Transcript - Improvement and Efficiency West Midlands

Best Practice Strategic Contract
Management
CONTRACT MANAGEMENT TOOLKIT
AWARENESS SESSION
Improvement and Efficiency
West Midlands
Ange Bateman
Contract Development Manager
Sheffield City Council
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Purpose of this Session
 Setting the scene - Why is Contract Management important?
 Bringing it to life – The Sheffield Journey - Introducing the Best
Practice Contract Management approach
 Bringing it to life – The Strategic Contract Management Toolkit.
 How Commercial Services within Sheffield City Council can offer
support with implementation, development and for the future?
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Why is Contract Management So Important?
The Context
 A significant and growing proportion of Council's total
expenditure is being outsourced to 3rd party
organisations
 The outsourced contracts need to deliver the
promised benefits (Value for Money), manage the
risks and continuously improve and change through
the life of the contract to meet changing demands
and expectations
 Councils are still ultimately responsible for all
outsourced services and the associated risks - both
citizen and legal responsibilities
 There is a continual need to drive on-going financial
savings and to hold Providers to commitments from
within the procurement process.
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Why is Contract Management So Important?
The Context
 Best Practice suggests that organisations should
Invest anywhere between 1-10% of contract value in
quality contract management; the average of 3%
(Source: Government Public Accounts Committee
Report 2008)
 Benchmarking suggests 5-7% ADDITIONAL savings
can be delivered on top of initial procurement savings
 Considering the total UK public spend purse. This
equates to circa £1 Billion extra savings
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Why is Contract Management So Important?
The Context: Challenges and Issues
 Misguided views & myths of the past – self managing contracts
& fluffy cuddly relationships !!!
 Lack of understanding & awareness of Contract Management
principles and processes
 Lack of organisational investment in Contract Management
(people, systems & processes)
 Lack of clarity around the different roles and responsibilities
 Not properly building Contract Management into procurement –
management resources and Provider expectation management
 Although there is evidence of pockets of best practice, Contract
Management is generally poor across the public and private
sector
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Why is Contract Management So Important?
The Sheffield Case Study
 Sheffield has a major portfolio of strategic contracts with an
annual contract value of over £270 million, where the strategic
contract management approach has been implemented:
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Waste Collection & Management
Construction & Building Services
Property Management & FM
HR & Payroll
Revenue Collection & Benefit Payments
Financial Business Transactions & ICT
Property PFI
Highways PFI
Schools Catering & Cleaning
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Why is Contact Management So Important?
The Sheffield Case Study
 Annual ADDITIONAL savings on average of 8% per annum
have been achieved through:
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Performance management – including KPI management
Price challenges, benchmarking & market testing
Cost avoidance & efficiencies
Continuous service & process improvement
Contract service step downs
 Increased Benefits Realisation – improved service delivery
 Effective Risk Management - legal and technical issues
 Relationships are sound - even in a challenging economic
climate
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Introducing the Strategic Contract Management
Approach
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Who says it is best practice?
