The NAO praised the handling of the 2018 collapse of Carillion, with new suppliers able to step in © DANIEL SORABJI/AFP via Getty Images
The NAO praised the handling of the 2018 collapse of Carillion, with new suppliers able to step in © DANIEL SORABJI/AFP via Getty Images

The 10 elements of the 'commercial lifecycle'

Will Green is news editor of Supply Management
20 July 2021

Guidance for public sector buyers on “managing the commercial lifecycle” has been produced by the National Audit Office (NAO).

The NAO said the good practice guide had been drawn from 209 reports concerning 350 commercial arrangements spanning the past 20 years.

In a report the NAO said the commercial lifecycle included the entire process from identification of a requirement through to contract termination or transition to alternative arrangements.

The NAO broke down the guidance, covering strategic and procedural considerations, into 10 elements:

1. Commercial strategy. This is defined as the approach a public body adopts to ensure procurements provide the intended outcomes in line with value for money, regulations, and other policy objectives.

“Commercial strategies should demonstrate more consistently how each commercial agreement aligns with wider strategic objectives at an organisational, or wider regulation and public policy level,” said the NAO. “The strategy should establish the approach for managing commercial risks and incentives throughout the commercial lifecycle.”

2. Capability. This covers both organisational and personal effectiveness.

“Organisations should ensure that appropriate skills are in place and that teams work collaboratively to apply relevant expertise and remain effective throughout the commercial lifecycle,” said the NAO.

3. Accountability and governance. Accountability covers managing public money and reporting to Parliament, while governance is the system that oversees commercial activity at an organisational level.

4. Transparency and data. This means publishing relevant information on a timely basis and having good quality, relevant information that is interpreted and acted upon.

“Government must address the issues with late and incomplete disclosure of statutory requirements for transparency in full,” said the report. “A significant opportunity exists to make better use of the government’s commercial data and digital solutions to improve value for money throughout the commercial lifecycle.”

5. Requirement. This is defined as the outcomes to be delivered and their purpose.

6. Sourcing approach. This is the assessment of how a requirement will be met, using in-house capability or an external supplier.

“There should be better consideration of all sourcing alternatives and of how effective competition supports value for money,” said the NAO. “When direct awards and/or urgent procedures are used, a robust justification for doing so should be recorded.”

7. Market monitoring. This is defined as the process of engaging with potential suppliers throughout the commercial lifecycle, including a procurement pipeline and awareness of supply chains.

8. Process and agreement. This includes the end-to-end process from issuing documentation, handling supplier engagement, bidder evaluation, award decision, standstill period, and notification to all bidders.

9. Contract management. All the activities related to performance and monitoring of a contract.

“Organisations should give active attention to the quality of performance and delivery throughout the commercial lifecycle to supplement routine monitoring,” said the report.

10. Review, transition and exit. This encompasses the factors that inform a decision to extend a contract, re-procure, transition to a new supplier, or end the contract.

“Planning and preparation for a range of future options should always be in evidence from the outset, and built into cost estimation,” said the NAO.

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