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CONTRACT MANAGEMENT

Contract management is an integral part of agency outsourcing activity. Agencies were asked questions about difficulties they experienced implementing outsourced contracts during 2003—04, keeping in mind all outsourced contracts, not just those related to ICT and HR services but all types of services and functions. Depending on the agency, this could have included, for example, services to the agency (e.g. legal services, publishing services, security vetting services) as well as services provided to the public under outsourced arrangements.

Overall, 33 agencies reported experiencing difficulties when managing outsourced contracts during the year; 46 did not experience difficulties and eight indicated that they did not have any services outsourced. Small, medium and large agencies were equally likely to report experiencing a difficulty (around 40% for all agency sizes).

The difficulties reported by agencies this year appear to be very similar to those reported in previous years. Figure 10.3 shows that contractor performance was less of an issue this year.

Figure 10.3: Contract management difficulties experienced by APS agencies, 2002—03 and 2003—04

Source: Agency survey

Contract management capability

The need for contract management skills in the APS has increased substantially during the last decade, reflecting the expansion of contracting out in the APS (including in relation to the provision of services to the public). Contract management skills have become an important capability for the APS.

Contract management capability was reported as a difficulty by 39% of agencies that reported experiencing a difficulty of some sort, a slight increase on last year’s result. Unlike last year’s findings, however, large agencies (67% of relevant large agencies) were much more likely to report contract management capability as a difficulty compared to medium (30%) and small (29%) agencies.

Consistent with last year, agencies reported that the strategies to address contract management capability included training staff, recruiting staff and increasing resources. However, as Figure 10.4 shows there appears to have been a change in the measures adopted to address the issue. Fewer relevant agencies are using training as a means of improving capability in this area and the issue was more likely to remain unresolved in agencies.

Figure 10.4: Agency measures to improve contract management capability, 2002—03 and 2003—04

Source: Agency survey

With agencies continuing to identify contract management capability as an area of difficulty, the drop in the proportion of agencies reporting the use of training as a means of improving capability is a concern. A key aim of agencies involved in outsourcing should be to ensure that employees who manage contracts are well equipped to deal with both the routine and more complicated issues that can arise. One of the main methods of ensuring that employees are well equipped to manage contracts is the provision of relevant and adequate training.

APS agencies seeking guidance in this area are encouraged to refer to the ANAO’s better practice guide on contract management.⁶ The guide is intended to assist agencies in their management of contracts. It contains research and experiences of better practices in contract management in Australia and internationally.

As part of its 2004—05 work program, the ANAO is conducting an audit of the management of contracted business support processes (e.g. human resource services, security services and accommodation management).

The audit will provide agencies with an insight into the extent and depth of current contract management practices, in particular, the extent to which the better practices from the Better Practice Guide on Contract Management have been adopted.

6 ANAO, Better Practice Guide on Contract Management, February 2001, <http://www.anao.gov.au>