Emerging best practice

Cost

Specification

Intelligent clients should maintain:

Examples of how it can be used

Intelligent clients:

Commercial Strategy

•  A should-cost model

•  (proportionate to the complexity of the service)

•  Decide whether to make or buy

•  Divide large services into lots in a way that helps competition

•  Choose an appropriate pricing mechanism

•  Engage the market early to improve understanding of suppliers and what can be delivered

•  Make early discussions with the end user of the contract to understand the environment, constraints, requirements, risks and opportunities

Commercial capability

•  Ensure the business has the ability to understand the cost-drivers and how they can influence supplier behaviour

•  Establish and keep in-house knowledge and use it to define what is bought

•  Align operational requirements with commercial possibilities

Market management & sourcing

•  A cost template for bidders to use (consistent with the should-cost model)

•  Evaluate bids consistently

•  Compare costs between bids to help negotiate with the preferred bidder

•  Evaluate potential solutions on the market

•  Benchmark and challenge individual suppliers on potential

Contract approach

•  A contract cost schedule (consistent with should-cost model and identical to winning bid)

•  Ensure the contract is consistent with the winning bid

•  Create a contract which incentivises the supplier to optimise price and quality

•  Are transparent through the procurement about requirements, including any uncertainties and likely changes

•  Risk assess the likelihood of individual bids being able to meet the expected scope

Contract management

•  An invoice format that follows the contract exactly

•  Ensure the invoice is consistent with the contract before paying

•  Understand the commercial pressures driving the supplier's behaviour

•  Ensure that sufficient capacity is available for any required work with suppliers to refine specification and reduce uncertainties

Lifecycle management

•  A contract cost schedule updated for any agreed changes

•  Evaluate and price any changes consistently

•  Forecast and manage budgets

•  Benchmark against similar contracts and the original bid

•  Revisit requirements throughout the contract's lifetime.

•  Recognise where there are uncertainties and plan for where changes are expected

Transition & termination

•  A revised should-cost model, learning lessons from the contract, to be used for the next contract

•  Prepare for the end of the contract by updating and refining the should-cost model

•  Put processes in place early to understand the service and how it could transition

•  Continue market engagement to keep options open