Contract Management Framework - "try the public sector pudding"

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Parliament.jpgA contract management framework may not be applicable in the private sector owing to greater autonomy in how organisations in the sector operate. However, the lessons the public sector is learning in contemplating the requirements of the National Treasury Contract Management Framework apply equally in the private sector, writes Paul Maddison of contract management advisory company Realyst, in this month’s SmartProcurement.

The concepts and theory of contract management have been well researched and documented over the last couple of decades, and are reflected in numerous best practice models and frameworks.

Although reports from the major research houses have long advocated the advantages of implementing contract management, adoption has been patchy at best in the private sector, focusing on automating specific business needs.

The problem with a standard implementation model in the private sector is that each industry, and each business within an industry, has its own unique DNA, having developed processes that add value to its business over many decades. No clear blueprint exists.

However, the value of contract management in the public sector is significantly easier to conceptualise and document than it is in the private sector: The public sector has a far more rigid approach, and while Departments and Government entities are different, which is reflected in the agreements they enter into, a Framework for Contract Management is easier to develop and allows for common threads no matter what activities a Department or entity undertakes.

Government's Contract Management Framework (“the Framework”) is truly world class

By adopting the Framework Departments and Government entities can expect significant improvements in the way they operate, from accountability and levels of responsibility internally, through to enhanced supplier performance, revenue collection and overall management efficiency. This is good news for Governments that want to improve service delivery and governance, says Maddison.

So, the research is there and the Framework has been developed; how do Departments and entities go from where they are now to this proposed good practice model? How do they ensure sustainable processes executed by trained staff?

The Framework attempts to address this by providing a set of activities required within a prescribed period, the start of which is the assembly of a contract register and developing the policies and procedures required.

“The size of the project in compiling the register depends, primarily, on how many contracts exist and how widespread the offices of the Department or entity may be,” says Maddison.

Then it’s a question of what data needs to go onto the register? What happens to the paper originals? Who should be responsible for keeping the register current? What value resides in the information? How many contracts should be standardised? How well are they compiled? Are there transactions against expired contracts? etc., etc.

Where does the responsibility for contract management reside, where are the skills to undertake these tasks, how can we make sure it’s a sustainable process?

These are the questions being asked in the first phase of its implementation alone, and the sector is not yet close to achieving the requirements of effectively managing the obligations of the parties that provide services to government.

The importance of this first phase, which would need to be in place by end-2012, should not be under-estimated: merely having a complete and full understanding of the commitments and obligations that reside in the Departments or entities is a huge step forward. The process of locating and capturing the data itself reveals much around the possibilities and opportunities for Government to drive value for money and service delivery.

From Realyst’s experience and understanding of contract management in the public sector, when interpreting the requirements of the Framework the recommendation is to start identifying the requirements for the register, understand where the agreements themselves reside, and consider their completeness and validity.

Relevance for the Private sector?

The lessons coming out of the initiative in the Public Sector apply equally in the Private Sector: to improve efficiency and performance any organisation needs to have a complete and comprehensive understanding of the contracts and obligations it is exposed to.

The next article will consider the next practical step of implementing the Framework in the Public Sector, and the inherent value that resides in a comprehensive register.

For more information please contact Paul Maddison on pmaddison@realyst.com

The Public Sector Contract Management Framework will be in the spotlight at SmartProcurement's upcoming technical Workshop on Wednesday 22nd August 2012 in Centurion.

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