and requirements. danger of benefits not being achieved without clear
and disability assessments (2016 report)
responsibilities, accountability and commitment.
The Major Project Authority’s reviews of E-Borders
The Department reorganised responsibilities so that each
(2015 report) found governance issues including unclear
contract has a senior contract owner and business partners
roles and responsibilities and prolonged disagreements
provide expertise and challenge financial reports. Dedicated
about critical issues. This was not helped by a lack
commercial teams within programmes are responsible
of continuity of key staff and programme reliance on
for commissioning commercial services and performance
suppliers for staffing.
management teams act as primary contacts for suppliers.

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lifecycle

5 4

Overview  >  Warning indicators  >  Emerging best practice   >  Case studies  >  Supporting information Contract
management
Contract
approach

NAO audit framework ? Examples of relevant guidance ?!

NAO good practice contract management framework

Supporting Commercial capability 1.4 O
 verall ownership of contract management across the organisation
information
is clear, with a ‘contract management senior responsible
owner’ with responsibility for driving organisation-wide contract
2. Does the department have the capability needed management performance.
to manage the contract and is it developing capability
2.3 Contract manager has appropriate skills with access to relevant
for the future? training and development. Experienced contract managers are
2.1 Does the department have the necessary capability, skills used on key contracts.
and systems? Contract managers have accurate job descriptions, roles and
2.4 
positioned at an appropriate level.
2.2 Does the department understand its future needs and is it
working towards meeting them? Contract managers have clear objectives and reporting lines.
2.5 

2.3 Has the department deployed its capability in a balanced way Government Commercial Function – Government Commercial Operating
across the lifecycle and is commercial capability effectively Standards Iteration ii
integrated with the business? The level of commercial interim staffing in departments is optimised.
1.4 
Ensuring strong and effective commercial engagement.
3.1 
Commercial contract management competency.
7.3 

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lifecycle

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Overview  >  Warning indicators  >  Emerging best practice   >  Case studies  >  Supporting information Contract
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Contract
approach

5 Maintain ‘organisational capability’ – Without effective governance and systems, even the most capable people will not succeed

Simply investing in skilled people will not be enough to ensure commercial success. The right people need to work within the right environment. This
includes having appropriate governance, systems, processes and data to make effective decisions. Team members need to know what is going on, the
levers at their disposal and how their actions affect the overall outcome required. This is an area where we have seen some of the biggest changes in
government departments over recent years, but no-one yet says they have a fully mature organisational model.

Warning indicators ? Emerging best practice

Insufficient data
and information being
available to make
informed decisions.
Data
IT and
Poorly established Governance systems processes Visibility
governance leading to
Put in place roles, responsibilities Develop and use systems that Make use of standard and Keep records with information and
unclear roles and and processes for monitoring, produce electronic invoices, record documented processes to manage dates relating to processes, contracts,
responsibilities and decision-making, ownership and cost and progress information in obligations, carry out procurement contract performance, and the pipeline
oversight from early in the contract a way that is consistent and easy processes in a lean and effective of forthcoming work. These should
ineffective oversight.
lifecycle. This includes establishing to analyse. This will allow closer way, and deal with changes or any be available to all those involved with
‘executive champions’ who report management of the contract with incidents or disputes. Collect and the contract and should feed into
to organisational committees less effort required. use information to make decisions the governance systems, including
Poor-quality information with oversight of the contractual across contracts, categories and the portfolio overviews, detailed above.
portfolio. Continuity should be organisation. See manage your own
and reporting systems and supported by back-up plans that obligations and properly evaluate bids
a  lack of standardised document what staff need to know for more details of processes.
approaches to using data. and specific handover processes.
See ensure a shared understanding
for more examples.

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Overview  >  Warning indicators  >  Emerging best practice   >  Case studies  >  Supporting information Contract
management
Contract
approach

On establishing governance

Our 2016 investigation into the UKTI specialist services contract Our 2014 report, Transforming government’s contract management,
Case
studies found communication during procurement to be relatively informal. identified good practice across five levels of governance. In particular
Significant changes, such as to the volume and contract price, were we found that:
not consistently recorded. These governance shortfalls contributed
to control problems, leading to pricing disputes and the ultimate early • The Department for Work & Pensions commissioned an external review
to identify good practice in its day-to‑day contract management and
termination of the contract.
improve consistency.
In our 2014 report on the Army 2020 recruitment programme we
recommended that the Ministry of Defence should closely monitor the
• The Department of Health reviewed its data to make sure contract
ownership information was up-to-date and strengthened its guidance
effectiveness of its governance regime to oversee its supplier. Its failure
for senior responsible owners.
to effectively manage contracts contributed to delays in developing
the software required and increased costs. This led to poor results and • The Department for Work & Pensions improved escalation routes by
an inability to implement the performance management mechanism. ensuring that all contracts have senior responsible owners reporting to
staff in suitable procurement categories.
In 2013, government’s internal audit agency criticised governance
and accountability arrangements for the shared service centres • The Ministry of Justice established a new commercial and contract
programme. This led to difficulties in deciding on a design, which governance committee with a wider remit and greater seniority covering
contributed to delays. The Cabinet Office took steps to restructure current contracts as well as those yet to be signed.
governance and clarified roles. The governance was further
• The Crown Commercial Service’s complex transactions team provided
strengthened in 2016 to better enable shared decision-making.
central support to departments with contractual disputes.

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NAO good practice contract management framework

Supporting Commercial capability Contract ownership is clear, with the budget holder, senior responsible owner
1.2 
information
(SRO), and contract manager clearly defined; there is continuity of governance as
far as possible.
2. Does the department have the
There are well defined processes and a clear contract management plan, with a
1.3 
capability needed to manage the
focus on outputs and a ‘whole life’ approach to performance.
contract and is it developing capability
for the future? Contract management processes are aligned with, among others, wider organisational
1.5 
governance processes, operational boards, and risk structures.
2.1 Does the department have the necessary
Contract management issues and performance are reported through the governance
1.6 
capability, skills and systems?
structure with senior level engagement.
2.2 Does the department understand its future Organisation has a contract management ‘community’ allowing contract managers
2.9 
needs and is it working towards meeting them? to share good practice. The community also plays a role in the wider government
2.3 Has the department deployed its capability contract management/procurement community.
in a balanced way across the lifecycle Government Commercial Function – Government Commercial Operating Standards Iteration ii
and is commercial capability effectively
2.3 Using management information to support effective demand and category management.
integrated with the business?

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6 Be ‘an attractive client’ – Short-term or ill-considered decisions influence whether suppliers want to work with government

Government does not always behave as if suppliers have a choice whether to work with it or not. Suppliers need to know that they will get something
out of a contract and that they will receive a fair deal before they bid. We often find that government is keen to take short term tactical advantages over
contractors, and fails to think about the long-term impact of its decisions on suppliers and market sustainability.

Warning indicators ? We continue to have concerns about the Emerging best practice
level of competition in some vital areas of
public service delivered through providers
Doing things quickly – even where competition exists it can
puts at risk long‑terms often be a thin market. We have sometimes
Before During Later
commercial sustainability. seen departments disappointed by how
difficult it is to generate interest, bidders
withdrawing during procurement and
Not providing sufficient suppliers seeking to terminate contracts Market engagement Procurement Live running
information during procurement, early. Public sector requirements can Engage with the market Keep potential suppliers well Ensure as far as possible
suppliers do not know what act as a barrier for some suppliers – our on an ongoing basis to informed about the procurement that the contract proceeds
promote opportunities and and the project ahead. in a consistent and fair way.
they are getting themselves into. report on government’s spending with assess suppliers.
small and medium-sized enterprises found Consider the impact of Continue to think about
Give as much notice as procurement decisions on the wider implications of
that transparency, government’s appetite possible about future contract risk and profitability. any decisions.
Short sighted commercial
for risk and disproportionate bidding approaches and contracts
decisions contribute to unfair, (before developing strategy). Provide the information required
requirements created barriers for smaller and allow time for bidder
non-profitable contracts and
businesses. Larger suppliers also told us due diligence.
impact market sustainability.
they discriminate which contracts to bid for
in choosing potential work. They consider
Insufficient time allowed for how contracts fit with their expertise
supplier due diligence. and existing or potential work, alongside
balancing contract risk against profitability.

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On ensuring fairness through procurement On ensuring contracts are profitable and set
reasonable expectations

Case Providing sufficient information throughout procurement allows bidders to know what they Contracts need to be profitable for suppliers to remain
studies are getting themselves into and minimise contractual risk, as well as supporting a fair and interested. In 2014, a supplier withdrew from providing
open contract. contracted-out health and disability assessments
(2016 report) for the Department for Work & Pensions
For the InterCity West Coast franchise (2012 report), the Department for Transport’s invitation
following concerns over the negative impact of
to tender contained significant gaps on how the Department would calculate any capital needed
the contract on claimants, its reputation, staff and
from bidders. There was considerable confusion among staff about the primary purpose of
profitability. The Department and suppliers recognise
the subordinated loan facility. Some bidders told us that when they asked for clarification on
that inconsistency in the approach to the contract,
issues, staff did not appear to know the answers and it often took some time before there was
inflexibility in setting terms and potential financial losses
clarification. We concluded that this contributed to cancelling of the West Coast procurement.
reduced the attractiveness of the contract.
For Transforming Rehabilitation (2016 report), the Ministry of Justice set out its commercial
The motivation of the Ministry of Defence’s supplier
strategy to bring new suppliers into the market, and put extensive effort into attracting a diverse
for military flying training (2015 report) to look for
range of potential bidders. While more than 700 private, public and third-sector organisations
cost reductions within the contract is likely to have
registered an interest, only one of its contracts was won by a supplier from outside the private
been affected by reductions in the overall value of
sector. Voluntary sector bidders were put off by the scale, fixed timetable and associated risks,
the programme to implement new core training as
and a lack of detail about the Ministry’s requirements for financial guarantees from bidders.
well as the structure of the incentivisation regime.
Our 2016 report on the UnitingCare Partnership contract found that bidders faced significant Its potential earnings reduced while its planning and
difficulties in pricing their bids accurately due to limitations in the available data. It was difficult to infrastructure costs have been largely unaffected by
determine accurately the volume, services to be provided and the costs of providing services, the changes. During the procurement of the Fixed
and bidders had to make large assumptions, with scope clarifications made late and in some Wing contract amendment two bidders withdrew
cases even after the contract was signed. from the competition, leaving one bidder, as they had
concerns about meeting the commercial and technical
requirements of the Request For Proposals.

