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Best Practice Contract Management

Commercial Services

Contract Management Toolkit

September 2012

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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?

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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

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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

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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

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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):

8.3

2.9

7.8

9.313.7

2.8

11.0

11.5

0.3

2007/8 2009/10 2010/11 2011/122008/9

£ Million Savings Achieved

Key:

Blue - Category Management/Procurement

Pink – Contract Management

Grey – E-Business

11.2

25.5

20.3

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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

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Intelligent Client Principles:

Roles & Responsibilities

Gov

erna

nce

SERVICE AREA CLIENT Policy, Strategy & Planning Service developments &

Business requirements Technical & Service

Assurance

CONTRACT MANAGEMENT Contract Performance

Management Contract Process

Management Strategic Relationship

Management

Beh

avio

urs

& V

alue

s

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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

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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

Risk

HighMediumLow

AmberAmberGreenUp to

£500k

RedAmberAmberBetween

£500k - £2m

RedRedRedGreater Than

£2m

Cost per Year

Contract Management Toolkit: Contract Categorisation

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CONTRACT PROCESS MANAGEMENT

Change

Payment

Project Management

Risk Management

Resource Planning

Milestone Timelines

Service 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

PERFORMANCE MANAGEMENT

Performance Management

Benefits Management

Service Review

Audit

Benchmarking / Market Testing

STRATEGIC RELATIONSHIP MANAGMENT

Governance

Communications / Branding

Relationship Management

Stakeholder Management

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’

Organised as per Intelligent Client Model roles allocated to Contract Management Function; Some processes identified overlap or are jointly owned with Service Client Functions)

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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

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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: 

Andy.howells@sheffield.gov.uk orAngela.bateman@sheffield.gov.uk

Adam.shephard@sheffield.gov.uk orTelephone 0114 2053819

 

Thank you

Any Questions?