This article by Jonathan Cooper-Bagnall, head of sourcing consulting at PA Consulting appeared in the Independent on 10th November 2009. it illustrates very well the challenge of making performance meaningful!
“Outsourcing is back on the agenda, with a multiple-supplier model. But as Jonathan Cooper-Bagnall says, a holistic approach is vital
The last recession, in the early years of the last decade, fuelled considerable debate on the value of outsourcing. Many organisations saw it as an opportunity to secure cost reductions by awarding large and often complex outsourcing contracts to the world’s leading service providers. Although outsourcing was not a new phenomenon, the scale of deals signed, the number of jobs moved to offshore locations, and the speed of the change, provoked concern as to whether this was sustainable and appropriate.
Today, the outsourcing debate is raging again. Public and private sector organisations are looking to strip more costs from their operations by further outsourcing and offshoring. Many already have experience of outsourcing, but that experience has been mixed. The scale of the earlier outsourcing and offshoring has proved sustainable. However, some contracts have not delivered as a result of rushed contract execution and underinvestment in the transition to new suppliers, and the management of those suppliers. Those mistakes need to be avoided this time round.
Any organisation considering outsourcing needs to answer the question of how the delivery of operations can be restructured so that it takes advantage of the outsourcing provider’s skills. According to PA’s 2009 International Outsourcing Survey, organisations are planning to break up the large, complex contracts and move to a set of smaller contracts with multiple suppliers. The perception is that this will deliver much-needed cost reduction, and that this multi-sourcing approach enhances competition and offers a more flexible and agile delivery of operations…..”
More at this link
In 2007-08, UK central government spent over £12 billion on service contracts primarily in the areas of information and communications technology, facilities management and business process outsourcing. The organizations surveyed estimated that they spent on average the equivalent of two per cent of annual contract expenditure on managing their service contracts.
The delivery of public services, protection against service failure and achievement of value for money are all dependent on effective contract management. The consequences of service failure can be serious – recent delays in the marking of SATS tests have highlighted the important role contractors play and the impact service failure can have. At the same time, this report identifies examples of good practice contract management, such as the Department for Work and Pensions’ contract with BT to provide telecommunications services where there was good senior management engagement with the supplier.
The report examined how well central government organizations were managing their service contracts, assessed against the good practice framework for contract management which the NAO developed at the outset of their work. Contract management is especially important where suppliers are engaged to provide services over a long period of time and clients need to ensure that service levels and value for money are maintained over the duration of the contract.
The key findings from the survey are given below and you can learn more about the report at the NAO Website at this link!
But if you would like to know how well your organization is delivering its services contract – G&W Consulting can provide you with an MPM Review which can tell you how well your organization is dealing with the issues identified blow. You can contract us at this link
NAO Report – Key findings
- Organizations were not always giving contract management the priority it deserves.
- Organizations do not always allocate appropriate skills and resources to the management of their service contracts.
- There were weaknesses in key performance indicators and limited use of financial incentives to drive supplier performance.
- Despite the critical nature of the contracts in seen in the survey, many did not have in place some or all elements of good practice risk management processes.
- Value for money testing can result in significant savings but the extent to which organizations test the value for money of ongoing services and contract changes is variable.
- In general both organizations and their suppliers were positive about working relationships, though less than half of organizations had implemented a supplier relationship management programme despite what appear to be clear benefits
- The Office of Government Commerce can do more to support central government organizations to improve contract management.
Don’t forget to see our controversial paper on Benchmarking at our White Papers and Other Resources page – we would very much welcome your views and comments.
Posted in Contract Management, Service Management
Tagged Contract Management, Contracts, Facilties Management, G&W, Good Practice, Intelligent Client, MPM Reviews, NAO, OGC, Service Failure, Services, Services Management, Supplier Managemnt, UK Central Government, Value for Money
We hope to provide you with lots of resources here at Making Performance Meaningful, the G&W Consulting Blog, to help you in improving your management of services and service contracts. Our first White Paper has been written by Geoff Edmundson, a G&W Director. Its presents a provocative view of benchmarking particularly as it relates to the Facilities Management industry. You will find a link to the White Paper at our White Papers and Other Resources page and we would very much welcome your views and comments. Here is what Geoff has to say about it in summary.
“Benchmarking has become associated with an ‘everything-can-be-measured and costed’ approach that can deliver a quick-fix from providing competition advantage to breakthroughs-in-thinking, changing culture, etc and represents a view that knows the cost of everything and the value of nothing. Benchmarking is becoming what statistically can be called ‘data sampling’ and ‘inference’, where data is purchased second and third-hand or is captured by proprietary software and then warehoused for some future use? What reliability can be ascribed to data, when it is analysed in the abstract without knowledge or understanding of the organisation and processes that have generated it or where little credence is given to its shelf-life?”