Outsourcing playbook puts emphasis on strong relationships

Out-Law News | 12 Jun 2020 | 12:45 pm | 2 min. read

Strong contractual relationships between public sector organisations and their suppliers can help prevent major outsourcings from failing, an expert in projects procurement and delivery has said.

Jonathan Hart of Pinsent Masons, the law firm behind Out-Law, said that the newly updated 'outsourcing playbook' published by the UK government emphasises the importance of relationships in making for successful projects.

The outsourcing playbook was first published last year. It effectively codifies best practice around outsourcing in the UK.

According to Hart, while the latest version of the playbook does not contain any radical alteration in approaches or thinking, it does contain refreshed content on building and making successful relationships.

Hart Jonathan

Jonathan Hart

Partner

The emphasis on building successful relationships builds on wider industry thinking around the need for a more collaborative approach to contracting

The playbook recommends that all outsourced services are "built on a robust contractual relationship overseen by an appropriately qualified contract manager with a clear operational understanding of the contract". It also highlights the benefits of "a partnership model" in "complex projects", where "the principles of collaboration, openness, transparency, and flexibility based on contractual delivery, can be beneficial in driving successful outcomes".

"Critical success factors of a partnership model include a focus on service delivery by both partners, clear roles and responsibilities, a shared understanding of how to effectively resolve disputes and a collaborative culture," according to the playbook. "This could include: the co‑location of employees; developing joint‑partnership principles and adopting a one‑team ‘win‑together, fail‑together’ approach; having a service delivery manager working alongside the contract manager."

Hart said: "The emphasis on building successful relationships builds on wider industry thinking around the need for a more collaborative approach to contracting, such as the ICE Project 13 initiative.  It also chimes with statistical research carried out by some consultancies, including Arcadis, that rather than poor contracts or poor conditions, it is poor contractual relationships that give rise to most contractual disputes."

In a separate new procurement policy note, PPN 04/20, published earlier this month, the government set out updated guidance for public bodies on how the UK can recover and transition from Covid-19 while maintaining delivery of critical services.

Victoria Miller of Pinsent Masons said: "Key to this recovery is ongoing payment of suppliers to maintain cashflow and to protect jobs. However, it is important to note that all public bodies should work in partnership with their suppliers to develop transition plans which will specifically reference the end date for relief, the process for reconciling payments made and allowing an assessment to be made as to whether the contract is operationally relevant and viable – and if not, agreeing proposals for variation or termination." 

According to Hart, the note has particular relevance for the construction sector. The note, which is effective from 1 July to 30 October, covers all PFI and PF2 contracts, but is not applicable to devolved administrations. Hart said it builds on previous guidance the government issued and "continues to emphasise the importance of keeping payment streams and cash flows open", and that the note also acknowledges that transition will need to take place and an end date for relief will need to be agreed.

New data published by the Office for National Statistics (ONS) has highlighted the challenges facing the construction sector during the ongoing pandemic. The construction output data for April this year fell by 40.1% compared to the previous month – the biggest drop in output that has ever been recorded in Great Britain. According to the ONS, the record fall in output was driven by both a decrease in new work and repair and maintenance jobs, with the housing sub-sector seeing almost a 60% drop in new work.

Hart said: "Current guidance being issued, including this week’s procurement policy note on recovery from Covid-19, highlights the importance around the visibility of pipelines. To focus on this, the industry needs some real commitment from the government. It is eagerly awaiting announcements this month, whether that will be a potential mini Budget, as well as the status of the pre-Covid-19 National Infrastructure Assessment, and what it means for the UK's infrastructure strategy."