PPN 05/16 (PCR 2015)
Open book contract management
In: Plan > Strategy and plan
Overview
This PPN applies to central government departments, executive agencies, and non-departmental bodies (collectively referred to as 'in-scope organisations'). Open Book Contract Management (OBCM or ‘Open Book’) involves the scrutiny of a supplier’s costs and margins through the reporting of, or accessing, accounting data. Its use is often associated with managing and controlling delivery of large, high value and complex contracts. It ensures transparency with regards to supplier charges, costs and planned return.
The overall approach to OBCM includes: a decision tool to determine the optimal benefit / cost tier of OBCM application; application model to identify the proportionate sets of tools and processes for that tier, and five tools used in OBCM processes and collaborative behaviours.
In-scope organisations are required to make an initial assessment of the contract to determine where OBCM can be applied and to what extent. This assessment uses a tiered framework which allows OBCM to be used in a proportionate way depending on the level of risk and complexity of the contract. OBCM should be used on those contracts where the additional costs are justified by the perceived level of benefits and risk.
Objective at this commercial stage
When planning the procurement, in-scope organisations should be aware that the needs of the contract, as well as the level of risk and complexity, should be assessed, to determine the type and level of Open Book practices that should be applied, using a tiered framework. Where a contract is assigned a tier, consideration must be given as to whether the allocated tier will deliver good benefits without being outweighed by the costs.
Key considerations at this commercial stage
In-scope organisations should:
- consider the appropriateness of Open Book practices when planning the management and delivery of large, high value, high risk and complex contracts
- ensure that adequate multi-disciplinary resources are available to apply Open Book practices
- assess the appropriate type and level of Open Book processes and application using a tiered framework based on, among other things, contract risk and complexity
- ensure that a "commercial sense-check" is applied to ensure that the potential benefits of Open Book practices outweigh the costs that will be incurred in its application
Legal framework
The PPN should be read alongside the relevant parts of the legal framework, including but not limited to, the following provisions of the Public Contracts Regulations 2015 (which may be particularly relevant to the consideration of this PPN):
- Regulation 18: Principles of procurement
- Regulation 67: Contract award criteria
- Regulation 68: Life-cycle costing
Additional support and guidance
Make sure you:
- read the PPN and any supporting implementation guidance
- seek legal and commercial advice in the context of specific procurements
