Procurement in a nutshell – open book contract management

The Crown Commercial Service (CCS) has issued a policy note and guidance to help contracting authorities on the new regime.

What is open book contract management?

The Government’s approach to OBCM involves the structured scrutiny of supplier’s costs and markings through the reporting of, or access to, accounting data.

The move follows previous reports of the Public Accounts Committee which concluded that the existing system of public sector contracting favours suppliers. A more transparent open book policy is considered to be one way to redress the perceived imbalance.

The intention is to give contracting authorities clarity about their suppliers’ charges, costs and planned returns. The Government’s view is that OBCM provides a collaborative basis which enables:

• performance review;
• agreement on the impact of change; and
• the advancement of ideas for efficiency improvements.

The Government’s hope is that OBCM will help contracting authorities improve value for money outcomes and build mutual understanding and trust with government suppliers.

Who does the policy note apply to?

The policy note applies to all central government departments, their executive agencies and non-departmental public bodies. Within these “in-scope organisations”, the commercial management, finance and audit departments are particularly encouraged to take heed of the provisions of the policy note and the guidance.

What contracts does OBCM apply to?

The Government’s vision is that in the future OBCM should be used in all contracts where the additional cost is justified by the perceived level of benefits and risk.

A tiered framework is introduced by the policy note, allowing contracting authorities to determine the most appropriate processes and tools to apply to each public contract.

By way of example, a low-risk, unspecialised contract with low innovation and easily understood costs would be a ‘Tier 1’ contract. As a simple form of contract there is little need for sophisticated processes or tools. Contract management would only require that charges being invoiced are verified as accurate and true.

Why is this important?

The policy note outlines that “in-scope organisations” should begin assessing their contract portfolios by no later than 24 June 2016, to establish which tier of OBCM review to adopt. Implementation of OBCM must begin by 24 July 2016.

How can I find out more?

If you have any queries on the issues raised or on any aspect of procurement, please contact us via our procurement hotline on 0191 204 4464.