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The NAO’s work includes looking at a huge range of government activities, and the setting up and managing of commercial arrangements are central to many of them. This became very clear when looking back at twenty years of our work auditing government’s spending and reporting on its value for money for taxpayers. Over this time, we have assessed over 350 of government’s agreements with commercial partners […]

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Capability is for contract life, not just for procurement

Posted on November 2, 2021 by

The NAO’s work includes looking at a huge range of government activities, and the setting up and managing of commercial arrangements are central to many of them. This became very clear when looking back at twenty years of our work auditing government’s spending and reporting on its value for money for taxpayers. Over this time, we have assessed over 350 of government’s agreements with commercial partners to deliver services and goods for the public.  

Government has come a long way in developing its expertise in this space, but the pandemic and the need to procure services quickly has highlighted the extent to which further improvements are needed. Our perspective looking right across government and its programmes puts us in a unique position to draw together lessons and the common themes which have kept coming up in our work. 

One example is our recently published Good practice guidance: managing the commercial lifecycle. In it we share fresh insights and learning from our extensive body of work on government’s commercial activities. The guidance has 10 sections – six procedural steps and four supporting elements. I previously wrote about one of those supporting elements, data, and this time I want to focus on another: capability.  

Capability covers both personal effectiveness and organisational capability. It means having people within commercial teams and elsewhere with the appropriate commercial skills, at the right time. It also means supporting them with appropriate organisational leadership, systems and levers to deliver the required outcomes. Achieving all of this will require some measure of collaboration across organisations – be they cross government, or the wider public and private sectors.  

Getting these capability aspects right is crucial throughout the entire process of the commercial lifecycle, from requirement through to transition at the end of the contract and is a key area for improving outcomes. An important aspect of managing contracts is being able to respond to change.  

Substantial additions to government’s programmes, like the purchasing of COVID-19 vaccines and the associated equipment to roll out the vaccine programme, have shown just how much change can occur in a short time. This comes alongside the pandemic’s disruption of long-held assumptions and traditions, with huge impacts to our ways of life. 

If that much change can take place within a couple of years, it’s clear that contracts, which sometimes span decades, must often react to very significant changes. That means that organisations need to make sure they maintain the appropriate skills and capability to manage contracts and commercial activities as a whole.  

Some of our past reports highlight the importance of capability approaches. For instance, in our progress report on Terminating the Magnox contract, we highlighted the importance of reassessing capability throughout the life of a contract.  

In March 2017, the Nuclear Decommissioning Authority (NDA) decided, based on legal advice, to terminate a 14-year reactor decommissioning contract due to a “significant mismatch” between the work specified in the tendered contract and the work that needed to be done. The NDA decided to renegotiate the contract with the incumbent, with the contract ending in 2019, nine years earlier than originally planned. To react to the change in circumstance and to better equip itself, the NDA commissioned a review of the delivery plan to improve its intelligent client capability before changing contract arrangements. It also strengthened its executive team, including a new commercial director, and increased the capacity of its contract management team. These changes were an example of meeting the expectation that contract staffing models should be regularly reviewed and tailored to different contract stages.  

In our report on the BBC’s TV licence fee collection, we recognised how the BBC had benefited from introducing contract governance and reporting, supported by a multi-disciplinary team model and a wider strategic contracts infrastructure. We also recommended that it should maintain information on commercial skills to enable it to adapt to changes, such as upgrades to technology and ICT, which require different skill sets. This point was particularly important because we had identified that the BBC did not routinely assess its commercial skills and future requirements. 

In our good practice guide we emphasise ways that improvements can be made to organisational and people capability, and their application throughout the commercial lifecycle.  

There is an opportunity to make projects more successful in the short and long-term. We include expectations that:  

  • Commercial, policy, operational and business teams work together to develop a clear understanding of the contracts and produce required outcomes 
  • Each contract staffing model is developed early, regularly reviewed and tailored to different contract stages 
  • Capability plans include operational resilience to address unplanned demands 
  • Knowledge and experience of underlying contract issues is retained throughout the lifecycle of a commercial relationship 
  • There is investment in the organisation and its people to ensure adequate access to training and development to support commercial awareness and expertise. 

The guidance also includes our expectations of good practice for all other stages of the commercial lifecycle and draws attention to some of the most important things for government to improve in its commercial activities. Stay tuned for further entries in this blog series, the next of which will be on commercial strategy. 

About the author

Iain Forrester

Iain Forrester is a qualified accountant with long experience of working on the NAO’s commercial and contracting related work. This has included cross-government work on grants, shared services, EU Exit, and the government’s response to COVID-19. He also worked on the commercial and contract management insights guide published in 2016.


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