Strategy into action - Managing changes to requirements
Contents
It is important for commissioners to realise that service demands changeand that a clear and transparent process of negotiating changes is essential to preserve commissioning objectives and to safeguard provider interests if the contract is to remain robust.
What are changes to requirements?
Changes to requirements can be small adjustments to existing service specifications, planned modular/incremental developments, major business change leading to completely new services - or anything in between.
Responsibility for authorising different types of change will often rest with different people, and documented internal procedures will need to reflect this. In particular, changes to the overall contract such as changes to prices outside the scope of agreed price variation mechanisms must have senior management approval. In many cases it will be possible to delegate limited powers to authorise minor changes which affect particular services or Service Level Agreements using agreed processes.
Ensure that changing requirements do not take the resulting contract:
- outside the scope of the original specification
- outside the permitted extensions to existing contracts allowed underthe relevant regulations.
Processes for managing change
A single change control procedure should apply to all changes, although there may be certain delegated or shortened procedures available in defined circumstances– such as delegated budget tolerance levels within which a contract manager would not have to seek senior management approval. However, flexibility needsto be built into this procedure to deal with issues such as emergencies.
A change control procedure should provide a clear set of steps and clearly allocated responsibilities covering:
- requesting changes
- assessment of impact
- prioritisation and authorisation
- agreement with provider
- control of implementation
- documentation of change assessments and orders.
Change during the term of a contract can be categorised as follows:
- planned/routine change
- proactive change programmes
- unplanned change.
Planned change
This could include modular and incremental developments, such as planning for changes to user requirements, refurbishment of workspace, maintenance/enhancements to existing systems or planned technology refreshment.
This type of change is most easily accommodated under, and is best suited to, formal change management processes. Well constructed contractual agreements should contain express provisions detailing:
- the procedures to be adopted in initiating, discussing and delivering change through:
- user groups
- change control boards
- formal approval processes etc
- benefits management regimes
- the procedures to be adopted for the escalation and resolution of disputes that may arise, such as:
- defined escalation routes and timescales
- alternative dispute resolution procedures (neutral advisors, expert determination, arbitration etc.)
- the procedure for making amendments to the contract documentation:
- QA procedures (including legal QA)
- authorisations (individual authorised signing powers)
- audit trail.
Proactive change programmes
Change need not necessarily always be reactive in nature; it can be initiated deliberately as a proactive approach. There could, for example, be an element of business transformation to drive forward a change programme. In this way the contract is used as a vehicle to deliver efficiency improvements and associated cost savings from the re-engineering of the customer's internal business processes – facilitated by the use of technology.
The details of approaches taken in each project to date have been different,but a typical partnership arrangement might be (in summary):
- Step 1: provider proposes business change project to customer
- Step 2: customer approves project on basis of agreed cost/benefitmodel
- Step 3: provider develops and implements new service to support new business process (at provider's risk)
- Step 4: implement and adopt new business processes
- Step 5: both parties measure resultant cost savings to customerusing agreed cost/benefit model
- Step 6: provider's service charges calculated as a percentageof realised cost savings to customer.
Recent contracts show an emerging trend. Over the life of the partnership as a whole, the expectation of the parties, sometimes underwritten by contractual guarantees from the provider, is that the aggregate cost savings to the customer over the term of the partnership may in fact exceed the aggregate 'core' service charges payable by the customer.
The viability/appropriateness of the approach outlined above of course depends on:
- the nature of the partnership
- the customer organisation (in terms of its receptiveness to change, potential for improvement in existing business processes etc)
- the services to be delivered.
Unplanned change
Unplanned change is imposed on the partnership from outside (for example,resulting from a change in some aspect of the external environment). This is the most difficult type of change to manage and accommodate – it is also potentially the most damaging to the partnership. It can hit the partnership unannounced and require immediate action by both parties. At worst it can serve to invalidate the deal for one or both parties, resulting in an unplanned conclusion of the programme or even the partnership.
Unplanned change will test the strength of the partnership relationship,and the capabilities of its management. The response to un-planned change is crucial and must be structured. In response to unplanned change, the partnership (that is both parties in co-operation), must undertake the following analysis:
- Step 1: understand and assess the impact of the change on thepartnership – can this be dealt with under the existing change management procedures or does this require specialised management?
- Step 2: escalate within both partner organisations as appropriate
- Step 3: review the basis of the deal – does the original deal remain viable for both parties?
- Step 4: assess the extent of change required to the deal
- Step 5: negotiate the required amendments.
From the customer's perspective as the public sector partner a key decisionpoint is often reached at Step 4 above. It may be necessary for both partners to make real, and sometimes significant, concessions in the resulting negotiationsin order to make the deal work for the future.
A complete audit trail of developments is essential to ensure public accountability,but you must be prepared to make bold judgments where necessary to ensure the survival of the partnership (subject to the overall deal remaining viable to the public sector partner). Your decision-making must be driven by clear business objectives - and values - of the organisation.
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