Better contract management could generate major savings

24 December 2008
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24 December 2008 | Paul Snell

The public sector could save between £160 and £290 million through better management of its service contracts, according to the National Audit Office (NAO).

A report from the spending watchdog found central government departments do not always give contract management the priority it deserves. In more than a quarter of deals there was no formal plan for it, and even in cases where there was, input from vendors was limited.

The study added there were a lack of key performance indicators, financial incentives for suppliers and good risk management processes in deals. It also criticised the lack of resources allocated to manage contracts and highlighted the increasing necessity for skilled contract managers.

"There remains a need for more qualified people to manage these contracts, and for clear performance indicators to show whether services match up to contract objectives," said Tim Burr, head of the NAO.

Total government spend on service contracts, on diverse categories such as IT, facilities management and outsourcing, is around £12 billion a year. The NAO said currently management was "not consistently delivering value for money", and it added its savings estimate was "conservative".

Recommendations from the watchdog included raising the profile of contract management and increasing ownership of deals among staff.

The OGC, which was told by the NAO it could do more to support departments, has launched guidance for buyers to improve the situation. Nigel Smith, OGC Chief Executive, said in a statement: "Every effort must be made to ensure that the Government obtains value for money from its contracts. We welcome the NAO report, which provides additional impetus to our work and highlights where more work can be done."


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