6. Planning and governance was one of the weaker areas in the contracts assessed by the National Audit Office, with six of the eight contracts rated as amber or worse, a finding consistent with the results of the Office of Government Commerce's own Procurement Capability Reviews. The National Audit Office also found, however, examples of excellent senior level engagement, for example, by the Permanent Secretary at the Department for Work and Pensions, who is actively involved in the management of major suppliers. In the Office of Government Commerce's view, Permanent Secretaries increasingly understood the importance of getting contract management right and of having proper governance, and most were personally involved in some aspects of procurement and in commercial matters more generally in their departments.[7]

7. It is also helpful for there to be a single point within a department for contract management policy, practice and capability, although fewer than half the organisations (43%) surveyed by the National Audit Office had an individual with overall responsibility for contract management across the organisation. In addition, there was no documented plan for managing 28% of contracts. The Office of Government Commerce considers that it should be standard to have a documented plan for managing major contracts and it would make this clearer in future guidance.[8]

8. In 2007-08, central government spent the equivalent of 2% of annual contract expenditure (an estimated £240 million) on managing service contracts. Having sufficient people with the right experience and skills is essential to effective contract management, but no commercial director/head of procurement rated the level of resources allocated to the management of their major service contracts as 'good'. In addition, 22% of the contract managers surveyed considered they did not have time to perform their responsibilities well. Resources were stretched, for example, at the Ministry of Justice, where the manager of the contract for court security, worth £29 million a year, also managed two other major contracts.[9]

9. The Office of Government Commerce does not consider it is possible to specify what percentage of the contract value should be spent on contract management as this will depend on the level of risk, the value for money opportunities, and the importance of the contract to the organisation. It would, however, review whether it could provide more advice on resourcing as part of future guidance on contract management.[10]

10. Over three-quarters of the contract managers surveyed had three or more years experience of managing major contracts, with 14% having one year's experience or less. Most contract managers had no formal commercial qualification but had undertaken some relevant training, although 60% of organisations did not provide a structured training programme for their staff. There was also a lack of established contract management 'communities' where contract managers could discuss issues and share good practice.[11]

11. The Office of Government Commerce considers that ensuring that contract managers receive the right training and development, and that they are part of a community so they can exchange best practice, is more important than professional qualifications. The Office of Government Commerce is taking action to bring contract managers into the fold of the procurement profession, which in the past has often not been seen as including contract managers. It is identifying contract managers across government, and at the time of our hearing Permanent Secretaries had just approved plans for career development, talent management, and learning and development across the government procurement profession, together with a reward strategy.[12]

12. Most service contracts are critical to the delivery of an organisation's business objectives and carry significant risk if the supplier fails. Despite this, many of the contracts in the National Audit Office's survey did not have in place some or all elements of good practice risk management (Figure 1). For example, 37% did not have a risk register and 56% did not have a contingency plan in case of supplier failure. The Office of Government Commerce accepts that there is more to be done on risk management, particularly given the prevailing economic circumstances. Though guidance is available, risk management is not embedded in all contracts.[13]

Figure 1: Risk management processes in place across central government service contracts

Source: Comptroller and Auditor General's Report, Figure 13

13. Two-thirds of the contracts in the National Audit Office's survey involved suppliers dealing with personal or security information, but even 30% of these contracts did not have a risk register. The Driving Standards Agency, for example, did not have a specific risk register for its contract for driving theory tests prior to the supplier losing a computer hard disk drive containing personal information about test applicants. The Office of Government Commerce pointed to the amount of work that was underway across government on data security. The Government had made clear to its largest suppliers their obligations in respect of handling sensitive and personal data, and there would be mandatory security clauses in future contracts to that effect. For example, suppliers' staff should be trained in areas such as the secure transfer and disposal of data.[14]

8   Qq 15-16, 54; C&AG's Report, paras 2.4-2.5 Back

9   C&AG's Report, paras 2.6-2.8 Back

10   Qq 55-58 Back

11   C&AG's Report, para 2.10 Back

12   Qq 8-9, 38-39 Back

13   Qq 2-4; C&AG's Report, paras 1.5, 2.21; Figure 13 Back

14   Q 23; C&AG's Report, paras 2.21-2.23; Ev 12 Back