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NAO good practice contract management framework

Supporting Market management & sourcing 4.2 The respective responsibilities of the contract manager and the
information
supplier are clear, and potentially defined in a ‘joint statement of
intent’ or similar.
3. Has sourcing supported the commercial
9.3 T
 he customer organisation understands what motivates and
strategy and followed recognised good practice
drives the supplier and how supplier development fits with the
to optimise VFM? supplier’s goals.
3.1 Has market management driven long term value for money?

3.2 Was there a defensible process that resulted in the selection of a

capable provider?

3.3 Was there optimum use of competitive pressure?

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7 Be ‘an intelligent client’ – Without understanding what is wanted and at what cost, government will not get the outcomes it wants

Far too often, we find that government does not understand what it means to buy and what this should cost, or what it has actually bought for the price
paid. Without this understanding, government exposes itself to a risk that it will not achieve its goals or that its contracts will be ineffective and inefficient.
In putting itself in the best position to negotiate or understand how contractual changes affect service and price, government needs to understand both
the specification and how the price offered by suppliers relates to its understanding of costs.

Warning indicators ? Emerging best practice

Intelligent clients need a deep

Incomplete, inaccurate understanding of the required
and broad specifications contract specification and the way
leading to requirements the contractors will deliver it. This
not being delivered or includes an understanding of the
significant costs to amend appropriate cost of the contract
the specifications. and the contractors’ cost drives.

See the next page.

Ineffective challenge
of the assumptions
underlying bids.

Misunderstanding of the
cost drivers and incentives
through, for example,
a lack of modelling.

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Cost Specification
Intelligent clients should maintain: Examples of how it can be used Intelligent clients:

Commercial • Decide whether to make or buy • Engage the market early to improve understanding of suppliers and
Strategy what can be delivered
• Divide large services into lots in a way that
helps competition • Make early discussions with the end user of the contract to
• A should-cost model understand the environment, constraints, requirements, risks
• Choose an appropriate pricing mechanism
and opportunities
• (proportionate to the complexity of
the service)
Commercial • Ensure the business has the ability to • Establish and keep in-house knowledge and use it to define
capability understand the cost-drivers and how they what is bought
can influence supplier behaviour
• Align operational requirements with commercial possibilities

Market management • A cost template for bidders to use • Evaluate bids consistently • Evaluate potential solutions on the market
& sourcing (consistent with the should-cost model)
• Compare costs between bids to help negotiate • Benchmark and challenge individual suppliers on potential
with the preferred bidder

Contract approach • A contract cost schedule (consistent • Ensure the contract is consistent with the • Are transparent through the procurement about requirements,
with should-cost model and identical to winning bid including any uncertainties and likely changes
winning bid)
• Create a contract which incentivises the supplier • Risk assess the likelihood of individual bids being able to meet
to optimise price and quality the expected scope

Contract • An invoice format that follows the • Ensure the invoice is consistent with the • Ensure that sufficient capacity is available for any required work with
management contract exactly contract before paying suppliers to refine specification and reduce uncertainties

• Understand the commercial pressures driving

the supplier’s behaviour

Lifecycle • A contract cost schedule updated for any • Evaluate and price any changes consistently • Revisit requirements throughout the contract’s lifetime.
management agreed changes
• Forecast and manage budgets • Recognise where there are uncertainties and plan for where
changes are expected
• Benchmark against similar contracts and
the original bid

Transition & • A revised should-cost model, learning • Prepare for the end of the contract by updating • Put processes in place early to understand the service and how it
termination lessons from the contract, to be used for and refining the should-cost model could transition
the next contract
• Continue market engagement to keep options open

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On developing what is wanted On understanding costs

Case Our 2015 report on the GP Extraction Service found that project In our 2016 investigation into UK Trade & Investment’s specialist
studies requirements were not initially set out in detail. When the NHS Information services contract we found that UKTI gave insufficient challenge
Centre (now NHS Digital) then needed to work with the client to produce to its supplier’s costings, bids and negotiations. For example, it did
detailed requirements, it had issues with high project manager turnover, not challenge when elements of the price that had previously been
reliance on contractors for expertise and not having sufficient capability for described as ‘fixed’ were changed, or when a new element was
requirement workshops. It found it difficult to agree detailed requirements. introduced to the pricing mechanism.

UnitingCare Partnership (2016 report) won a five-year contract

On using knowledge to challenge bidders to provide older people’s and adult community services from the
Cambridgeshire and Peterborough clinical commissioning group.
The partnership made a tactical decision to submit a lower bid to win
Our 2016 report on contracted-out health and disability assessments
the tender, despite increasing demand for services. This lower bid
found that the Department for Work & Pensions continued to set high
helped win the contract, but neither organisation could fully assess
targets and use assumptions without evidence or sufficient testing and
whether the contract price was viable due to limitations in the data.
challenge. It also allowed bidders to make assumptions about staff training
This contributed to the collapse of the contract.
that it knew were overly optimistic and difficult to achieve.
In our 2015 Superfast (Rural) Broadband Programme update we
The Department for Transport shared with us its approach to developing
found that during the first phase of the programme, the Department
a benchmark to assess bids. It iteratively develops models for expected bids
for Culture, Media & Sport developed its knowledge of costs and
each time it runs a rail franchise competition. Models consider, alongside
undertook cost comparison exercises. It used this understanding
other assumptions, previous growth rates, adjustments for planned changes
to agree lower costs with its supplier in the next phase of the
(eg electrification of particular routes), the context of bids on other franchises
programme.
and a prediction of the likely offers from bidders. These are used to predict
revenue costs and likely profit demands. This means that the Department
can take a more intelligent view of bids and focus on the areas that fall
outside its predictions and expectations, which will be more risky.

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NAO good practice contract management framework

Supporting Market management & sourcing 1.2  arket intelligence is used to maintain an understanding of the
M
information
market and of alternative suppliers (to inform benchmarking,
contingency planning and re-competition strategies).
3. Has sourcing supported the commercial
10.2 The capacity and capability of potential suppliers is analysed, and
strategy and followed recognised good practice
linked to wider government analysis.
to optimise VFM?
11.5 Market making is undertaken where appropriate to stimulate
3.1 Has market management driven long term value for money? competition and ensure the requirements can be delivered by the
market; there is an understanding of issues such as switching
3.2 Was there a defensible process that resulted in the selection of
and bidding costs.
a capable provider?
Cabinet Office open book guidance
3.3 Was there optimum use of competitive pressure?
Discusses how government is to decide which contracts would
benefit from open book approaches. At a minimum, it recommends
understanding cost units and drivers.
IACCM – Tackling the weaknesses in Contract Management Pitfall 1:
Lack of clarity in scope and goals

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8 Properly evaluate bids – Evaluating the capability to deliver is just as important as evaluating what will be delivered
Government officials often say that they are good at ‘getting the bidding process right’. Very few procurements are legally challenged. But we have
recently seen a handful of examples where procurement has gone very wrong. And when it goes wrong it has a significant impact on value-for-money.
Furthermore, in our discussions, practitioners told us that they felt that the right bidder does not always win. In part this comes from the challenge of
assessing suppliers’ ability to deliver, rather than assessing competing promises of what they will deliver.

Warning indicators ? Emerging best practice

Process weaknesses, such

as errors in the assessment
criteria and not being Have
Assessment
consistent or transparent. Assessment
against
Assessment pre‑determined
of capability of risks thresholds been
outcomes
breached?

Competition structured in a
way that rules out desirable
bidders such as small
and medium enterprises. Clear business outcome agreed Consider past performance to the Assess the risk of a bid not being Determine a minimum standard
with the operational team at all levels extent procurement regulations allow. delivered in line with the specification in advance, with bids below this
of the organisation. A procurement policy note requires considering capabilities, ambition and not considered.
Evaluation criteria not aligning Clear criteria and measures linked
organisations to: satisfy themselves innovation, dependencies and risk,
Use a realistic ‘should cost’
to the outcomes required. that suppliers’ recent performance is and the supply chain.
to overall outcomes. model and expectations to create
in line with requirements; ensure that
Assess risks consistently through, for thresholds of acceptability.
Work out how this will this selection criteria on past performance
example, scenario testing.
be measured in the bid assessment. and related required information are
Bids evaluated on the basis specified in EU procurement notices; Consider potential timing of cash flows.
Require and assess a method
of promises rather than an obtain and where necessary verify the
statement and team diagram. information as part of applying selection
assessment of a capability to
criteria and pass on relevant information
deliver that promise. to the Crown Commercial Service.

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On carrying out the On using evaluative criteria to get a supplier that can provide the desired outcome
procurement process

Case Our 2016 investigation into UK The Ministry of Justice’s evaluation of transforming The Home Office and HM Revenue & Customs told
studies Trade & Investment’s specialist rehabilitation (2016 report) bids considered both us that they have been developing a more intelligent
services contract found that it financial and qualitative criteria. To ensure that no approach to evaluating bids. This involved developing
breached good practice and the supplier captured more than 25% of the total market, its models to allow them to more effectively balance
principles of good procurement. approach allowed it to revert to the next-best bidder in the need for cost, quality, and efficiency; perform
The negotiations before contract four cases. This contributed to increasing the number sensitivity analysis; and understand what it meant
award gave the impression of of suppliers. when criteria changed.
UKTI not wanting to reopen the
The Crown Commercial Service told us that when In our 2014 report on procuring new trains, we
competition to other bidders by
it realised that only the incumbent supplier would bid recommended that the Department for Transport
awarding the official contract on
for new government travel contracts, it restarted the continue to consider train operating companies’ ability
one basis, while agreeing to act on
process using different criteria. This brought in more to work collaboratively with train manufacturers when it
another. Negotiating on key issues
small and medium enterprises. selects operators and drafts franchise agreements, to
after bids were submitted restricted
help reduce whole system costs.
competitive tension and exposing The Department for Culture, Media & Sport’s approach
it to a risk of significantly reduced to rural broadband contracts (2013 report) was When reporting in 2012 on Hinchingbrooke Health
value for money from the deal. less well developed. Given weak competition across Care NHS Trust, we found that the authority let
the rural broadband market, it developed a national bidders adjust the risk in their own proposals and could
procurement approach with local bodies agreeing not be sure it compared like with like when selecting
call-off contracts with suppliers. This reduced public its preferred bidder. This increased the risk of making
sector risk but also competition as the framework entry the wrong choice. We recommended that procuring
requirements favoured those with national capacity. authorities need to apply consistent risk adjustments
This led to one effective bidder – the incumbent – so bidders are treated equally and only realistic savings
winning all local contracts. opportunities are considered.