 Chartered Institute of Purchasing & Supply (CIPS)
 Audit Commission
 LGA
 DEFRA
 The vast majority who have seen it
Developed by Sheffield City Council using established principles, case
studies and private/public sector experience
A unique approach which translates contract management principles
into processes which drill down to a detailed practical toolkit which can
be used by all types of contract managers on all types of contracts
Two component parts:
 Intelligent Client Strategic Framework
 Contract Management Toolkit
The key benefit of this contract management approach is that it can be
commenced at any time to make a significant positive impact
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Intelligent Client Strategic Framework
 The 'Intelligent Client' is defined as the integrated roles,
responsibilities, structures, processes and values that exist to
ensure that a Council manages and develops the delivery of
services and systems and obtains value for money over the full
life of the commercial relationship
 The Intelligent Client has been developed to ensure that Councils
get the very best from contractual relationships in terms of value
for money, risk management and service development
 The principles are standard but the specific implementation can
be tailored to the individual commercial relationship
 It can equally be applied to internal service providers or arms
length organisations
 The principles ideally should not be optional but established as
Council policy
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Intelligent Client Principles
Roles and Responsibilities
COMMERCIAL
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Policy, Strategy & Planning
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Service Developments & Business
Requirements
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Contract Performance
Management
Contract Commercial Process
Management
Technical & Service Assurance
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Strategic Relationship
Management
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Internal Process Management
Contract Technical Process
Management
Behaviours and Values
Governance
TECHNICAL / OPERATIONAL
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Contract Management Toolkit
 The Contract Management Toolkit translates Contract
Management into easy to follow processes, which can be
customised, where appropriate, into bespoke activity packages
 The aim of the Toolkit is to provide a comprehensive set of best
practice processes, tools and techniques that can be accessed
and consistently applied across the organisation to effectively
contract manage and ensure value for money customer
focussed services
 The Toolkit enables users to identify the type of contract they
are managing and then apply a suite of processes to the degree
appropriate to that contract
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Contract Management Toolkit
Contract Categorisation
Greater Than
£2m (or appropriate)
Cost per
Year
Red
Red
Red
Between
£500k - £2m
Amber
Amber
Red
Up to
£500k
Green
Amber
Amber
Low
Medium
High
Risk
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The above matrix enables the Contract Manager to apply the Processes to a
degree that is ‘fit for purpose” for the particular contract
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The above matrix also helps to advise on the right resources with appropriate
skills required for the effective management of the Contract
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Contract Management Toolkit
The Component Parts CONTRACT PROCESS
 Identifies up to 26 key processes to effectively
contract manage a contract
 Depending on contract categorisation get ‘full fat’ or
‘slimmer's version’
 Organised as per Intelligent Client Model roles
allocated to Contract Management Function; Some
processes identified overlap or are jointly owned
with Service Client Functions)
MANAGEMENT
Change
Payment
Project Management
Risk Management
Resource Planning
Contract Activity Timelines
Service Review and Planning
Business Continuity
Financial Updates & Modelling
CONTRACT PERFORMANCE
MANAGEMENT
Performance Management
Benefits Realisation
Management
Service Review
Quality Audit
Benchmarking / Market Testing
STRATEGIC RELATIONSHIP
MANAGMENT
Financial Strategy
Contract Health Checking
Governance
Asset Management
Relationship Management
Exit
Stakeholder Management &
Communications
Step-in
Notice / Termination
Transition / Mobilisation
Dispute Resolution Procedure
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Operational Contract Manual
How Sheffield Can Support Contract Management
Implementation in Other Councils
 Organise and/or attend regional & national awareness events
for key stakeholders
 Run awareness/training sessions on Contract Management and
the detailed use of the Toolkit:
 On Council premises
 Up to 15 delegates per session
 When charged cost is £500 per session plus expenses
 Provide electronic access to the Toolkit for Council employees
 Provide additional support through consultancy services where
appropriate
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How Sheffield Can Support Contract Management
Implementation in Other Councils
 Annual cost per organisation (regardless of number of Toolkit
users) - 3 year minimum commitment
 Small Council - £3,600
 Medium Council - £4,500
 Large Council - £6,000
 Annual Toolkit fee to cover:
 Help Desk support
 Regular update of Toolkit to incorporate latest thinking,
experience and developments
 Forums & Networking – Sharing best practice
 Ad hoc detailed consultancy support on specific areas, problems
etc. at a defined day rate if requested
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Contract Management Toolkit
Proposed New Approach
Operation
Preparation
COMMISSIONING
Pre Contract Preparation
PURCHASING/ACQUISITION
Completion/Transition
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Proposed Additional Toolkit Items
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Process Development
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Documentation Management Process
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Negotiation
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Organisational Failure
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To discuss further after today or if you want
to start implementing best practice
contract management contact:
[email protected] or
Telephone 0114 205 3110
Thank you
Any Questions?
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