PPN 004 (PA 2023)

PPN 004 Open book contract management

In: Define > Business need

Overview

This PPN applies to central government departments, their executive agencies, and non departmental bodies (collectively referred to as 'in-scope organisations') when awarding public contracts for goods, and or services, and or works, other than special regime contracts. Other public sector contracting authorities may wish to apply the approach set out in this PPN.

Open Book Contract Management (OBCM or ‘Open Book’) is 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
  • 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.

Note: This PPN replaces PPN 05/16 for procurements commencing on or after 24 February 2025.

Objective at this commercial stage

The needs of the contract, as well as the level of contract risk and complexity, should be assessed using a tiered framework to determine the appropriate type and level of Open Book practices that should be applied. 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:

  • assess the needs of contracts, as well as the level of risk and complexity, to determine the appropriate type and level of Open Book practices that should be applied, using a tiered framework
  • consider a proportionate set of processes and tools to be applied based on the tier allocated, using the decision tool
  • ensure that a “commercial sense-check” is applied so that the Open Book practices will deliver good benefits without being outweighed by the costs

This content is under development.

Read the PPN

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