Contract renegotiations provide a good opportunity for government departments to make short-term cost savings. But it’s important to ensure such contracts don’t store up problems for the future.

There is a propensity for contract renegotiation in government at the moment. It derives from the current cost-cutting agenda, which places pressure on public sector procurement managers to get the best possible value out of their contractors.

When existing contracts are put under scrutiny, it is imperative to ensure that long-term stability is not sacrificed for the sake of short-term cost reductions. This is the view of Elizabeth Cooper, who is a partner at the law firm Nabarro, and specialises in procurement.

“It’s a challenging time for the civil service,” Cooper notes. “Contract efficiency is a major issue for government departments, who want to be sure they are spending the public’s money as wisely as possible.”

There are, of course, risks involved in renegotiating with contractors. Firstly, although it can bring savings, there is an issue of consistency in managing the contractor relationship. “For example, if a contract has been managed in a certain way for the past three years,” explains Cooper, “and the approach shifts in response to the changing financial conditions, then disputes may arise; particularly in situations where contract performance has not been as vigorously measured in the past.”

That is where Nabarro’s advice can be helpful. The firm’s public sector specialists advise clients on how to successfully manage their relationships with contractors. This ensures both parties comply with the original contract, and guards against potential disputes between suppliers and the government.

A further area of potential risk comes if the terms of the original contract change significantly. As Cooper explains, if the provisions of the contract do not allow for the degree of change being contemplated, then it might be argued that a new procurement is required. “There is potential for contractors who might wish to tender for such opportunities to make a legal challenge against the government,” she says, “on the basis that the contract should have been put back out to tender.”

Such a state of affairs is clearly one that government departments will do well to avoid, especially given the downward pressure on spending. And this is precisely Cooper’s concern: “What might seem like a short-term, ‘quick win’, could actually lead to problems in the long term,” she says. “Nabarro wants to help the government avoid this situation, by ensuring that contract efficiency is maximised in a way that is sustainable for the future.”

With a strong track record of successful working with the public sector to get the best from existing contracts, the firm is well placed to offer support. It provides a conflict avoidance programme alongside its advice on contract efficiency, and both areas of the practice are geared towards helping government departments minimise the risk of disputes with suppliers.

“Effective and efficient use of existing contracts is key to the government’s long-term success in reducing the deficit,” Cooper remarks. “Nabarro advocates a measured approach to this, so that the likelihood of future problems is significantly reduced. That’s the way to ensure contract renegotiations deliver on their cost-saving promise.”

For more information on how Nabarro can help, click here: Conflict Avoidance and "Take advice now, to safeguard future savings"

CONFLICT AVOIDANCE, contract renegotiation

Last updated 473 days ago by Nabarro