17 September 2009
UK public sector buyers must improve the way they manage suppliers in the wake of the economic downturn, a report by business advisory firm Deloitte said.
As government budgets diminish because of the recession, the risk of supplier failure is increasing, but purchasers are not taking account of this, the report, No More Them and Us, suggested.
Buyers are failing to enforce contractual penalties where services fall below standard and are not integrating contingency measures into contracts in case of supplier failure, it continued.
Mike Turley, head of Deloitte's public sector practice, said: "The notion that the government must improve its management of contracts and suppliers is not new; yet the prospect of a prolonged and dramatic period of austerity for public spending will worsen the impact of ineffective supplier management.
"As budgets and supplier profitability contract during 2010 and beyond, the margin for error on both sides will shrink, and thus intelligent supplier management will be critical."
The report recommended a number of measures to help government buyers improve contract management. These include stringent controls surrounding supplier behaviour, better risk management over the life of a contract rather than just at the start, and introducing systems that provide an early warning of suppliers who are struggling.