Key points

1.	Conduct meaningful engagement with the market. Set a collaborative tone and provide clear escalation routes for suppliers.
2.	Risk should be allocated to, and managed by, those best able to bear and manage them (this includes the contracting authority). Contractual allocation should reflect the extent to which parties are responsible for risks and their management.
3.	Contracts should be designed to be profitable and offer a fair return for the market to be sustainable. It is good practice to test profitability under different circumstances and make use of the Should Cost Model in developing payment mechanisms.
4.	The payment mechanism and pricing approach including limits of liability should reflect the level of risk and uncertainty in the scope of requirement and will be subject to greater scrutiny.
5.	When a contract is publicly designated as onerous, it should prompt a root cause analysis and conversation with the supplier.

Want to know more?

2. The Green Book: appraisal and evaluation in central government.

3. Orange Book: Management of risk - Principles and Concepts.

4. Risk Allocation and Pricing Approaches Guidance Note. This was designed for public services, however it provides useful guidance for other markets.