Best Practice Contract Management
Commercial Services
Contract Management Toolkit
September 2012
1
Purpose of this session:
 Introductions
 Setting the scene - Why is contract management so 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 will
support you in its implementation and in the future?
2
Why is contract management so important?
The context:
 A significant and growing proportion of Council's total
expenditure is going to 3rd party organisations
 There will be a continual increase in core service outsourcing
which needs to continuously improve and change through the
life of a contract to meet changing demands and expectations
 Councils are still responsible for all their outsourced services
and the associated risks - both citizen and legal responsibilities
 There is a continual need to drive on-going financial savings:
 Benchmarking suggests 5-7% ADDITIONAL savings on top
of initial procurement savings
 Over the UK this equated to circa £1 Billion extra savings
3
Why is Contract Management so important?
There are some real challenges and issues to
address
 Misguided views/myths of the past – Self managing contracts &
fluffy cuddly relationships !!!
 Lack of understanding/awareness of contract management
 Lack of investment in contract management (people, systems &
processes). In the Client side as well as procurement
/commercial services.
 Lack of clarity around roles and responsibilities
 Properly building it into procurement – managing expectations of
providers that they will be contract managed
 Contract management is generally poor across the public (and
private) sector so this does need major change
4
Why is contact management so important?
The Sheffield Case Study
 Sheffield has a major portfolio of strategic contracts with a value
of nearly £270 million per annum where the best practice
contract management approach has been implemented:
 Waste collection & management
 Construction & building services
 Property Management & FM
 HR & Payroll
 Revenue Collection & Benefit Payments
 ICT
 Financial business transactions
 Property PFI
 Highways PFI
5
Why is contact management so important?
The Sheffield Case Study (2)
 Annual ADDITIONAL savings of 8% per annum have been
achieved through:





Performance management – KPI’s
Price challenges/benchmarking
Cost avoidance
Continuous service & process improvement
Dealing with specific circumstances e.g. recent Council
budget cuts
 AND service has improved, risks have been managed, no legal
issues and relationships are sound - even in these challenging
times
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Why is contract management so important?
Sheffield Case Study (3):
25.5
Key:
20.3
0.3
Blue - Category Management/Procurement
Pink – Contract Management
Grey – E-Business
11.5
11.0
11.2
2.9
2.8
2007/8
7.8
2008/9
9.3
8.3
2009/10
2010/11
£ Million Savings Achieved
13.7
2011/12
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Why is contract management so important?
Some key truths, principles and facts:
 Never outsource strategic capability – retain intellectual property
& expertise
 Never give up control  Partnering - A relationship with a provider based on strong
performance management but with joint behaviours about joint
problem solving and continuous improvement (Source: Office
Government Commerce (OGC))
 Invest 1-10% of contract value in quality contract management,
with an average of 3% (Source: Government Public Accounts
Committee Report 2008)
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Introducing the best practice contract
management approach:





Who says it is best practice?
 Chartered Institute of Purchasing & Supply (CIPS)
 OGC
 Audit Commission
 LGA
 DEFRA
 Everyone who has seen it!
Developed by Sheffield but assembled from established principles,
case studies and private/public sector experience
Unique in that it is an approach which takes established principles right
down to detailed, practical toolkits which can be used straight away by
all types of contract managers
Two component parts:
 Intelligent Client Strategic Framework
 Contract Management Toolkit
The key benefit is that with this contract management approach you
can start quickly 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 partner relationships in terms of
value for money, service development and risk management
 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 Bodies
 The principles should not be optional but established as Council
policy
10
Intelligent Client Principles:
Governance
SERVICE AREA CLIENT

CONTRACT MANAGEMENT
Policy, Strategy & Planning  Contract Performance
Management
 Service developments &
Business requirements
 Contract Process
Management
 Technical & Service
Assurance
 Strategic Relationship
Management
Behaviours & Values
Roles & Responsibilities
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Contract Management Toolkit:
 The Contract Management Toolkit translates Contract
Management into easy to follow, and customise, where
appropriate, activity packages
 The aim of the Toolkit is to provide a complete best practice set
of processes, tools and techniques that can be accessed and
consistently applied across the Council 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 appropriate to
that category of contract
12
Contract Management Toolkit:
Contract Categorisation
Cost per
Year
Greater Than
£2m
Red
Red
Red
Between
£500k - £2m
Amber
Amber
Red
Up to
£500k
Green
Amber
Amber
Low
Medium
High
Risk


The above matrix structures the Toolkit to be ‘fit for purpose”
The above matrix also helps to ensure the right resources with appropriate skills depending on the
operating model of each Council
13
Contract Management Toolkit:
The Component Parts
 Identifies up to 27 key processes to effectively
contract manage a contract
 Depending on contract categorisation get ‘full fat’ or
‘slimmer's version’
CONTRACT PROCESS
MANAGEMENT
Change
Payment
Project Management
 Organised as per Intelligent Client Model roles
allocated to Contract Management Function; Some
processes identified overlap or are jointly owned
with Service Client Functions)
Risk Management
Resource Planning
Milestone Timelines
Service Planning
Business Continuity
PERFORMANCE
MANAGEMENT
Performance Management
Benefits Management
Service Review
Audit
Benchmarking / Market Testing
STRATEGIC RELATIONSHIP
MANAGMENT
Governance
Communications / Branding
Relationship Management
Stakeholder Management
Financial Updates & Modelling
Financial Strategy
Contract Health Checking
Asset Management
Exit
Step-in
Notice / Termination
Transition / Mobilisation14
Dispute Resolution Procedure
How Sheffield will support the implementation
in Councils:
 Organise Regional awareness raising events or key stakeholder
events
 Run one day training courses on how to implement the
approach and the detailed use of the toolkit:
 On Council premises
 Up to 10 delegates per session
 Each delegate gets a full set of the documentation, toolkit etc
 Cost is £500 per session plus expenses
 BUT initial courses FREE funded by LGA
 Subject to final agreement with CIPS all Contract Managers
attending the one day course will become 'Accredited Contract
Managers' with a certificate from Sheffield Council/CIPS with
CIPS CPD points awarded
15
How Sheffield will support the implementation
in Councils (2):
 Annual Toolkit Support & Maintenance fee to provide:
 Help desk support
 Annual update of Toolkit to incorporate latest thinking,
experience and developments
 User Group Event
 Forums & Networking – Sharing best practice
 Cost per organisation (regardless of number of toolkits) with 3
year commitment
 Small Council - £2700
 Medium Council - £3600
 Large Council - £4500
 Ad hoc detailed support on specific areas, problems etc at a
defined day rate if requested
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To discuss further after today or if you want
to start implementing best practice
contract management contact:
[email protected] or
[email protected]
[email protected] or
Telephone 0114 2053819
Thank you
Any Questions?
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