All public managers should manage contracts

Choose a public service organisation — it could be where you work or your local government or a major hospital — and I will bet you that the number of human resources professionals is greater than the number of procurement professionals. Not only that, it will be far out of proportion with the split of the budget between employee and non-employee expenses. Why is that? 

An example

Let me use myself as an example. My CIPFA professional qualification course included general theories about management but it was mostly about accounting and trained me to be an accountant and not a manager. Therefore, after qualification, I went through the whole management development process as part of my professional development. I did management courses on recruitment, leading a team, equalities and diversity, disciplinary procedures and communication. I also did some skills-based training on things like report writing and presentations. What I didn’t do was any training in connection with procurement, contract management and negotiation skills. In fact, I don’t think those courses were available to me.

As it happened, almost immediately after I qualified I became involved in an outsourcing project and other outsourcing projects happened fairly regularly throughout the 20 or so years I worked as an public sector accountant. I learned, therefore, about procurement and contracts from the lawyers and procurement professionals I worked with. Whilst this is great on-the-job training, if I had been assigned to some different tasks and projects as a newly qualified accountant I never would have learned this stuff. I doubt, though, that it would have stopped me becoming a finance director because it was never on a person specification or asked about in an interview

Does it matter?

I think this matters. I think weak contract management skills is an under-recognised problem. 

The Open Contracting Partnership’s 2020 Annual Report estimates that public contracts amount to $13 trillion a year. That is something like 15% of the world’s total GDP and about half the total spending by governments. The proportion of government spending through public contracts will vary between countries and programme areas, but it is clear that procuring and managing contracts needs to be a significant component of the work done by public managers.

I think the senior managers in an organisation need to know how to manage contracts and suppliers given the proportion of spending that is not an employee spending. I find it very hard to believe that senior private sector managers get their jobs without having experience of managing contracts and suppliers. 

I think that if an organisation’s managers know nothing about contract management and supplier relationship management then they do not know the good from the bad, they do not know if their organisation is good or bad at managing its suppliers. That has to be an issue. 

What should be done?

Actually I don’t think the answer is for public sector organisations just to recruit a mass of qualified procurement professionals and hope that fixes things. What I think needs to happen is more subtle than that. I think public managers need their training and development to encompass the provision of public services through outsourced suppliers just as much as through direct employees. They should continue to have their training in recruitment and diversity and so on; but they should also have training in the parallel arts of procurement, contract management, and supplier relationship management. 

This applies to public finance professionals just as much as to public managers in general. Public finance professionals can play a positive role through the whole contract life-cycle. They can help in the procurement phase; they need to understand contracts in order to give advice during the delivery phase of a contract, and how it affects the budget. If things go wrong then public finance professionals can help with the exit from the contract and its replacement with an alternative supplier or even the direct provision by the public organisation.

None of these things will happen by accident. I think the professional accounting syllabuses need to incorporate procurement, contract management and negotiation as key skills for finance professionals. I think they could also encourage their students to adopt a more commercial approach in their thinking so they can understand suppliers better. 

More generally, a good starting point for any organisation would be to analyse how much of its activity is done by direct employees and how much by contractors and train its managers to match.