Public sector contracts: Are you getting what you’ve paid for?

The UK public sector spends over £100bn per annum on contracts with third-party suppliers, which means that the management of these contracts has huge potential to deliver value for money for taxpayers (or, of course, the opposite). The drive for cost savings has seen a fall in the number of contract management officers in many government and public sector bodies, but the risk is that this is a false economy. Without professional input to drafting, implementation, scrutiny, and monitoring, these contracts could fail to deliver the savings they promise. Worse still, they could actually end up costing more. We’ve seen many cases where billing errors running to millions of pounds have gone undetected, and that’s just one example.

So how can you tell if you’re getting what you paid for?

Three ways to ensure value for money:

1. Take a closer look at your contracts

Where resources are limited it’s important to focus on the contracts that present the highest risk. This starts with a risk assessment across the whole portfolio, covering the contractor providing the services, the value, duration and stage of the contract, and any issues experienced thus far. ‘Red flags’ for higher risk contracts might include peaks and troughs in spend over time which cannot be easily explained. Likewise, the more complex a contract is the more risk there will probably be – those which have a lot of performance measures need to be looked at closely, to ensure they’re being properly monitored, and the criteria are fit for purpose.

2. Conduct regular reviews

All contracts should have ‘open book’ audit clauses, so you can undertake regular proactive and reactive reviews. These are a vital way of ensuring that the contract is delivering what it promised, both financially and in terms of quality of service. Independent assurance can really help here, too. And make sure your audit clauses give you the right to access the full breadth of management information and data the supplier holds on the contract, so you get the full picture, not a partial or distorted one.

3. If in doubt, do a historical review

If you suspect a contractor has been misreporting their performance or billing incorrectly, the best place to start is with a thorough historical review of the contract. This could help you recover costs if you’ve over-paid, or your supplier has under-delivered.

Given the complexity of many public sector contracts, this can involve the analysis of huge volumes of complex data, and it’s important to ensure this doesn’t get in the way of business as usual. But the rewards can be very significant: we’ve often found anomalies amounting to millions, typically from incorrect billing. This usually arises from incomplete or inaccurate reporting of contractual KPIs, applying commercial mechanisms like indexation wrongly, or changes in the service which haven’t been properly incorporated into the contract terms or billing arrangements. Issues like these are also important ‘red flags’, indicating there could be a need to review or change your contract terms.

 

To learn more about key themes related to contract management in the public sector, read our new publication, 'the Negotiator'.

Are you sure you’re getting value for money through effective contract management?  Schedule a meeting to discuss your situation in confidence.

Claire Halstead |  Director
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Katie Mills |  Manager
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