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Best Practice Strategic Contract Management

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Presentation on theme: "Best Practice Strategic Contract Management"— Presentation transcript:

1 Best Practice Strategic Contract Management
CONTRACT MANAGEMENT TOOLKIT AWARENESS SESSION Improvement and Efficiency West Midlands Ange Bateman Contract Development Manager Sheffield City Council

2 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?

3 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.

4 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

5 Why is Contract Management So Important
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

6 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: 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

7 Why is Contact Management So Important? The Sheffield Case Study
Annual ADDITIONAL savings on average of 8% per annum have been achieved through: 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

8 Introducing the Strategic Contract Management Approach
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 

9 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

10 Intelligent Client Principles
Roles and Responsibilities Governance TECHNICAL / OPERATIONAL Policy, Strategy & Planning Service Developments & Business Requirements Technical & Service Assurance Contract Technical Process Management COMMERCIAL Contract Performance Management Contract Commercial Process Management Strategic Relationship Management Internal Process Management Behaviours and Values

11 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

12 Contract Management Toolkit Contract Categorisation
Cost per Year Greater Than £2m (or appropriate) Red Red Red Between £500k - £2m Amber Amber Red Up to £500k Green Amber Amber Low Medium High Risk The above matrix enables the Contract Manager to apply the Processes to a degree that is ‘fit for purpose” for the particular contract The above matrix also helps to advise on the right resources with appropriate skills required for the effective management of the Contract

13 Contract Management Toolkit The Component Parts
CONTRACT PROCESS MANAGEMENT Change Payment Project Management Risk Management Resource Planning Contract Activity Timelines Service Review and Planning Business Continuity Financial Updates & Modelling Financial Strategy Contract Health Checking Asset Management Exit Step-in Notice / Termination Transition / Mobilisation Dispute Resolution Procedure Operational Contract Manual 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) CONTRACT PERFORMANCE MANAGEMENT Performance Management Benefits Realisation Management Service Review Quality Audit Benchmarking / Market Testing STRATEGIC RELATIONSHIP MANAGMENT Governance Relationship Management Stakeholder Management & Communications

14 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

15 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

16 Contract Management Toolkit Proposed New Approach
Operation Preparation COMMISSIONING Pre Contract Preparation PURCHASING/ACQUISITION Completion/Transition

17 Proposed Additional Toolkit Items
Process Development Documentation Management Process Negotiation Organisational Failure

18 or
To discuss further after today or if you want to start implementing best practice contract management contact: or Telephone Thank you Any Questions?

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