Good Practice
National Audit Office Best Practice Guidance (Part 5) – Clarify Commercial and Operational Balance

At the end of last year, the UK’s National Audit Office issued a very useful document titled “Commercial and contract management: insights and emerging best practice”. We did provide an initial overview of it here, and now we are into a more detailed review of its content and findings. For each area the NAO has covered, we will look at their content and then give any additional analysis or thoughts we would add to the mix. Today, we will take a look at the fourth of the NAO insights (as they call them) – “Clarify commercial and operational balance”.

This falls under the wider heading of  “commercial capability” and covers issues around the team involved in major contracts on the buy-side. That means commercial (procurement) people working with colleagues in operational, business and policy areas to develop a clear view of the outcomes desired and how the contract will deliver those. So there are issues around roles and responsibilities, as well as the very fundamental question of capability. This is an area that NAO perceives as generally weak in UK government.

NAO suggests four steps;

  1. Plan who should be involved and when, thinking ahead about risks and opportunities for each lifecycle stage.
  2. Resources; Give the right people the right levers, such as an overarching governance structure, the right skills, knowledge and training, access to expertise and clear ownership.
  3. Manage handovers and interfaces (from procurement to operations) and maintain clear documentation
  4. Continuity; look at retention incentives, processes when key people leave.

Some of the biggest “disasters” in public procurement have come from issues around unclear responsibilities, often combined with a lack of appropriate skills. In the case of the West Coast rail franchise competition, “no one person oversaw the whole process, or could see patterns of emerging problems”.

Public Spend Forum Comments

The NAO could have written an entire report around “capability”, so given this section is just one of many, it cannot possibly get into all the issues around this topic. Similarly, the issues around who should be involved and when during the end to end process are complex and worthy of deeper commentary.

For instance, one of the problems we have seen is a disconnect between those involved up to contract award (on the buy-side) and those who then get involved in managing post-contract award operational delivery. We might have placed more emphasis in the guidance on the need for some continuity, for instance, by identifying the ultimate contract manager early and having him or her involved through the procurement and contracting process.

However, it is worth noting that there is some case law now that suggests authorities need to tread carefully if using a contract manager as part of the selection process when the contract is re-tendered!

Contract managers are also not valued highly in most public organisations in terms of grade and salary, which is an obvious problem when it comes to getting the right people into key roles – the NAO clearly cannot solve that problem easily. But in terms of training and capability, this is an area where the growth of IACCM in recent years has been helpful, as that organisation has provided competition to CIPS and in the contract management field has become a useful source of material and resource.

But training contract managers is still a challenge, simply because every contract requires slightly different skills and knowledge, and indeed the range of skills needed is broad, from highly developed negotiation skills through to technical analysis and finance knowledge.

In the public sector in particular, negotiation is probably more critical for contract managers than it is for procurement practitioners, and this is an area that is not well developed generally. And as a final point on the NAO guidance, we might have included more on the need for technology and systems to support contract management. The public sector is reasonably well equipped with eSourcing technology now; but less advanced when it comes to using contract management tools.