Brian Thompson, director at Drivers Jonas Deloitte, answers frequently asked questions on good contract management and how it could help save you money:

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Contract management sounds dull but is it? No. It demands innovative thinking, aligning conflicting interests, an understanding of government policy in practice, changing the behaviours of colleagues and contractual partners, spotting the wood among the trees, diplomacy and negotiating skills, and a rare ability to follow the money.

In the government’s drive to deliver efficiencies and raise the standard of public services, it can’t afford to ignore one of key functions today.

The public sector spends literally billions of pounds each year on third party suppliers of services under long term property and FM contracts exemplified by the hundreds of PFI projects in place, many of which are now into their second decade.

Within the property arena, the public sector may have purchased the provision and management of schools, administrative office, courts, hospitals, call centres and customer facing buildings that provide a shop front for government services.  At a simpler level, the service may be a bundle of facilities management services accompanied by some carefully crafted measures to reward or penalise the service provider.

This short article answers some common questions on the subject but also poses some questions that are not asked as frequently as they should be.

Is the public sector good at contract management?

A glance at some official publications reviewing deals done, such as those produced by the National Audit Office or Audit Commission, would suggest that the public sector has much to learn in the way it manages its suppliers.  And we all know that when the NAO states that a deal or particular practice is bad, it must be really bad.

However, this is a bit unfair.

Government delivers public services and the private sector exists to make a profit.  The DNA of public servants charged with managing a contract is programmed to ensure they think and act in a way that doesn’t see cash as king but regards excellent customer service as the measure of success.

So yes, there are examples of excellence in contract management but they aren’t necessarily the result of a consistent and widespread recognition of the strategic need for this rare resource.  Fortunately for the government’s purse, some private sector service providers are surprisingly unfocused on maximising returns from ‘partnership’ arrangements.

Government has yet to fully value the role of contract management, and has tended to invest too little and too late in the necessary resources and required competencies.

What are the consequences of poor contract management?

Paying too much for a specified and supposedly pre-priced service, or paying for a service you are not receiving.  In complex, multi-property PFI deals, it is easy to lose track of rights and obligations. The body of knowledge and understanding that existed when the deal was done can dissipate very quickly.

Contracts will often possess ‘grey’ areas: it is here that the robust argument wins, or the tenacious operator grinds down the other party into submission.

My PFI deal is almost 10 years old – is it too late to act?

No.  It is never too late to carry out a health check on the contract.  It can be illuminating to revisit the following:

• Balance of risk transfer anticipated when the deal was done
• Reasonableness of expenditure over and above any contracted Unitary Charge
• Performance and payment: research has shown that many contract managers don’t understand the payment mechanism because of its complexity.  Has it been applied correctly?
• Flexibility to change: if the contract isn’t meeting your needs, what scope is there to agree changes that will be in the interests of both parties?

Should I be prepared to change the contract?

The final bullet point above is crucial.  Contracts can be very long term but government is prone to change direction and focus.

Don’t fall into the trap of believing that a partnership only works if the contract is put in a locked drawer and the key is thrown away.  To me, that sounds like a desire to avoid confrontation.  Keep a contract alive, and refresh it over time.  That doesn’t mean the original contract has failed. Instead, it suggests the contract management team has succeeded.

So, in summary, letting a contract takes its course may indeed be dull, but getting it to work for you and support changing public sector priorities and initiatives can be a real challenge.

And maybe even fun!

• Crossrail launches tender for final boring contract
• Call for Scotland to centralise property management
• Watchdog slates government’s management of PFI-funded housing
• Manchester awards £90m town hall revamp contract
• Maude quizzes Trillium on cutting contract costs