Contract management
Contract management is an integral part of agency outsourcing activity. Agencies were asked questions about difficulties they experienced managing and/or overseeing outsourced contracts during 2004–05. These questions sought information about all outsourced contracts, not just those related to ICT and HR services. 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.
Thirty agencies (37%) reported experiencing difficulties when managing outsourced contracts during the year; 38 agencies (46%) did not experience difficulties and 14 agencies (17%) indicated that they did not have any services outsourced. Medium agencies (46%) were more likely than large agencies (38%), who were in turn more likely than small agencies (29%), to report experiencing a difficulty.
The difficulties reported by agencies this year appear to be very similar to those reported in previous years. Although, as Figure 12.3 shows, contract scope and internal resistance are becoming less of a concern, agencies continue to grapple with problems surrounding contractor performance and contract management capability.
Figure 12.3: Contract management difficulties experienced by relevant agencies, 2002–03 to 2004–05
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 43% of the 30 agencies that reported experiencing a difficulty of some sort, a slight increase on last year’s result. Relevant large agencies continue to be most likely to report contract management capability as a difficulty (50% in 2004–05, down from 67% of relevant large agencies in 2003–04). However, this year higher proportions of both relevant medium (42% in 2004–05 compared to 30% in 2003–04) and small (40% in 2004–05 compared to 29% in 2003–04) agencies reported contract management capability as a difficulty.
Consistent with last year, agencies reported that the strategies to address contract management capability included training staff, recruiting staff and increasing resources. As Figure 12.4 shows there appears to have been a change in the emphasis of strategies used by agencies to address the issue. This year there was a substantial increase in the proportion of relevant agencies using training as a means of improving capability in this area. This increase may be partially affected by the introduction of the new Commonwealth Procurement Guidelines in January 2005 and the associated information provided by Finance. Clearly, 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—adequate and relevant training is a positive step in addressing this issue.
Figure 12.4: Agency measures to improve contract management capability—relevant agencies, 2002–03 to 2004–05
Source: Agency survey
The ANAO released a business support process audit, Management of Business Support Service Contracts, in March 2005. The audit was based around its Better Practice Guide on Contract Management,5 and was conducted with four agencies to examine the management of business support service contracts (e.g. human resources services, security services and accommodation management).6 One of the findings of this audit was that there was a considerable lack of training for contract managers—as a consequence, contract objectives may not be being achieved efficiently or effectively by agencies. This finding, and the resulting recommendation, further support the need for agencies to ensure that staff with contract management responsibilities are given relevant and adequate training in addition to supporting guidance from the agency, Finance and the ANAO.
5 ANAO, Better Practice Guide on Contract Management, February 2001, <http://www.anao.gov.au>
6 ANAO, Management of Business Support Service Contracts, Performance Audit Report No. 37, March 2005, <http://www.anao.gov.au>
