Contract management in the public sector offers opportunities

Richard Roosjen and Annemarie Ruiter are the process owners for contract and supplier management within Gooise Meren. This is a merged municipality, formed in 2016 through the amalgamation of Bussum, Muiden and Naarden. “That merger explains part of the challenge,” they state. “Contracts are scattered across personal network drives or in the mailboxes of people who have taken on a different role, or who no longer work for the organisation at all.”

Over two years ago, Richard set to work on contract management within the municipality, starting with mapping out all existing contracts. “After that exercise, we had to conclude that the contracts of two-thirds of our suppliers were not transparent. For example, because they were stored somewhere in a decentralised way, or not stored at all.”

This picture is a familiar one to Maarten Anbeek, Sales Director Benelux at ISPnext. Around one hundred public institutions use ISPnext’s digital platform for Business Spend Management. “This platform covers the entire Source-to-Pay process, but within the public sector the most commonly used solution within th public market is Contract Management,” says Anbeek. “I recognise what Richard describes. A lack of overview and insight makes proper control of expenditure impossible. At the same time, crucial information for audits or reports to the administrative or political leadership is simply not available.”

Roosjen provides practical examples of shortcomings in contract management. “During the inventory, for instance, I came across a maintenance contract for gas cylinders. It turns out we haven’t used gas cylinders since 2018. Yet invoices were still being paid for maintenance. If you don’t have a clear view of the contract term, tacit renewal often takes place – even when it’s not what you want. This issue often arises with property leases as well.”

There is also frequently a lack of proper oversight when it comes to care contracts in the context of social support (WMO) and youth care. “People in the field are quick to respond with the remark: ‘That’s not my responsibility.’ Understandably so – their focus is on the client, not on expenditure. But if such contracts are not stored centrally, monitoring them becomes very difficult.”

To learn from one another, Roosjen and Ruiter regularly exchange knowledge and experiences on the subject of contract management with colleagues from neighbouring municipalities. “The primary focus everywhere is on the lawfulness of spend. But I also notice a growing emphasis on the quality of service provision and on sustainability. That really is a trend.”

They illustrate the theme of sustainability with another example. “In a road construction contract, a 10% bonus was included if a roundabout was built in a sustainable way. For example, using machinery powered by green electricity. Upon inspection, however, it turned out the roundabout was built using diesel engines. Such contract terms must be well known and properly monitored, otherwise you end up paying too much and missing your sustainability goals.”

For other public institutions struggling with similar issues, Gooise Meren has a number of tips. “First of all, find out where all your contracts are and ensure you have a central overview of them. Then link this to your expenditure. Are contracts actually being used, and conversely, is more being spent than contractually agreed?”

The main advice is to keep things simple. “Don’t try to tackle everything at once. Start with the largest and most high-risk contracts.” Gooise Meren has classified its contracts into four categories, ranging from high to low risk. “That classification depends on factors such as financial value, impact on our operations, and impact on service delivery to citizens.”

The third firm recommendation is: assign direct responsibility for each contract. “That person must check whether the contract is actually being used, how it is being used, and whether there are any complaints. They should then sit down with the supplier at least once a year. This way, you can quickly detect potential points of escalation.”

According to Roosjen and Ruiter, the public sector still leaves many opportunities untapped in the area of contract management. “The costs of contract management are well recognised, but how much it actually delivers is less well known. Our first inventory showed that there was room for improvement in seven out of ten contracts.” One factor to take into account: such a conclusion is politically sensitive. “Naturally, a department manager does not like to hear that he or she is not in control and that things need to improve.”

With greater awareness within the municipal organisation, easy wins can be achieved quite quickly. In addition, there is potential for economies of scale, particularly within a merged municipality. “You see, departments within a municipality often operate like their own small businesses. For instance, the management of the town hall, the management of cemeteries, the management of public spaces, and so on. As a result, contracts soon become fragmented.”

Gooise Meren has stored all contracts in a central system and intends to make even better use of this platform in the future. “Our goal is to ensure that at least 95% of all contracts are renewed or terminated on time. We also want to monitor quality more closely, especially for contracts that fall under national or European procurement requirements. In addition, we want to optimise contract usage. Our staff should make more purchases under existing framework agreements and fewer outside of contracts. There is still a great deal of potential there.”

This article was produced in collaboration with the professional journal Deal!