No substitute for old fashioned contract management

£10 billion is spent by The Greater London Authority (GLA), which includes the Transport for London (TfL).  A report by the Greater London Authority Oversight Committee has warned that taxpayer money maybe going to waste due to their procurement arrangements “not being followed in all cases” leading to taxpayers’ not getting “the best value for money”.

The GLA Oversight Committee have made several recommendations including for TfL to regularly review and improve their procurement processes and systems, annual updates on the progress against their procurement improvement programme by setting clear performance targets, ensure their processes are robust and transparent to prevent future legal challenges.  Download the report here to view all their recommendations.

Management of PPE contracts

£46.7 billion was spent as part of the UK Government response to Covid-19.  58% of this value has been awarded for products and suppliers whilst 41% was dedicated to procuring related services.  This was further broken down into 4 major categories:

1. Personal Protective Equipment (PPE)
2. Test and Trace Programme
3. Hospital Supplies
4. Vaccines

The Department of Health and Social Care has been managing the PPE contracts it entered in 2020 to reduce its risk and minimise losses to the taxpayer.  The National Audit Office (NAO) are currently investigating the Department performance in managing PPE contracts with a specific analysis of:

1. PPE purchased by the Department
2. How the Department is managing the PPE that it has received
3. Contractual issues that have arisen and how the Department is dealing with these.

From this report, the Department for Health and Social Care has spent £12.6 billion on PPE against contractual commitments of £13.1 billion.  176 contracts are at risk of not achieving value for money with total amount at risk being £2.7 billion.

One of the nuances of working in the Public Sector there is rightly a lot more transparency and independent scrutiny over procurement and whether contracts deliver the outcomes intended.  However, there are lessons for all sectors from these reports.

6 actions to manage and mitigate risk

1. Establish the type of supplier relationship you want upfront in any process, if you treat suppliers at arm’s length, with a tactical approach to the procurement, don’t listen or effectively engage the market, don’t expect to contract with the right supplier and post contract award have a strategic relationship!
2. Challenge the requirements upfront and ensure the contract has the appropriate KPI’s, financial management, transparency and appropriate audit rights that are proportionate to the size, risk and criticality of the contract.
3. Look to the future, long term contract needs, long term levers to manage the relationships and flexibility to adjust requirements and create commercial flexibility.
4. Ensure cross-functional teams are established through the development of the sourcing strategy, through the actual procurement and are in place through implementation and into contract management.
5. For critical contracts, ensure there are executive sponsors and internal transparency around service and commercial performance.
6. Avoid upfront payments unless there is a clear case for investment and ensure contracts contain ways to claw back any payments and there is a financial stability monitoring system in place and that is not just D&B monitoring.

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