Press Release - Using the contract to maximise the likelihood
of successful project outcomes
7 June 2006
The Ministry of Defence is at the forefront of best practice in
some areas of contract negotiation but needs to achieve these high
levels more consistently, the National Audit Office reported
today.
The report to Parliament by head of the NAO, Sir John Bourn,
looks at the importance of good contract management and builds on
the ‘gold standards’ model the NAO developed last year, which
details criteria for best practice in project management.
As a way of assessing the MoD’s approach to contract management,
the report also considers how commercial organisations such as
Virgin, BAA, Toyota and Sainsbury’s operate in this area. Although
there may be some lessons the Department could learn from industry,
in many aspects they lead the way.
All stakeholders consulted felt the MoD had strong legal,
financial, commercial and negotiation skills. However, there was
scope for improvement in managing and sharing knowledge, which is
particularly important in such a specialist area. One MoD project
team tackled these problems by offering bespoke training to their
contractors on the proposed pricing mechanisms or a particular
model of weapon they were negotiating.
A high turnover of staff also meant that in some instances
contracts were being managed and negotiated by staff without
adequate understanding of the product or service concerned. In some
cases this left the MoD having to bring in commercial specialists
to provide this expertise.
The NAO initiated the development of a contracting strategy tool
which the Department will take forward to consider its use as a
practical guide to help users identify key issues, particularly at
the start of the negotiation process.
Sir John Bourn, head of the NAO, said:
“The Ministry of Defence is at the forefront in some
areas of contract best practice and, when viewed against the
constraints under which they work, that is a real achievement.
However, they must now meet the challenge of ensuring that all of
their contract negotiation is consistently at this high
level.”
This is the second report in a series of studies and follows
‘Driving the successful delivery of major defence projects:
effective protect control is a key factor in successful projects’,
which was published in May 2005.
Notes for Editors
- In addition, the NAO has made supporting data collated during
this study available online to help those interested explore the
evidence underpinning our recommendations in greater detail. This
is available at: http://www.naodefencevfm.org/
- Press notices and reports are available from the date of
publication on the NAO website at www.nao.org.uk.
Hard copies can be obtained from The Stationery Office on 0845 702
3474.
- The Comptroller and Auditor General, Sir John Bourn, is the
head of the National Audit Office which employs some 800 staff. He
and the NAO are totally independent of Government. He certifies the
accounts of all Government departments and a wide range of other
public sector bodies; and he has statutory authority to report to
Parliament on the economy, efficiency and effectiveness with which
departments and other bodies have used their resources.
Press Notice 42/06
All enquiries to Mark Anderson, NAO Press Office:
Tel: 020 7798 7558
Mobile: 07796 937 119