Effective contract management by the public sector can ensure the SPV is being properly held to account and maintenance work is being completed in line with the contract. Contract management software is an essential tool in achieving that.10
The IPA or sponsor departments should implement best-of-breed contract management technology, as follows.
a) Contract Repository
The NAO report recommended that the IPA and sponsor departments should 'assess the costs and benefits of developing an electronic repository of PFI contracts which supports authorities to manage their contracts and helps sponsor departments and IPA to identify high-risk projects and enable a more consistent approach across government'.11
A central electronic repository of PFI contracts (such as that implemented by the MoD on all 18 of its DIO PFIs, and by investors across their portfolios of PFIs globally) will support Authorities in managing their contracts and will help sponsor departments, the IPA, SFT and LP to identify high-risk projects and enable a more consistent approach across government.12
For the first time, the Government would be able to be across its entire portfolio of PFIs, catching up with the best practice of its private sector partners.
b) The contracts in the Contract Repository are fully up-to-date, with all amendments incorporated ('single version of the truth')
As the NAO notes:
'The PFI contract is central to preparing for and managing the expiry process. These contracts are long, complex documents and in most cases, the parties to the PFI contract will have made amendments over time to change service requirements or achieve specific savings. ... Depending on the number of variations, it can take a considerable amount of time to gather together the PFI contract.' 13
This builds on its earlier major report on transforming contract management in government; noting that:
• 'systems for maintaining up-to-date versions of contracts remain weak' 14, and
• 'we have yet to see a system that shows departments their current contracts including all changes'. 15
Similarly, the SFT notes that 'as a first step the Authority should review the contractual documentation and ensure that it has a full copy of all relevant documents including any amendments and variations.' 16
Modern technology resolves this long-standing issue; providing all stakeholders with access to an online library of fully up-to-date contracts in IDF (or in HTML or PDF if the needs of the project require). This is a 'single version of the truth' for all stakeholders. Each project is updated with further amendments and variations as and when they are made during the course of the project and leading up to expiry.
c) Ensuring On-Going Contractual and Statutory Compliance
On-going contract and statutory management is vital to ensuring value for money is being delivered for the taxpayer and is the first step of the expiry process. It has, however, been a long-standing area of concern and a weakness in government contract management.
The SFT notes that:
'While the Authority is preparing for Handback, it will also need to continue the ongoing contract management of the contract to ensure ongoing service delivery', 17 and 'we would expect that contract managers would monitor and closely manage the contracts in accordance with good practice. This should enable the Authority to achieve the service and standards to which it is entitled, while maintaining a constructive and open relationship with the private sector parties.' 18
Similarly, the NAO notes that:
'Effective contract management by the public sector can ensure the SPV is being properly held to account and maintenance work is being completed in line with the contract.' 19
And in its report on contract management, the NAO noted that:
• 'Poor contract management is a long-standing issue' 20
• 'Previous attempts to improve contract management have not delivered sufficient change' 21
• 'The underlying causes of problems in contract management go beyond poor administration and lapsed awareness' ...
o Government fails to recognise the value of contract management....
o Senior managers in central government departments have not taken contract management seriously ..
o Senior managers have not demanded visibility over their contracts ..
o Managers have rarely demanded combined portfolio information to scrutinise and challenge operational contracts
o Government as a whole deploys less of its specialist commercial resources on contract management than the private sector ... contract management has been vulnerable to administration cuts and under-investment'22
• 'The government will not get value for money from its contracts until it improves contract management.' 23
This is the time for government to be on top of the contract management of its PFIs.
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9 (N.B. there is obvious self-interest for Affinitext in this section of the submission., as this is our area of global expertise)
10 NAO Report 'Managing PFI assets and services as contracts end' (29 May 2020), para 2.18
11 Ibid. para 16 e.
12 Id.
13 Ibid. para 3.3
14 NAO Report 'Transforming government's contract management' (4 September 2014), Key Finding 9
15 Ibid. Key Finding 17
16 Scottish Futures Trust 'PPP Projects Nearing the End of Contract: A Programme Approach' (15 April 2020), para 6
17 Ibid. para 12.1
18 Ibid. para 12.5
19 NAO (2020), op.cit., para 2.18
20 NAO (2014), op.cit., Key Finding 10
21 Ibid. Key Finding 11
22 Ibid. Key Finding 12
23 Ibid. Key Finding 20 (Value for Money Conclusion)