Whitehall fitted for contract framework

There is a contradiction at the heart of contract negotiation that is not an easy one to solve, especially for the government under the glare of public accountability.

There have been some spectacular failures of public sector technology projects. Weakness in contracts have often seen the taxpayer continuing to pay untold millions to suppliers who are simply not delivering their side of the bargain.

But if Whitehall tries to tie suppliers down too tightly, companies simply will not bid.

A balance must be struck.

Treasury agency the Office of Government Commerce (OGC) is charged with the task of saving £3bn over the next three years by streamlining the government's procurement process.

The agency's Contract Innovations Team is developing a standard contract that can be used as a basis for individual department's deals.

A one-size-fits-all approach is not practical because every project is different - some may involve only a simply hardware purchase, others an entire complex implementation from design to support.

But a standardised 'foundation' contract, covering basic elements such as payment and delivery terms and the penalties if the supplier fails to deliver, would introduce an element of consistency into the negotiations and stop each deal re-inventing the wheel.

A guidance document will be published this autumn to help departments choose which of a variety of procurement models best suits their project.

OGC deputy chief executive John Oughton says the work is a response to a growing perception that the traditional format for government deals are not necessarily the best way forward.

'We are producing guidance to codify and improve government contracting for IT, including for IT-enabled business change projects,' Oughton told Computing.

'OGC is consulting a range of players, including government departments, supplying companies and industry bodies to find out more about the procurement approaches that work best, and under what circumstances. We are interested in innovative approaches - so long as they work,' he said.

The question of finding the right balance in contract negotiations is one that needs to be addressed, says Nick Kalisperas, public sector programme manager at supplier trade body Intellect.

'Some people believe contracts will be so tight that suppliers can't bid for certain deals. But on other occasions there is the view that the supplier is running roughshod over the customer. These two perceptions will not change as long as there are projects that run over budget or are not delivering to specification,' he said.

To some extent the relationship between the customer and the supplier is as important as the contract, says Kalisperas.

'It will always be difficult to strike a balance but in the end it is down to the individual customer and supplier to negotiate their contract.

'It is important that the procedure is right and the procurement is conducted properly but fundamentally it comes down to the relationship between the customer and supplier to get the project done.

'The two parties must understand each other and both be pulling in the same direction. It is when there is a misconception between them that there is a problem,' he said.

An understanding of the need for balance - between the government's requirement for risk avoidance and what the supplier can realistically deliver - must percolate through the system, says Tola Sargeant, analyst at Ovum Holway.

'At the top level it is sufficiently understood but making that filter through to people who make decisions on the ground is harder and may take a few more years. Things are moving in the right direction but problems with contracts in central government are still hitting the headlines so things still need to change,' she said.

A standardised foundation contract such as the OGC is developing is a good idea, but may be hard to implement if it is not mandatory, said Sargeant.

'The hardest part is getting people to actually use it. Every contract is different and every department will have its own needs so it will be very difficult to do, but there must be a workable solution.

'The solution is, as much as anything, awareness of the issue throughout the system not just at the top,' she said.

Your suggestions count

The OGC's Contract Innovations Team is working on a guidance document to help government departments decide which of a range of possible IT purchasing approaches meets the needs of their particular project.

'The team is consulting a range of players including government departments, supplying companies and industry bodies to find out more about the procurement approaches that work best, and under what circumstances,' said OGC deputy chief executive John Oughton.

If you have any comments or experience you think the OGC would find helpful, please email the innovations team on servicedesk@ogc.gsi.gov.uk, writing 'Contract Innovations Feedback' in the subject line.