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NAO good practice contract management framework

Supporting Market management & sourcing 11.1 Processes are in place to evaluate and review options around
information
delivering services in-house or outsourcing.
11.2 Market intelligence is used to maintain an understanding of the
3. Has sourcing supported the commercial
market and of alternative suppliers (to inform benchmarking,
strategy and followed recognised good practice
contingency planning and re-competition strategies).
to optimise VFM?
11.3 The capacity and capability of potential suppliers is analysed,
3.1 Has market management driven long term value for money? and linked to wider government analysis, for example, by the
Office of Government Commerce.
3.2 Was there a defensible process that resulted in the selection of a
capable provider? The Scottish Government’s Procurement Journey

3.3 Was there optimum use of competitive pressure?

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9 Keep up competitive tension – Competition need not just happen at the start – sustaining competitive tension throughout adds value

We believe that competition can be taken further than just focusing on ensuring that there are sufficient, credible bidders during procurement.
Competition is critical at the bid stage but this alone will not provide value for money. It is also desirable to keep-up competitive tension throughout the
contract. Organisations can also learn from others, such as defence, where single-source suppliers are common.

Warning indicators ? Emerging best practice

Negotiations slipping Pre-Bid Bid stage During

until after contracts are contract
signed leading to a loss of
competitive tension.

Over-reliance on initial
competition to maintain
Market engagement: Maximise engagement through Market engagement: Keep all bidders in the game Market engagement: Continue to keep the market
tension throughout the early and ongoing discussions and listening. Discuss as long as possible. warm to help sustain a credible set of possible
contract with, for example, prospects, inform the market of plans and use suppliers and benchmark performance. This keeps
Agree all core contract terms before signature.
a lack of consideration of knowledge to outline what is to be provided. Allow alive the threat of leaving a contract with alternatives
suppliers to influence, understand and prepare to bid kept open. Consider commercial trends and the
benchmarking and
for work. impact that shifting markets and technology has on
other ways of securing the relative power of suppliers and government.
Consider contract structure. There are opportunities
competitive pressure.
to be innovative. This could include competition Benchmark changes to the model and market and
between lots, formal benchmarking and allocation of understand thresholds for acceptable performance.
work depending on performance between suppliers.
Contracts being perpetually Take strategic decisions that balance, alongside
other factors, the need for competitive tension.
renewed as competition is
Reward good performance by, for example,
not considered or sustained
varying contract volumes between suppliers.
throughout a contract.

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Case studies On setting up contracts to On considering competition as part

encourage competition of decision-making

On maintaining competition We found good practice in the way that the Department HM Revenue and Customs successfully negotiated
throughout procurement for Work & Pensions set up its Work Programme cost savings on its Aspire contract (2014 report) in
(2014 report) contracts, where using two or three prime 2007 and 2009, but in doing so conceded safeguards
Our 2016 investigation into UK Trade & Investment’s
suppliers in each region helped sustain competitive designed to preserve competitive pressure. For
specialist services contract found that UKTI agreed
tension. The Department could shift referrals between example, it gave the Aspire suppliers greater exclusivity
to negotiate a significant change to the contract after
suppliers if performance differences exceeded a certain and suspended its right to benchmark services, thereby
bids were submitted and before the contract was
level. In addition, it could issue performance notices losing its ability to assess how well the suppliers
awarded. It was procuring the contract under the
‘restricted procedure’, whereby the contract should to prime contractor suppliers where performance were performing against commercial comparators.
be awarded on the basis of the bids provided by targets were not met. Eventually it could terminate Recognising their importance, it restored some of the
those invited to the competition and there should their contracts, with a range of experienced suppliers conditions that provided competitive tension in a further
have been no further negotiation. UKTI and its able to take their place. In practice, the benefits of this re-negotiation of the contract in 2012.
supplier did not formally record the outcomes of approach have not been fully realised as the contractual
negotiations. Restricting competitive tension exposed performance structure made it more expensive to
it to a risk of significantly reduced value for money terminate poorly performing suppliers.
On using alternatives to competition
from the deal.
In our 2016 report on nuclear power in the UK we
Our 2015 report on rail franchising recommended found that government paid low‑carbon generators the
that the Department for Transport develop Our 2015 open book report highlighted ways that the
difference between the price they receive for electricity
alternatives to its commercial approach to reduce the Ministry of Defence deals with single source contracts.
sold and a measure of the average market price for
risk to value for money in the event of market interest Where contracts are let without competition, it
electricity in the UK market. This would cover the gap if
and competition falling. This could involve introducing scrutinises suppliers’ costs, systems and overheads
the average price fell below the contract. These contracts
more negotiation and dialogue with bidders to a to check whether costs are in line with the contract
are designed to create competition between projects and
better deal. and to forecast the cost of defence equipment and
technologies as part of supporting awarding contracts
support. It collates supplier information to support this.
competitively and improving value for money.

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NAO good practice contract management framework

Supporting Market management & sourcing 11.4 There is ongoing evaluation of emerging technologies and
information
practices, and identification of opportunities from both
immediate and parallel market sectors.
3. Has sourcing supported the commercial
11.6 A re-competition strategy and plan is put in place in a timely
strategy and followed recognised good practice
manner; the contract manager feeds into strategy development
to optimise VFM? for the ‘new’ procurement process.
3.1 Has market management driven long term value for money? Government Commercial Function – Government Commercial Operating
Standards Iteration ii
3.2 Was there a defensible process that resulted in the selection of a
capable provider? 5.1 Early engagement of suppliers.

3.3 Was there optimum use of competitive pressure?

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10 Ensure shared understanding – Misunderstanding of the contract and how it works creates confusion and tension

Far too often we find contracts that are unreadable, and misunderstandings about how they work or are priced, resulting in contract or service failures.
Government contracts deal with complex services, systems and infrastructure, but that does not mean they need to be made harder to read by poor
drafting, jargon and inconsistency. On the contrary, it makes it more important for contracts to be readable and easy to understand. Contracts provide
a foundation for building effective commercial relationships and need to be useable by people without legal training.

Warning indicators ? Emerging best practice

Badly drawn-up contracts,

Greater accessibility and awareness of commercial terms.
for example with undefined
terms and a lack Pre-procurement During market engagement, be clear about what is wanted, or where this is still to
be defined.
of plain English.
Agree requirements with internal stakeholders.

‘Core terms’ differing

across similar contracts
and limited standardisation Carry out procurement in line with supplier expectations.
Procurement
across contracts. Agree clear heads of terms to understand what should be negotiated up front.

Terms and references that

are overly complex and Ensure that contracts are simple, accessible and easy to read.

difficult to understand; Produce a ‘contract summary’ or define main terms that may sit alongside the contract.

this may introduce Drafting Use standardised contracts or standardised contract terms where ever possible, and
make clear where the contract has not used standard terms. This also allows more time
ambiguities and lead to 
to be invested in developing specific contact terms that may be more complicated.
different interpretations.
Use worked examples to help explain how contract provisions work.

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Case studies On clarity over contract terms and requirements

On standardisation In reviewing its electronic monitoring contracts Our 2016 investigation into the UKTI specialist
(2013 report) the Ministry of Justice discovered that services contract considered the UKTI’s
We have previously reported on how standardised NHS  suppliers had been misreporting their performance, termination of a contract after a commercial dispute
private finance initiative contracts led to successful in part because they understood contractual terms over pricing. One reason behind the dispute was
hospital contracts for example in West Middlesex differently from the Ministry . This led to a dispute about that it was unclear how the contract was meant to
University Hospital (2002 report), by encouraging potential overcharging. Despite widespread reporting be priced, so UKTI was unable to understand the
improvements in value for money through the on this case we have since seen further issues with a commercial deal it had struck.
central renegotiation of terms and conditions. lack of clarity over contract terms.
In 2016, we investigated the collapse of the
HM Treasury has maintained standard contract terms Our 2015 report E-borders and successor UnitingCare Partnership, where an NHS contract
for private finance initiative (PFI) projects, and we programmes outlined varying interpretations of the was terminated after eight months as the supplier
see standard terms across the health and defence contract, in particular the underlying requirements. found it needed more funding than was available.
areas. However, most contracts we came across The Home Office incorporated the supplier’s proposed One month into the contract, the supplier asked for
are not standardised. The Ministry of Justice’s own design within the contract, but had not sufficiently 21% more revenue for the first year. The two sides
2013 contract management review identified aligned this with its own requirements. This resulted differed in their understanding of the extent to which
that it did not collect management information in a in disputes after contract award over whether contract clauses allowed the supplier to negotiate
standardised way – this was a factor in reducing the the proposal satisfied the Home Office’s needs, extra funding after signing the contract. Although
quality of information available. causing long delays. both parties negotiated to reduce the funding gap,
they were not able to reach a resolution.

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NAO audit framework ? Examples of relevant guidance ?

Cabinet Office open book accounting guidance

Supporting Contract approach Required government to decide which contracts would benefit. At a minimum it
information
recommends understanding cost units and drivers.
Open-book accounting and supply-chain assurance (NAO report)
4. Has the contract set up risk and
reward dynamics that will encourage NAO good practice contract management framework
delivery, minimise perverse incentives The contract manager understands his/her own role and has clear visibility of
4.1 
and promote good relationships? well‑structured roles and responsibilities on the supplier side.

4.1 Is there an appropriate allocation of risk The respective responsibilities of the contract manager and the supplier are clear,
4.2 
between department and contractor? and potentially defined in a ‘joint statement of intent’ or similar document.

4.2 Are there incentives to encourage Procurement policy note – Information sharing in government procurement exercises
the contractor to act in the interest of Sets out the steps to take in the case of a commercial dispute settlement.
the department?
Model services contract and models for construction procurement
4.3 A
 re suitable mechanisms established to (Crown Commercial Service)
drive the desired relationship? Government Commercial Function- Government Commercial Operating Standards Iteration ii
6.1 Greater accessibility and awareness of commercial terms.

