Contract Pitfalls

A recent Guardian article has caused me to reflect on what we need to think about in our contracts monitoring.  The Guardian focus is on a massive outsourcing contract to Capita in Birmingham.  This is the same company that causes so much controversy in Barnet, just across our Borough boundary.  Given that Brent already has a large number of contracts, I thought it would be good to analyse how we can avoid the kind of problems you see there and in other Councils.

Scale
A big problem that Barnet and Birmingham have given themselves is the sheer scale of their outsourcing contracts.  Particularly in Barnet, the sheer range of activities covered mean that very few companies will be able to bid for the business when it comes up for renewal.  This risks Capita becoming a quasi-monopoly, which would not only make a future bidding round less competitive, but also will also make normal contract monitoring harder.  After all, if the contractor thinks future business is guaranteed, he has little incentive to maintain quality.  Fortunately, it would be very hard for Brent to embark on this kind of all encompassing contract even if it wanted to.

Transparency
The scale and complexity of the contract may also make it easier for the contractor to conceal which bits are extremely profitable and which bits are not.  Indeed, the contractor may not know himself, so there is a real risk of opportunities being missed.

The best answers to these sort of problems lie in open book accounting, clear targets and proper monitoring.  These should all be easier with smaller contracts like the sports centre contract we have at Willesden, rather than the great behemoths you see in Barnet.

Public Accountability
Birmingham is being criticised for hiding behind "commercial confidentiality".  I suspect that this is something of  an excuse.  Certainly a lot of data should be available to the public which can't be reasonably withheld on confidentiality grounds.  There could be individual aspects that are reasonably withheld, but this would also be the case if everything was in house.

More worrying is the length of the contract.  If the contract is for many years, it may well be harder to change its nature as political priorities change, for example following a change of majority party at an election.

Culture and Clienting
I think the most important thing is to keep an appropriate level of challenge in the relationship between commissioner and client.  People sometimes talk about contractors as if they simply want to cut costs.  In fact, it could be just as important to maintIn a reputation for quality.  Both sides also need to retain a reasonable level of give and take for the relationship to work.