2.9 Government officials appear too often to have seen contract management as enforcing the deal that was made when the contract was agreed. Under this procurement model of contracting, commercial functions have seen themselves as adding value through effective procurements that drive down price, mitigate the risk of legal challenge or dispute during the contract life and negotiate economic changes.
2.10 The procurement model of contracting does not work for anything other than the most basic services. It is not possible to fully specify more complex services. Ensuring services have been provided to the appropriate standard requires expert judgement and continually using commercial influence to manage the service. For longer-term contracts, the government needs flexibility to ensure that services continue to meet changing business requirements.
2.11 Government needs to recognise that value is achieved over the life of the contract. Good contract management requires a multi-disciplinary approach, owned by the business. All those responsible for the contracted-out service must use commercial influence to bring about improvements in the service and cost reductions. This includes using contractual incentives, damages, threats to reputation, promises of future opportunities and withholding consent to any key approvals required. Good management also requires effective relationship management and understanding the service that is meant to be provided. Done well, a department has considerable influence over the contractor even after the initial competition is concluded. Contract management then becomes a vital part of how an organisation meets its objectives.