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11 Understand risks – Understanding and allocating risks appropriately remains fundamental in driving the right behaviours

Over the last few years, many of our disagreements with government relate to how it measures, understands and allocates contract risks. Inappropriate
allocation of risk has been a problem we have seen since our audits of the earliest government public-private partnerships. It continues to be the area
of most contention between the NAO and government in our audits of its largest contracts. Although the importance of risk is widely recognised across
government, we would be more convinced that it was well managed if we saw proper processes in place.

Warning indicators ? Emerging best practice

Not understanding
and quantifying risks
in advance.

Failing to allocate risks Identification and quantification Allocation Plan

to those best able Ensure all contracts are subject to a Enure risk allocation matrix is included in the outline Establish a systematic, project
to manage them. commercial risk assessment, and that business case for all contracts. This should reflect: management style approach
there are regular risk reviews across to management.
the whole contract portfolio to test • In considering who is best able to manage risk,
government needs to take into account ability Set out the distribution of risks in
and benchmark commercial risk.
A lack of recognition that to manage and capacity to bear risk. advance, with the contract and contract
risks will always return to Conduct workshops and modelling management plan structured around
with suppliers, commercial and • As government has the biggest balance sheet risk
the risk allocation.
government when things go allocation should always default to government,
business owners to understand risks
except where suppliers are better able to Create appropriate incentives for suppliers
wrong – the full risk cannot be (for larger contracts).
manage risk. to manage risks, that is commensurate
allocated to the contractor. Carry out analysis to outline options with their importance. Incentives need to
and assess the impact of various risk • Government should accept and manage ultimate
outweigh the costs that may be incurred.
risk – the impact of poor performance always
allocation approaches.
returns to government when things go wrong. Ensure levers are in place to effectively
manage risk and that these work.

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On understanding risks On allocating and managing risks

Case We found in 2013 that the Department for Culture, Media In 2008, the Ministry of Defence contracted a supplier to develop and manage a new
studies & Sport did not model the contractual risks of its rural approach to military flying training (2015 report). The provider was responsible for
broadband contract to decide whether the price paid for providing aircraft and simulators for training, running training courses, and training
the balance of risk was reasonable. It transferred much of an agreed number of aircrew each year. The Department retained responsibility
the downside risk to the supplier, such as increased costs for some aspects of the core training, which undermined its ability to fully hold the
and lower revenues, but also the upside risk of the supplier supplier to account for the activities it sought to transfer out. The risk to UK military
getting larger volumes than expected. Similarly, in the shared capability of not training enough aircrew to meet military needs ultimately rests with
service centres programme departments were able to delay the Department and cannot be transferred.
their moves as long as they were able to maintain their legacy
systems. The Cabinet Office argued that it had transferred On trying to transfer all risks
the financial risk of delays to the programme through its
contracts. However, neither the contractor nor the Cabinet
Office had the power to prevent delays, so this risk could not The ultimate risk (beyond whatever financial or reputational harm a company takes)
reasonably reside solely with the contractor. rests with government. In 2002, we reported that the Ministry of Defence, in relation to
its nuclear submarine facilities at Devonport, considered that it had transferred the
In our 2012 report on the first carbon capture and storage risk of cost overruns to the private sector. However, the Department ultimately funded
competition, we found that the Department of Energy & the cost overruns as it had nowhere else to go and needed to ensure the supplier
Climate Change did not have a clear strategy to address remained viable.
commercial risks. The Department requested frequent
external reviews which advised of significant risks. However, The franchising of Hinchingbrooke Health Care NHS Trust (2012 report) transferred
it continued without fully considering the cost implications demand risk and up to £5 million of financial risk to the provider. The NHS East
because the potential strategic benefits outweighed its of England Strategic Health Authority provided incentives for bidders to include
costs. We found that as expected costs increased the guaranteed payments by double-weighting these in the financial assessment. However,
project became unaffordable, and negotiations with the one it made no other changes to bidders’ projected savings to account for risk. This
remaining bidder were ended by the government. approach may have encouraged bidders to make overly-optimistic savings projections.

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NAO good practice contract management framework

Supporting Contract approach Contractual/supplier risk management is in place with clear responsibilities and
7.1 
information
processes, identification of who is best placed to manage risk, and supplier
involvement where appropriate.
4. Has the contract set up risk and
Risks are formally identified and monitored regularly, with mitigating actions
7.2 
reward dynamics that will encourage
developed and implemented where possible, and ‘obsolete’ risks removed from
delivery, minimise perverse incentives consideration where appropriate.
and promote good relationships?
Escalation and reporting routes are in place for risk governance.
7.3 
4.1 Is there an appropriate allocation of risk
CIPS’ contract management guide
between department and contractor?
Covers how to assess risks and set up mitigation (pp. 7–9).
4.2 Are there incentives to encourage
the contractor to act in the interest of The HM Treasury Green Book
the department? Outlines requirements to set out risks in business cases (at 4.3) and the Orange Book
gives more detailed guidance on risk management.
4.3 A
 re suitable mechanisms established to
drive the desired relationship? Cabinet Office – Communicating risk guidance
Details communication strategy and how to develop good risk management more widely.
Government Commercial Function – Government Commercial Operating Standards Iteration ii
6.3 Appropriate risk allocation between parties.
The Scottish Government’s Procurement Journey – Risk management

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12Design performance measures that work – Without relevant and workable measures, business outcomes may fail or perverse incentives
may be created

We rarely see performance management mechanisms (which apply rewards or penalties, such as through key performance indicators) working as intended. Even where
normal processes have been followed, we have seen clients happy despite measures not being met and unhappy when they are. As a result, we need to question not
only whether the performance regime is right (does it incentivise the right behaviours, penalise poor performance and ensure that government gets what it wants?),
but also whether government knows what performance is and can manage contractors to get what it wants. We develop this point further in client leadership.

Warning indicators ? Emerging best practice

Existing guidance outlines formal approaches and processes to establishing, monitoring and evaluating performance. Determining the right measures, and
the right number of measures, to include in a contract is important, but needs to form part of a wider process:
A lack of alignment between
overall business outcomes
Get Focus on what matters Time should be invested to produce measures that flow from the strategy that outlines
and performance measures. measures expected outcomes – the key things that matter.
right Proportional The burden of work required, such as in obtaining information and monitoring, should not
outweigh benefits when considering the number of measures and access to robust data.
Measures that are
Clear Need advance agreement on the purpose, definition and measurement of each measure.
complicated, vague
Strong evidence base Evidence gives confidence that targets are achievable.
or ill thought through.

Review Where possible amend key performance indicators during a contract lifetime without altering the balance between risk and
Financial incentives linked to & update reward. Indicators that probably should be changed may include those where incentives linked to measures are too small
performance measures being to matter; that are not providing the right incentives; have insufficient information to monitor performance, or where the time
needed to monitor performance outweighs the benefits gained. A regular review allows government to consider whether
too small to have an impact.
indicators remain relevant.

Measures becoming out-of-date Use other A well-designed set of performance measures should motivate suppliers but they should be used alongside other
levers methods. See client leadership focuses on what matters and understand suppliers’ motivation.
during the contract.

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On the content of performance measures On changing performance measures mid-contract

Case We have seen many cases of ineffective performance measures. Changes to performance measures during a contract have been rare
studies Our 2014 report on the Work Programme found that flawed but we have seen good practice:
measures meant the Department for Work & Pensions had to
make incentive payments to even the worst performing suppliers. • The Ministry of Defence told us that it considers reviewing key
performance indicators for each contract every year. As part of
We recommended that it should review whether different groups
this exercise, it reduced 140 key performance indicators to eight
need different minimum service standards; monitor minimum
on a facilities management contract after considering whether
service standards by group; and gather other standard measures of
the benefits of this change outweighed the costs and risks of
services. Also, our work on contracted‑out health and disability
the process. The Department told us that it is also looking to
assessments (2016) and on transforming rehabilitation (2016)
renegotiate a current estates management contract because the
highlighted the challenges in developing service level agreements
effort of measuring performance outweighs the benefit it gets
that measure quality and the need to understand the trade‑offs
from measurement.
between quality and other factors when setting the service level
agreements. It is important for the Department to gain good • On the Work Programme (2014 report), the Department for Work
information to be able to manage performance, incentivise & Pensions changed the way that it approached performance
providers and identify emerging risks. measurement two years into the scheme in response to the
difficulty of monitoring and enforcing minimum service standards.
It was able to get a better oversight of performance and provide
better incentives to suppliers as a result.

• We found the Home Office’s contract for Yarl’s Wood

immigration removal centre (2016 report) distracted the teams
from what mattered – the Department is now reducing the number
of key performance indicators from 120 to around 30.

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NAO audit framework ? Examples of relevant guidance ?

NAO good practice contract management framework

Supporting Contract approach A performance management framework is in place when the contract is signed.
5.2 
information
The framework is comprehensive, objective and provides incentives for the supplier
to meet or exceed agreed performance standards.
4. Has the contract set up risk and
Service levels agreements are in place, and are linked to business needs, understood
5.3 
reward dynamics that will encourage
by the supplier, and monitored by the contract manager and/or end users.
delivery, minimise perverse incentives
and promote good relationships? 5.4 Supplier performance is assessed using clear, objective and meaningful metrics,
linked where appropriate to the Office of Government Commerce’s ‘Common
4.1 Is there an appropriate allocation of risk Assessment Framework’ for monitoring suppliers.
between department and contractor?
NAO payment by results guidance
4.2 Are there incentives to encourage Explains benefits, structure, risks and framework for payment by results.
the contractor to act in the interest of
the department? Model services contract (Cabinet Office)
Details expected contract terms for different approaches.
4.3 A
 re suitable mechanisms established to
drive the desired relationship? The Scottish Government’s Procurement Journey – Contract and supplier management

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13 Manage your own obligations – Government must meet its own obligations for contracts to succeed

We often see government not fulfilling its own contractual obligations. Supplier performance can depend on government taking actions such as making
critical decisions, designing a process, projecting forecasts or providing assets such as IT systems. Not delivering on these government’s obligations can
lead to extra costs through projects being delayed or a limit to government’s ability to hold suppliers to account. Along with meeting its contractual
obligations, government needs to ensure it fully capitalises on the benefits a contract and a commercial relationship can bring.

