By: Paul Emanuelli

This article is an excerpt from the 2021 edition of The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.

In its January 2020 report entitled Future Submarine Program — Transition to Design, Australia’s Auditor-General recommended that government institutions ensure that they properly resource their negotiation teams in major procurements. The report, which focused on an $80 billion submarine project, the largest Department of Defence procurement in Australian history, concluded that the project was already experiencing slippage on in its design planning milestones. The Auditor-General made a series of recommendations useful to all public institutions regarding the need to properly resource negotiating teams for complex projects to better ensure project success. Those recommendations included ensuring that negotiating teams include the necessary technical expertise to properly manage risk by developing clear performance milestones and contract off-ramps. The recommendations also included ensuring thorough record-keeping practices and strong contract management disciplines:

Procurement
  • When planning for complex technical negotiations, consider establishing expert oversight arrangements to support the negotiating team.
  • When undertaking complex negotiations, maintain adequate records, continually assess risks and engage actively with those charged with oversight.
  • When negotiating and contracting for complex procurements, appropriately identify and advise government on major risks and proposed mitigation strategies.
  • When developing long-term contracts, incorporate formal review and exit points.
  • Complex contracts will generally require active management to achieve contracted outcomes. A clear and consistent approach to contract management, particularly in the early stages of a long-term relationship, will help establish mutual understanding between the parties.
  • Realising value-for-money under a contract requires a close watch over the timely and cost-effective delivery of contracted milestones as well as the achievement of program outcomes.

As Australia’s Auditor-General emphasised, to better ensure project success, purchasing institutions should mobilize well-resourced contract negotiation teams that are equipped to properly manage the critical early stages of project planning and execution. Purchasing institutions embarking on any major project would be well-served by following those recommendations in their own initiatives.