Best Practice Contract Management Commercial Services

1. Best Practice Contract ManagementCommercial Services Contract Management Toolkit September 2012

2. Purpose of this session: • Introductions • Setting the scene - Why is contract management so important? • Bringing it to life – The Sheffield Journey - Introducing the best practice contract management approach • Bringing it to life – The strategic contract management toolkit. • How Commercial Services within Sheffield City Council will support you in its implementation and in the future?

3. Why is contract management so important? The context: • A significant and growing proportion of Council's total expenditure is going to 3rd party organisations • There will be a continual increase in core service outsourcing which needs to continuously improve and change through the life of a contract to meet changing demands and expectations • Councils are still responsible for all their outsourced services and the associated risks - both citizen and legal responsibilities • There is a continual need to drive on-going financial savings: • Benchmarking suggests 5-7% ADDITIONAL savings on top of initial procurement savings • Over the UK this equated to circa £1 Billion extra savings

4. Why is Contract Management so important?There are some real challenges and issues to address • Misguided views/myths of the past – Self managing contracts & fluffy cuddly relationships !!! • Lack of understanding/awareness of contract management • Lack of investment in contract management (people, systems & processes). In the Client side as well as procurement /commercial services. • Lack of clarity around roles and responsibilities • Properly building it into procurement – managing expectations of providers that they will be contract managed • Contract management is generally poor across the public (and private) sector so this does need major change

5. Why is contact management so important? The Sheffield Case Study • Sheffield has a major portfolio of strategic contracts with a value of nearly £270 million per annum where the best practice contract management approach has been implemented: • Waste collection & management • Construction & building services • Property Management & FM • HR & Payroll • Revenue Collection & Benefit Payments • ICT • Financial business transactions • Property PFI • Highways PFI

6. Why is contact management so important? The Sheffield Case Study (2) • Annual ADDITIONAL savings of 8% per annum have been achieved through: • Performance management – KPI’s • Price challenges/benchmarking • Cost avoidance • Continuous service & process improvement • Dealing with specific circumstances e.g. recent Council budget cuts • AND service has improved, risks have been managed, no legal issues and relationships are sound - even in these challenging times

7. Why is contract management so important? Sheffield Case Study (3): 25.5 0.3 Key: Blue - Category Management/Procurement Pink – Contract Management Grey – E-Business 20.3 11.5 11.0 11.2 13.7 2.9 9.3 8.3 7.8 2.8 2008/9 2007/8 2009/10 2010/11 2011/12 £ Million Savings Achieved

8. Why is contract management so important? Some key truths, principles and facts: • Never outsource strategic capability – retain intellectual property & expertise • Never give up control - • Partnering - A relationship with a provider based on strong performance management but with joint behaviours about joint problem solving and continuous improvement (Source: Office Government Commerce (OGC)) • Invest 1-10% of contract value in quality contract management, with an average of 3% (Source: Government Public Accounts Committee Report 2008)

9. Introducing the best practice contract management approach: • Who says it is best practice? •  Chartered Institute of Purchasing & Supply (CIPS) •  OGC •  Audit Commission • LGA • DEFRA •  Everyone who has seen it! • Developed by Sheffield but assembled from established principles, case studies and private/public sector experience • Unique in that it is an approach which takes established principles right down to detailed, practical toolkits which can be used straight away by all types of contract managers • Two component parts: • Intelligent Client Strategic Framework • Contract Management Toolkit • The key benefit is that with this contract management approach you can start quickly to make a significant positive impact 

10. Intelligent Client Strategic Framework: • The 'Intelligent Client' is defined as the integrated roles, responsibilities, structures, processes and values that exist to ensure that a Council manages and develops the delivery of services and systems and obtains value for money over the full life of the commercial relationship • The Intelligent Client has been developed to ensure that Councils get the very best from partner relationships in terms of value for money, service development and risk management • The principles are standard but the specific implementation can be tailored to the individual commercial relationship • It can equally be applied to internal service providers or Arms Length Bodies • The principles should not be optional but established as Council policy

11. Intelligent Client Principles:

12. Contract Management Toolkit: • The Contract Management Toolkit translates Contract Management into easy to follow, and customise, where appropriate, activity packages • The aim of the Toolkit is to provide a complete best practice set of processes, tools and techniques that can be accessed and consistently applied across the Council to effectively contract manage and ensure value for money customer focussed services • The Toolkit enables users to identify the type of contract they are managing and then apply a suite of processes appropriate to that category of contract

13. Contract Management Toolkit: Contract Categorisation Cost per Year Greater Than £2m Red Red Red Between £500k - £2m Amber Amber Red Up to £500k Green Amber Amber Low Medium High Risk • The above matrix structures the Toolkit to be ‘fit for purpose” • The above matrix also helps to ensure the right resources with appropriate skills depending on the operating model of each Council

14. Contract Management Toolkit:The Component Parts • Identifies up to 27 key processes to effectively contract manage a contract • Depending on contract categorisation get ‘full fat’ or ‘slimmer's version’ • Organised as per Intelligent Client Model roles allocated to Contract Management Function; Some processes identified overlap or are jointly owned with Service Client Functions)

15. How Sheffield will support the implementation in Councils: • Organise Regional awareness raising events or key stakeholder events • Run one day training courses on how to implement the approach and the detailed use of the toolkit: • On Council premises • Up to 10 delegates per session • Each delegate gets a full set of the documentation, toolkit etc • Cost is £500 per session plus expenses • BUT initial courses FREE funded by LGA • Subject to final agreement with CIPS all Contract Managers attending the one day course will become 'Accredited Contract Managers' with a certificate from Sheffield Council/CIPS with CIPS CPD points awarded

16. How Sheffield will support the implementation in Councils (2): • Annual Toolkit Support & Maintenance fee to provide: • Help desk support • Annual update of Toolkit to incorporate latest thinking, experience and developments • User Group Event • Forums & Networking – Sharing best practice • Cost per organisation (regardless of number of toolkits) with 3 year commitment •  Small Council - £2700 •  Medium Council - £3600 •  Large Council - £4500 • Ad hoc detailed support on specific areas, problems etc at a defined day rate if requested

17. To discuss further after today or if you want to start implementing best practice contract management contact: Andy.howells@sheffield.gov.uk or Angela.bateman@sheffield.gov.uk Adam.shephard@sheffield.gov.uk or Telephone 0114 2053819 Thank you Any Questions?