Warning indicators ? Emerging best practice

Create clear contract

Ambiguous responsibilities
and unclear obligations
leading to confusion. Contracts should
include a complete
schedule of
Set out obligations government obligations.
Poor management of multiple
stakeholder dependencies
through, for example,
lack of a project Carry the
management approach. obligation schedule through Use a project and
to the project, assigning programme management
milestones and responsibilities. approach to establish formal
processes for meeting
Not making the most of the Use a benefits realisation plan contractual and wider obligations.
to understand the wider value
potential for contracts and to be added. Devote resources to
commercial relationships to Project manage meeting each objective
Share the schedule with in the contract.
add value beyond the all relevant parties.
contract itself.

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On the impact of not meeting obligations and managing interdependencies

Case We frequently see government failing to recognise interdependencies or • Failing to transfer risk as planned. Our 2010 report on PFI
studies meet its obligations, with a range of negative results, for example: hospitals found that hospital trusts had difficulty meeting their
obligations to allow suppliers to manage maintenance. This was
• Extra costs and delay. The Ministry of Defence contracted a
because they needed to vacate hospital wards for maintenance
supplier to recruit enough suitable personnel for its Army 2020
to be carried out. Because they did not always allow scheduled
(2014 report) structure. The supplier’s performance, agreed in its
maintenance, trusts found themselves accepting the maintenance
contract, depended on the Department providing supporting ICT
risk, despite having paid for the risk to be transferred.
infrastructure for their new recruitment software by an agreed date.
The Department did not provide this infrastructure which meant • Complexity. The Cabinet Office’s shared service centres
the supplier could not run the recruitment process as planned. (2016 report) programme relied on the different customer
It had to fund extra costs to support manual workarounds, which departments and organisations agreeing the specification of new
were likely to total some £25 million. The Home Office’s E-borders software. Reaching an agreement took longer than expected which
(2015 report) supplier carried out initial design before designers were led to significant delays. Suppliers argued that government was
fully aware of the Department’s detailed requirements. Disputes responsible for some of the extra costs. Government and suppliers
arose because the supplier did not believe the Department had are in the process of renegotiating the contracts.
rights to change requirements after contract award, and this
• Failing to achieve benefits. For planned benefits from the new
resulted in programme delays.
emergency services network (2016 report) contract to be
• Understanding and challenging supplier performance. Our realised, major business change by the emergency services is
2015 report on military flying training found that the Ministry needed. Supporting the achievement of these benefits is not part
of Defence had difficulty holding the supplier to account for its of the programme’s scope and it was not clear who should take
performance partly because it was required to provide instructors responsibility for changing behaviour. Without a co-ordinated
itself. Because of issues with its own performance, the Department approach to add value, we found that the programme’s benefits
deducted little from payments because of its supplier failing to would likely be reduced.
meet its responsibilities despite considering performance to
have been poor.

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NAO audit framework ? Examples of relevant guidance ?

NAO good practice contract management framework

Supporting Contract management 5.1 S
 ervice management is well structured; baselines are understood by both parties, and
information
suppliers understand the service they are required to deliver. The contract manager
ensures that the customer organisation provides the supplier with the information and
5. Is the contract being managed contacts needed to deliver he service.
well, with costs and benefits being
5.6 C
 lear processes are in place to handle operational problem resolution and resolve
realised as expected? issues as quickly as possible.
5.1 Do the department and the contractor 5.7 W
 here appropriate, user compliance with the contract is monitored and managed to
have comprehensive knowledge of ensure maximum operational effectiveness and value for money.
service performance?
Crown Commercial Service contract management principles
5.2 Is the contractor providing a service in
2  e clear about accountability, roles and responsibilities. Ensure contract ownership,
B
accordance with the contract and are they
management processes and governance mechanisms are clear with defined roles
actively managed by the department to
and responsibilities at appropriate levels of seniority. Make sure contracts have a
meet or exceed requirements?
documented Contract Management Plan.
5.3 Is the department meeting its obligations? Government Commercial Function – Government Commercial Operating Standards Iteration ii
6.4 D
 epartments will have a mechanism for tracking the deliverability of
mobilisation obligations.

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14 Know what suppliers are doing – To manage a contract it is important to understand performance and costs

Government needs a ‘hands-on’ approach to understanding suppliers’ performance. It has been increasingly aware of the need to do this but can go
further. Assurance requires investment of both time and resources so government needs to think carefully about how to get the right approach.
We have seen both cases where there is not enough assurance over reporting and cases where there is too much compliance testing without it
being targeted effectively. Decisions need to be made, for example, on the balance of self-reporting with independent monitoring and of the use of
detailed controls testing with a proportionate approach.

Warning indicators ? Emerging best practice

A lack of transparency
about supplier data, despite
government’s transparency agenda.

Proportional Self-reporting Substantive Rolling assurance

Overreliance on supplier approach vs vs vs
self‑reporting without gaining own information controls testing standing teams
independent assurance of data.

A tendency to substantively All major contracts need a bespoke Government data is easier to assure Where suppliers self-report, A rolling programme of routine
test supplier information compliance programme aligned to but is not always feasible or efficient. government needs assurance. assurance could reduce the
rather than understanding the the risks of that contract. Controls assurance is often less need for compliance testing of
controls over the information. onerous, more efficient, improves all contracts.
Supply chain assurance strategies
understanding and can help indicate
should be set out early and included
broader concerns that need
in the contract management plan.
Challenges in understanding to be actioned.
the supply chain’s performance However controls testing requires
and resultant risks. more expertise to do properly.

Insufficient consequences for

poor performance or errors being
found through assurance.

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On self-reporting versus supplier assurance On a controls based approach versus substantive testing

Case In our 2015 report on the provision of out‑of‑hours GP service Government can obtain assurance through substantive testing
studies in Cornwall we reported that supplier staff had made unauthorised or a controls-based approach. Our 2014 report Transforming
changes, which were inappropriate and lacked justification, to government’s contract management reported that the Cabinet
performance data. The Primary Care Trust relied on the supplier Office and Confederation of British Industry were producing a
self‑reporting and performance was overstated on multiple measures. set of principles to improve transparency. This led to the Institute
for Government recommending transparency to be included in
Our 2014 report on the Department for Work & Pensions’ Work
government contracts alongside existing confidentiality and freedom
Programme showed the merits of validating performance data,
of information clauses, in its report Enhancing transparency in public
in particular job outcome payments. The Department checks job
service contracts. We also described how the Department for Work
outcome claims and extrapolates rates of invalid claims to reduce
& Pensions required major suppliers to commission external reviews
payments to suppliers. The Department estimates that its approach
to receive independent assurance on performance and on their
has saved it £21 million up to March 2014. The validation regime
controls. This improved the Department’s level of assurance and
may also have deterred suppliers from claiming some job outcomes.
supported performance management.
It continues to improve its approach.

We found in 2016 the Department improved assurance over supplier

data for its contracted‑out health and disability assessments On understanding the supply chain
through independent quality audits. We had previously recommended
the Department improves its validation of key performance data.
In the Ministry of Justice’s Transforming Rehabilitation (2016 report)
programme, directly contracted suppliers use a complex supply
chain of private and third sector organisations. We recommended
that the National Offender Management Service combine its supply
chain analysis with feedback from voluntary organisations to identify
and address gaps in provision.

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Overview  >  Warning indicators  >  Emerging best practice   >  Case studies  >  Supporting information Contract
management
Contract
approach

NAO audit framework ? Examples of relevant guidance ?

NAO good practice contract management framework

Supporting Contract management 5.1 S
 ervice management is well structured; baselines are understood by both parties, and
information
suppliers understand the service they are required to deliver. The contract manager
ensures that the customer organisation provides the supplier with the information
5. Is the contract being managed and contacts needed to deliver the service.
well, with costs and benefits being
5.2 A performance management framework is in place when the contract is signed.
realised as expected? The framework is comprehensive, objective and provides incentives for the supplier
5.1 Do the department and the contractor to meet or exceed agreed performance standards.
have comprehensive knowledge of 6.7 W
 here open-book or similar financial/pricing mechanisms are used, the process
service performance? is managed professionally and fairly.
5.2 Is the contractor providing a service in Crown Commercial Service open book guidance
accordance with the contract and are they
Sets out aims, objectives and expected approaches for open book contract management.
actively managed by the department to
meet or exceed requirements? HM Treasury guidance to making savings in operational PFI contracts
Information Commissioner’s Office roadmap for transparency in outsourcing
5.3 Is the department meeting its obligations?

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approach

15 Show what you care about – Client leadership encourages emphasis on the right business outcomes

A shared understanding of outcomes between government and suppliers, and strong client leadership, can help to overcome poorly designed contracts
and the limitations of formal performance measures. Effective client leadership gives government an opportunity to keep suppliers focused on what really
matters to them and service users. Suppliers react to what clients pay attention to. They may even ignore contractual requirements if they believe that the
client is ignoring them, or go beyond the contract if they believe that it will win them merit with the client.

Warning indicators ? Emerging best practice

Not being clear

to suppliers about
what government
wants from a contract.

Not paying attention

to what matters during Plan Work together
the contract.
Clarity from the outset about the business outcomes Clearly and consistently communicate to suppliers
that are most critical to service users, and that what really matters through progress meetings, site visits,
government cares about. and information requests, to improve contract compliance
Not being close enough and ensure outcomes achieved.
Encourage suppliers to plan for outcomes that really
to suppliers. matter. This should align with contract incentives, but does Work closely and flexibly with suppliers through
not always. progress meetings to ensure that service is in line
with the contract.
Set timetables that are clear and agreed.
Explicitly manage any trade-offs required to  deliver the
Use contract provisions that promote continuous
outcomes that matter.
improvement and innovation.

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management
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approach

On focusing on what matters On working together to focus on what

matters to both government and supplier

Case The National Savings & Investments (NS&I) operational services The Ministry of Defence told us that some of its
studies contract with Atos has a range of key performance indicators covering contracts include a ‘reward fee’ where a share of
areas of the business, from accounting and complaint handling to call the agreed profit is awarded if the supplier has
centre and internet performance. NS&I can reduce the amount paid demonstrated some of the softer factors required in
to Atos where performance indicators are missed with deductions managing the contract. Using an agreed framework,
escalating if targets are repeatedly missed. However, instead of the Ministry of Defence will use its discretion in
automatically applying maximum deductions where an indicator is making payment. It has been positive about the
missed, NS&I prefers to discuss with Atos the circumstances of the benefits of this approach.
failure, waiving or reducing the deduction if they are satisfied with
the action taken. This protects the customer by ensuring the supplier
continues to focus on service quality and continuity in areas where a
key performance indicator target is likely to be missed.

In 2015 we visited the facilities management service run by Amey at

the National Physical Laboratory. We found that the contract, which
was coming to an end, was out of date. The contract included over
80 key performance indicators although scientists told us that what
mattered most to them– the availability of laboratory time – was not
reflected. Client contract managers worked closely with the supplier,
helped through being based in the same location as the supplier, and
being able to receive regular feedback from service users. Given the
focus of service users, Amey established regular drop-in sessions to
allow scientists and other users to engage with its staff and develop
their understanding of current user priorities.

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Overview  >  Warning indicators  >  Emerging best practice   >  Case studies  >  Supporting information Contract
management
Contract
approach

NAO audit framework ? Examples of relevant guidance ?

NAO good practice contract management framework

Supporting Contract management 4.4 B
 oth regular structured and informal communication routes
information
between the contract manager and supplier are open and used;
customer and supplier staff are co-located where appropriate.
5. Is the contract being managed well, with costs
4.6 C
 ommunications between the contract manager, supplier and other
and benefits being realised as expected?
stakeholders (users of the contract and others such as technical
5.1 Do the department and the contractor have comprehensive experts) are effective; and stakeholders are involved in contract
knowledge of service performance? management processes where appropriate.

5.2 Is the contractor providing a service in accordance with the Government Commercial Function- Government Commercial Operating
contract and are they actively managed by the department to Standards Iteration ii
meet or exceed requirements? 7.1 Contracts should deliver the outcomes anticipated.

5.3 Is the department meeting its obligations?

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Overview  >  Warning indicators  >  Emerging best practice   >  Case studies  >  Supporting information Contract
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approach

16 Understand suppliers’ motivation – Use other levers to get the best from suppliers

Suppliers are normally motivated by maximising their profits on contracts but they are also motivated by other factors. The high-profile failure of public
service delivery can affect a supplier’s reputation. For example, it can affect their ability to win future work both with government and elsewhere, and
significantly affect their share price. However, government contracts can also offer suppliers public recognition and prestige, alongside opportunities
to fulfil wider values and objectives. Our work with suppliers has shown how important reputation is to them and how some manage this at least as
strongly as formal performance management mechanisms against contractual incentives.

Warning indicators ? Emerging best practice Factors influencing delivery include supplier values and reputation

Good contract managers realise that Provider control framework and culture
suppliers care for other things alongside
profit. This include reputation, values Goverance Visibility Values & Management Incentives
Not taking advantage and how staff are engaged and included. objectives focus & rewards
Alongside contractual performance
of suppliers’ reputation
measures, they use these insights to
management which we have influence suppliers’ performance and
seen built into internal get the best from suppliers. Compliance Working Inspection &
User feedback
monitoring relationships regulation
control frameworks. Government has begun to focus more
on ‘strategic relationship management’,
which could be used to capture and Performance
Client Service External
share insights more widely. management
leadership user reputation
Ignoring the ways mechanism
suppliers can use contracts
Long-term
and contract performance Performance
strategic Consultation Media
& reporting
to align with their own relationships
supplier values, objectives
and standards
for staff engagement. Service

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management
Contract
approach

On using transparency and reputational risk On using supplier values and objectives

Case In 2015, Sodexo and Mitie invited us to visit In 2015, Amey and Interserve invited us to visit the
studies the services they respectively run at HMP services they respectively run at the National Physical
Northumberland and the Heathrow Immigration Laboratory (NPL) and the Defence Training Estate.
Removal Centre. These highly regulated services This allowed us to see the impact of corporate
are subject to external inspections from Her Majesty’s objectives concerning reputation on the contract,
Inspectorate of Prisons (HMIP) and the Independent and the opportunities this raised for the client.
Monitoring Board, the findings of which are publicly
At NPL, contract managers could ‘trade-off’ service
reported. The performance of HMP Northumberland is
credit deductions for extra activity outside the scope
also reported in the Prisons Rating System alongside
of the contract. Amey developed an energy reduction
all other prisons. The suppliers acknowledged
plan that benefited the client while also aligning with
that this increased level of transparency brought a
Amey’s corporate objective to protect and enhance
reputational incentive to deliver a good service.
the environment.

At the Defence Training Estate, Interserve pursues

its corporate social responsibility objectives through
making £10,000 available each year to support
community activities in each of the six contract regions.

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Overview  >  Warning indicators  >  Emerging best practice   >  Case studies  >  Supporting information Contract
management
Contract
approach

NAO audit framework ? Examples of relevant guidance ?

NAO good practice contract management framework

Supporting Contract management 5.1 S
 ervice management is well structured; baselines are understood
information
by both parties, and suppliers understand the service they
are required to deliver. The contract manager ensures that the
5. Is the contract being managed well, with costs customer organisation provides the supplier with the information
and benefits being realised as expected? and contacts needed to deliver the service.

5.1 Do the department and the contractor have comprehensive Incentive structures (financial or non-financial) relate clearly to
6.5 
knowledge of service performance? desired outcomes, and are well managed and governed, with
appropriate checks and approval mechanisms.
5.2 Is the contractor providing a service in accordance with the
contract and are they actively managed by the department to
meet or exceed requirements?

5.3 Is the department meeting its obligations?

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17 Plan for uncertainties – Contracts become unworkable if they do not align to changing circumstances

Government works within a constantly evolving environment, which it can struggle to reflect in contracts. For many contracts, some uncertainty will
be expected when the contract is signed. Customer behaviours can be difficult to predict, public policies can change or requirements may need to
be refined where contracts introduce new processes and systems. The result is that poor contracts prove too inflexible, resulting in costly changes,
the contract failing to deliver what was intended or delivering the wrong thing. Where government plans for the need for flexibility upfront, it is much
better able to manage uncertainty.

Warning indicators ? Emerging best practice Dealing with uncertainties

Flexibility not being

built into a contract,
particularly in the early days.

Contracts not reflecting Recognise Reduce Manage

uncertainties and the need
to change, and therefore running
into difficulties, particularly
where uncertainties Consider potential changes
are significant. in users’ needs, requirements
and external factors. Regularly monitor risks
Specify details where reasonable. and uncertainties.
Create trust and openness
Residual risks associated around uncertainties. Build in pilots and process tests to pin Keep data up to date and share
down more details. with suppliers.
with uncertainties not being Design contracts that allow for
change, eg through contracting Design contracts that include agreement Consider how to reflect outcomes
recognised or managed.
for a minimal solution. on the cost of potential future options. of pilots and other work.

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approach

On managing uncertainties On considering the risks associated

with uncertainties

The Department for Work & Pensions introduced the Work Programme (2014 report) Our 2016 report on Transforming Rehabilitation
Case
studies quickly in 2011. The programme had a slow start and ramp-up. The Department recognised identified concerns about how uncertainties were
uncertainties within the programme and took a more active approach to changing its managed. Outsourcing immature businesses within
requirements and monitoring, including terminating some contracts, during the early stages. the wider context of a changing new probation
system increased the risk and made the programme
For the Yarl’s Wood Immigration Removal Centre (2016 report), some users’ needs were
less attractive. We recommended that departments
not being fully met. We recommended that when designing contractual arrangements,
outsourcing complex transformed services should
departments should consider including arrangements to assess users’ initial needs, and
consider how to mitigate or reduce risk and
any that develop while using the service. They should ensure that there are mechanisms for
uncertainty from concurrent changes, including
varying the contract or buying more services if necessary.
through phasing changes to occur at different times.
In our 2016 report on contracted-out health and disability assessments, we
recommended that the Department for Work & Pensions should set out realistic targets and
follow clear principles for challenging assumptions. Otherwise, there is a risk that bidders
will not be able to tell whether requirements are deliverable. We recommended that where
assumptions are uncertain, the Department should develop its principles for using ‘allowable
assumptions’ clauses and extend these beyond the initial stages of a contract.

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management
Contract
approach

NAO audit framework ? Examples of relevant guidance ?

NAO good practice contract management framework

Supporting Contract lifecycle 8.1 T
 he contract is regularly reviewed (with a view to updating
information
where necessary) to ensure it meets evolving business needs.
8.2 P
 rocesses are in place that clearly lay out the governance
6. Is the contract delivering value for money and will
of contractual change – who needs to approve what and
it continue to demonstrate VFM through its lifecycle?
how it will happen – with a focus on effective and prompt
6.1 Does the contract continue to support the strategic intent? change implementation.

6.2 Are VFM mechanisms used to ensure the contract continues Government Commercial Function – Government Commercial Operating
to deliver VFM over its life? Standards Iteration ii
Contracts will outline agreement on the costs of potential
6.2 
6.3 Is change controlled and well managed and does the contract
future options.
remain current?
6.5 Transition arrangements.

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18 Work towards business-as-usual requirements – A sufficient and effective transition period from procurement to live running is crucial

The critical importance of ‘mobilisation’ – the time between contract award and business as usual – is sometimes underestimated. This phase includes
supporting a smooth transition; time to set up good practice; and identifying potential contractual changes, problems and risks that may have a
subsequent impact. The early success of a contract depends on how quickly and efficiently government gets the contract up and running. Not getting
it right at this stage will set the tone for the rest of the contract, and could have serious consequences. Government’s commercial operating standards
recognise the importance of mobilisation as a specific phase to consider, monitor and assess.

Warning indicators ? Emerging best practice Mobilisation factors to consider would include:

Rushing mobilisation,
which has an impact
on performance.

A lack of clear specification

of roles and responsibilities
before ‘live running’, Establish a Set aside time and resource Use effective processes Monitor the results
creating uncertainties and mobilisation plan
performance challenges. Mutual agreement about the Allow both suppliers and government Set realistic timetables and milestones. Ensure there is a mechanism
level of detailed required to sufficient time to prepare resources for tracking the deliverability of
Establish governance processes and
get up and running. and plans. mobilisation obligations to ensure:
reporting arrangements.
Extending ‘service credit Get wider input into design Dedicate funding to ensure a • Obligations are documented
Work together, involving previous and understood.
holidays’, reducing the and specification before high‑quality transition.
suppliers where applicable.
work begins.
effectiveness of the early Explicitly recognise challenges.
Apply performance measures,
• Obligations are risk
Create shared transition assessed early.
stages of a contract. Bring in staff with specific expertise. whether interim or full, to see how
goals and responsibilities.
performance is progressing. Apply a benefits realisation approach.

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On allocating enough time and resources On clarifying what is required

Case Our 2016 investigation into the UnitingCare Mobilisation provides a further opportunity to agree
studies Partnership found that bidders highlighted an a clear specification, providing a foundation for the
insufficient amount of transformation funding and the contract. The Cabinet Office’s shared service centres
short mobilisation period allowed. The client told us programme (2016 report) did not secure sufficient
See also Transition
that it expected the supplier to invest its own funds early support from departments, which felt insufficiently
& termination
section for some to support service transformation, but this was not a involved in appointing suppliers and designing new
overlapping requirement in the contract. UnitingCare Partnership systems. Failing to get an early agreed design contributed
examples. told us that it disagreed with this expectation. to delays in implementing the programme.

Our 2016 report on contracted-out health

and disability assessments praised the
Department for Work & Pensions and suppliers On putting performance regimes in place
on the transition of health assessment provision
from one supplier to another. Their success was
Our 2014 report on COMPASS contracts for the
down to key factors including recognising the
provision of accommodation for asylum seekers
challenges of a tight timetable (four months) and
found that transition happened during a demanding
seconding staff to support transition; tripartite
period for the Home Office. As a result of the
governance arrangements; and shared goals
capability issues, in some areas transition to the new
and reporting arrangements.
contracts took longer. During transition the Home
Office decided not to impose any penalties through
its key performance indicator regime.

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Contract
approach

NAO audit framework ? Examples of relevant guidance ?

NAO good practice contract management framework

Supporting Contract lifecycle 1.1 T
 here is a planned transition from the tendering/contract award
information
phase to the contract management phase, and a handover to the
contract manager; the cost of contract management is included
6. Is the contract delivering value for money and will in the business case and budgets.
it continue to demonstrate VFM through its lifecycle?
CIPS – contract management guide
6.1 Does the contract continue to support the strategic intent? Covers the various activities to be carried out immediately post‑contract
6.2 Are VFM mechanisms used to ensure the contract continues award (p. 26).
to deliver VFM over its life? IACCM and DPSS consultants’ interactive guide to post-award processes

6.3 Is change controlled and well managed and does the contract Local Government Association – A Councillor’s Guide to Procurement
remain current? Covers critical success factors for contract management (p. 27 and 28).
Government Commercial Function – Government Commercial Operating
Standards Iteration ii
Departments will have a mechanism for tracking the deliverability
6.4 
of mobilisation obligations.

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19 Think about contract end up front – A lack of upfront planning puts effective contract transfer at risk

Even before a contract is signed, government needs to be thinking about its end. We see termination rights vary in how they are stipulated and used,
and it is not always clear why. The questions we ask include – in what circumstances could a contract be terminated? Or extended? What can be
learned from the contract and how will this be captured? What information and data will be needed so that a subsequent supplier could take over?

Warning indicators ? Emerging best practice

New suppliers not having Ensure contracts are clear on contract-end options Ensure there are sufficient means to incentivise
access to sufficient information, Plan and timings, for example the right to terminate Plan the the supplier to maintain resources and
thoroughly wind-down
(which is valuable and should not be traded away performance right up to the end of the contract.
in particular from existing
unless the benefits received outweigh the loss
suppliers, to ensure incurred).
an effective transition. Ensure contracts are clear on transition
responsibilities, with detailed timings and
definitions of what should be delivered. Also,
Performance dipping where allow for modification/expansion of transition
arrangements through agreed contract Work out the information suppliers will need
suppliers begin to wind‑down review processes. Consider for transition, eg information on costs and
towards the end of a contract. Consider the risks of failure and different
information service volumes and asset registers.
approaches to the end of the contract. Set out how bidders will have sight of
Put in place contingency plans from early in all information they require from the
Not formally building in time the contract. incumbent supplier.
to learn from experiences.

Allow enough time and resources for looking at

Lessons lessons learned from the contract.
Termination rights being learnt
traded away Follow a standard process for lessons to feed
into future work.
without justification.

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Clear termination approach Embedding a lessons learned process

Case We recommended in our 2014 report on the Department for Work & The Department for Transport is committed to continuously improving
studies Pensions’ Work Programme that the Department should develop its rail franchising programme (2015 report) and has embedded a
a clear approach to making any future termination decisions. After structured approach to learning lessons and responding to feedback
agreeing termination costs, the Department should evaluate the impact from operators and stakeholders. This includes:
of terminating a contract; set out clear principles for making future
termination decisions using break clauses in the current contracts; and • holding ‘lessons learned’ workshops after each franchise
competition.
include relative as well as better absolute measures of performance in
setting the conditions under which it could terminate contracts at no cost. • holding ‘bidder days’ to give bidders the opportunity to feed
back their experiences of the procurement process and make
suggestions for improving it.

Supporting supplier transition needs • reviewing the complexity and quantity of information it requires from
bidders in its financial models.

Our 2016 report on the Yarl’s Wood Immigration Removal Centre As a result, the Department has made changes to simplify and improve
found that services did not fully meet users’ needs. There was a the bidding process and encourage new entrants.
lack of clarity over each supplier’s responsibilities which took time to
become clear. We recommended that where multiple organisations
become responsible for providing a service, the departments involved
should agree on how to resolve issues, such as gaps between
contracts and interdependencies, before transition.

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NAO good practice contract management framework

Supporting Termination and transition 7.4 C
 ontingency plans are developed to handle supplier failure (temporary or long-term
information
failure/default); exit strategies are developed and updated through the life of the contract.
7.5 C
 ontractual terms around termination are understood and monitored by the
7. Is the Department ready to move
contract manager.
into a new contract?
NAO principles on supplier failure
7.1 Has market management been undertaken
to support new contracts? Sets out principles to consider when planning for and managing failure. This includes:

7.2 Has the end of the contract been managed

• Setting out a definition for failure

efficiently and effectively to allow re-bid • Developing contingency plans

or handover?
• Appropriate oversight arrangements
7.3 Are insights from the operation of the
• Monitoring failure
contract brought to bear in developing
the new contract? • Considering market impact

• Learning lessons

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20 Allow time to consider potential end of contract – Not thinking early enough about the future beyond a contract increases risks

In not making decisions about reprocuring contracts early enough, government limits its options, leading to the status quo often being adopted. At this
point the contract lifecycle comes full circle – decisions on whether or not to end a contract need to consider the overarching commercial strategy and
wider market considerations. It takes time to consider these implications. Not allowing enough time weakens government’s negotiating position and
stifles opportunities for innovation or securing value for money. Government needs to make early thinking part of a routine process.

Warning indicators ? Emerging best practice

Assess contract Assess options

performance for change
Contracts extended
Evaluate and compare Detailed market
on poor terms following contract performance analysis, consider
insufficient time to consider against outcomes commercial options
and market
possible termination
and transition.

Not starting transition

early enough and having to Take early informed decision on contract termination or renewal
discard options as Conduct market intelligence, assess options and
a result. go through government decision‑making process

Reluctance to use
processes for dealing with Take action to prepare for and carry out transition
provider failure. (eg time and resources, plan dependencies and collect information)

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On timing transition right On approaches to failure On learning lessons

Case Our 2016 report on contracted-out health and Our 2015 report paper on managing provider The Ministry of Justice completed
studies disability assessments praised the Department failure set out options for managing failure and how a lessons learned exercise on its
for Work & Pensions and suppliers on the transition adopting either a market-focused or provider‑focused language services contract,
of health assessment provision from one supplier to approach reflects different appetites for failure. (2014 report) reviewing lessons to
See also contract
another. However, we still found that the Department We reported seeing many instances where ensure that they would be taken
lifecycle section for
some overlapping needs to prepare for transition earlier and had done government has set up failure regimes but few into account in future contracts. In
examples. limited preparatory work for contract transition. occasions where it has allowed suppliers to actually particular, the Department reviewed
fail. To manage markets and suppliers it is important the use of management information
We reported in 2016 that HM Revenue & Customs
for government to follow through with its planned for new policies. It conducted a
had set out a phased approach to replacing its
processes for failure. separate review of governance that
Aspire contract to manage commercial and technical
led to the Department strengthening
risk and give it more time to smoothly exit from the
its governance, including its
contract. This followed findings in our 2014 report
approvals and assurance processes.
that the Department had yet to develop a formal
business case and overall project plan. It was left
with much to achieve in little time.

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 7   Transition & termination

INSIGHT 19 INSIGHT 20 Navigation Home

Think about contract end up front Allow time to consider potential end of contract Commercial
strategy

1 Commercial
capability
Transition
& termination
7 2

6 3 Market
management
Contract & sourcing
lifecycle

5 4

Overview  >  Warning indicators  >  Emerging best practice   >  Case studies  >  Supporting information Contract
management
Contract
approach

NAO audit framework ? Examples of relevant guidance ?

NAO good practice contract management framework

Supporting Termination & transition 7.4 C
 ontingency plans are developed to handle supplier failure (temporary or long-term
information
failure/default); exit strategies are developed and updated through the life of the contract.
7.5 C
 ontractual terms around termination are understood and monitored by the
7. Is the Department ready to move
contract manager.
into a new contract?
CIPS – contract management guide
7.1 Has market management been undertaken
to support new contracts? The guide sets out that the end of a contract should have been considered during the
pre‑contract award stages, but also highlights the importance of allowing for risk of failure
7.2 Has the end of the contract been managed to agree and a period of time for the contract to be re-let in order to ensure smooth
efficiently and effectively to allow re-bid transition (p. 34 and 35).
or handover?
National Outsourcing Association manual for the effective exiting of outsourcing agreements
7.3 Are insights from the operation of the The guidance suggests that the provisions of detailed exit management plans at a certain
contract brought to bear in developing point  should be specified in a contract, alongside requiring regular updates (p. 11).
the new contract?
Government Commercial Function – Government Commercial Operating Standards Iteration ii
Creating a comprehensive commercial pipeline (minimum of 18 months) of
2.2 
high risk contracts.

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 Appendices

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Appendix One Appendix Two Appendix Three

Commercial
strategy

1 Commercial
capability
Transition
& termination
7 2

Glossary National Audit Office studies Useful links

6 3 Market
management
Contract & sourcing
lifecycle

1 of 2
5 4

Contract Contract
management approach

Glossary
Key terms Other definitions

We have used the following key terms:

Term Definition

• commercial and contract management refers to the wider Benchmarking Comparative exercise using other similar services/contracts
process of managing a contract across a project’s lifecycle. as a way of assessing price or performance.

Business case The justification for a project based on its rationale, risk, cost
• procurement process refers to the process of identifying a
and benefits.
supplier of a good or service and then arranging a contract,
including the tendering and any competition and negotiation. Business owner The front-line manager with responsibility for a contract or
element of a contract.

• contract termination refers to the ending of a contract, either

Change control The process of managing changes to a contract.
through reaching the end of its defined period or other reasons.
Client leadership An approach to managing a contract in such a way as to take
• contract transition refers to the continuing of provision after leadership over the focus of the parties involved.
the end of the contract, either through extension, renewal or Commercial An overall strategy for a contract, with a clear rationale and
a new contract with a different supplier. strategy link to organisational strategy and how value for money will
be achieved. Part but not all of this will be the commercial
When describing risk, we use contract risk to encompass all case as part of the business case.

risks related to a contract and its performance, compliance risk Contract Plan for how to manage a contract which sets out resources,
as the risk of consequences of failing to follow expected standards, management plan risks and the various contract management activities that will
be carried out.
and risk allocation to mean the proportioning of contract risk
between different parties. Control test Checks performed to verify whether internal controls
are working.

Crown Commercial Executive agency sponsored by the Cabinet Office which

Service brings together policy, advice and direct buying for the
public sector.

Forensic audit Evaluation of financial information for use as evidence in court.

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 Appendices

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Appendix One Appendix Two Appendix Three

Commercial
strategy

1 Commercial
capability
Transition
& termination
7 2

Glossary National Audit Office studies Useful links

6 3 Market
management
Contract & sourcing
lifecycle

2 of 2
5 4

Contract Contract
management approach

Glossary continued
Term Definition Term Definition

Framework An agreement with suppliers to establish terms governing Segmentation Identifying different types of contract, for example by size or
contracts that may be awarded during the life of the agreement. risk, to manage them in different ways.

KPIs A series of measures against which performance on a contract Sensitivity analysis The study of how the uncertainty in an output can be
(Key Performance can be judged, which should incentivise good performance and  apportioned to different sources of uncertainty in its inputs.
Indicators) penalise poor performance.
Service Credit Mechanism for reducing payments if supplier performance fails
Market engagement The process of identifying potential suppliers and discussing to meet expected standards.
contracts or potential contracts with them.
Service Level Agreement on the levels of performance expected, which can
OJEU notice Official Journal of the European Union (EU) notice – publication Agreement (SLA) be used to decide service credits and other incentives.
that lets potential suppliers know of a procurement process
under EU rules. Should-cost model Model which allows an estimation of the expected cost of
goods or  services to use as a comparator for bids received or
Open book A type of supply chain assurance wherein the supplier makes actual costs.
more of their contractual and financial information available.
Sourcing Process of finding, evaluating and engaging potential suppliers
Partnering Development of successful, long term, strategic relationships about an upcoming opportunity.
between customers and suppliers, based on achieving
best practice. SRO Senior Responsible Owner with the ultimate responsibility for
a contract.
Payment by results A type of public policy where payments are contingent on the
independent verification of results. Staffing model A model for staff requirements and which staff will be allocated
to a contract to meet its contract management requirements.
PFI Private Finance Initiative (PFI) as a way of funding public
infrastructure projects with private capital. Substantive test Analytical procedures or tests of detail used to verify assertions.

Preferred bidder The bidder which the vendor intends to award the Supplier Methods of strategically planning for, and managing,
business to, subject to the completion of negotiations Relationship interactions with supplier.
and legal arrangements. Management (SRM)

Project The whole process by which projects are carried out, including Transitioning Process of changing from one contract for a service/good to
management wider strategic consideration outside of commercial factors. another contract for the same or similar contract/good.

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 Appendices

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Appendix One Appendix Two Appendix Three

Commercial
strategy

1 Commercial
capability
Transition
& termination
7 2

Glossary National Audit Office studies Useful links

6 3 Market
management
Contract & sourcing
lifecycle

1 of 4
5 4

Contract Contract
management approach

links to insights
Study title

Commercial Commercial Market Contract Contract Contract Transition &

strategy capability management approach management lifecycle termination
& sourcing

Cabinet Office: Shared service centres, 2016 1 5 11 13 18

Cross-government: Government's spending with small and 6

medium-sized enterprises, 2016

Cross-government: Open-book accounting and supply-chain 9

assurance, 2015

Department for Culture, Media & Sport: The rural broadband 3 8 11

programme, 2013

Department for Culture, Media & Sport: The superfast (rural) 3 7

broadband programme: Update, 2015

Department for Education: The Building Schools for the 4

Future Programme, 2009

Department for Transport: Lessons from cancelling the 4 6

InterCity West Coast franchise competition, 2012

Department for Transport: Procuring new trains, 2014 1 8

Department for Transport: Reform of the rail franchising 9 19

programme, 2015

Department for Work & Pensions: Contracted-out health 2 3, 4 6, 7 12 14 17, 18 20

and disability assessments, 2016

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 Appendices

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Appendix One Appendix Two Appendix Three

Commercial
strategy

1 Commercial
capability
Transition
& termination
7 2

Glossary National Audit Office studies Useful links

6 3 Market
management
Contract & sourcing
lifecycle

2 of 4
5 4

Contract Contract
management approach

Study title

Commercial Commercial Market Contract Contract Contract Transition &

strategy capability management approach management lifecycle termination
& sourcing

Department for Work & Pensions: The Introduction of 2

the Work Programme, 2012

Department for Work & Pensions: The Work 1, 2 9 12 14 17 19

Programme, 2014

Department of Energy & Climate Change: Carbon 11

capture and storage: lessons from the competition for
the first UK demonstration, 2012

Department of Energy & Climate Change: Nuclear power 9

in the UK, 2016

Department of Health and NHS England: Out-of-hours 14

GP services in England, 2014

Department of Health: General Practice Extraction 7

Service – Investigation, 2015

Department of Health: Investigation into the collapse 6, 7 10 18

of the UnitingCare Partnership in Cambridgeshire and
Peterborough, 2016

Department of Health: The franchising of 8 11

Hinchingbrooke Health Care NHS Trust, 2012

Department of Health: The performance and 13

management of hospital PFI contracts, 2010

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 Appendices

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Appendix One Appendix Two Appendix Three

Commercial
strategy

1 Commercial
capability
Transition
& termination
7 2

Glossary National Audit Office studies Useful links

6 3 Market
management
Contract & sourcing
lifecycle

3 of 4
5 4

Contract Contract
management approach

Study title

Commercial Commercial Market Contract Contract Contract Transition &

strategy capability management approach management lifecycle termination
& sourcing

Department of Health: The PFI contract for the 10

redevelopment of West Middlesex University Hospital, 2002

Home Office and NHS England: Yarl’s Wood Immigration 12 17 19

Removal Centre, 2016

Home Office/Ministry of Justice and Cabinet Office/ 5 14

Cross-government: Transforming government’s contract
management, 2014

Home Office: COMPASS contracts for the provision of 3 6 18

accommodation for asylum seekers, 2014

Home Office: E-Borders and successor programmes, 2015 2 4 10 13

Home Office: Upgrading emergency service 4 13

communications: the Emergency Services Network, 2016

HM Revenue & Customs: Managing and replacing the 2 9 20

Aspire contract, 2014

HM Revenue & Customs: Replacing the Aspire contract, 2016 2 20

Ministry of Defence: Army 2020, 2014 5 13

Ministry of Defence: Military flying training, 2015 6 11 13

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 Appendices

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Appendix One Appendix Two Appendix Three

Commercial
strategy

1 Commercial
capability
Transition
& termination
7 2

Glossary National Audit Office studies Useful links

6 3 Market
management
Contract & sourcing
lifecycle

4 of 4
5 4

Contract Contract
management approach

Study title

Commercial Commercial Market Contract Contract Contract Transition &

strategy capability management approach management lifecycle termination
& sourcing

Ministry of Defence: The construction of nuclear 11

submarine facilities at Devonport, 2002

Ministry of Justice: Electronic monitoring contracts, 2013 10

Ministry of Justice: Language services contract: 20

Progress update, 2014

Ministry of Justice: Transforming Rehabilitation, 2016 2 3, 4 6, 8 12 14 17

Principles Paper: Managing provider failure, 2015 20

UK Trade & Investment: Investigation into the UKTI 4, 5 7, 8, 9 10

specialist services contract with PA Consulting, 2016

Our enquires into Civil Service Learning’s contract with Capita, 2015
Department for Work & Pensions: Universal Credit: Progress update, 2014
Department for Transport and HS2 Ltd: Progress with preparation for High Speed 2, 2016

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 Appendices

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Appendix One Appendix Two Appendix Three

Commercial
strategy

1 Commercial
capability
Transition
& termination
7 2

Glossary National Audit Office studies Useful links

6 3 Market
management
Contract & sourcing
lifecycle

5 4

Contract Contract
management approach

Useful links
National Audit Office Green Book supplementary guidance The Scottish Government’s Procurement
(NAO) guidance on delivering public value from Competency Framework
spending proposals
NAO Overview of commercial and The Scottish Government’s
contracting in government Crown Commercial Service contract Procurement Journey
management principles
NAO Good practice contract Government Commercial Function-
management framework Crown Commercial Service model Government Commercial Operating
services contract Standards Iteration ii
NAO Managing supplier failure
Local Government Association’s making IACCM’s Ten pitfalls to avoid
NAO Open-book accounting
savings from contract management in contracting
and supply‑chain assurance
Crown Commercial Service Open
NAO Payment by results Sources of information
Book Contract Management Guidance
analytical framework
Whole of government accounts 2014-15
Procurement Policy Note –
Taking Account of Suppliers’ HM Treasury Public Expenditure
Other guidance
Past Performance Statistical Analysis
CIPFA Practical Guide to Contract
Management in the Public Sector Procurement Policy Note –
Information sharing in Government
CIPFA Open book procurement exercises
contract management
Local Government Association’s
CIPS Contract management guide A Councillor’s Guide to Procurement

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