Public Sector Outsourcing Survival Guide: How to Successfully Disaggregate Outsourced Utilities

Disaggregation is increasingly on the agenda and difficult to control. This is part of a series of information designed to give you an understanding of the main legal issues that commonly arise in public sector outsourcing and to help you overcome some of the pitfalls.

In this overview, our commercial contracting experts take a look at what you need to know about disaggregating a service currently provided by the Department or by a contractor. We’ll explain what you need to know about the basics, share our experience on legal issues that commonly arise, and share our top tips for navigating some of the pitfalls.

Government policy is clear on the role contract unbundling can play in creating healthy outsourcing markets. Breaking down services into their component parts and procuring them separately can help increase competition, spur innovation, increase SME access and enable flexibility by avoiding future lock-in. However, disaggregation presents its own challenges. Instead of having a prime contractor who is responsible for end-to-end service delivery, departments find themselves having to take on the lead role – often after losing the experience the role demands.

In this overview, we look at the legal issues that commonly arise when unbundling services and share our advice on how you might seek to resolve them.

What problems commonly arise?

  • Watch out for the gap. Having a network of providers providing different but interfacing services can make it difficult to identify the root cause of a service failure, and even more difficult to hold providers accountable and ensure the failure is corrected as quickly as possible. possible. Service resilience may suffer.
  • Lack of data on service delivery. When the existing service is provided by a single vendor or managed by a primary vendor, it can be difficult to disentangle what the service entails and the key interfaces and dependencies. There may also be a lack of performance data at the service line level.
  • Resource. The challenge of managing multiple purchases simultaneously should not be underestimated and requires strong program management. Similarly, adopting the leadership role requires that the Department have contract managers with the appropriate capability and understanding of the services. On a second generation outsourcing, this know-how may no longer exist.

Our tips for solving common problems:

  • Simplify. It can really help for both the procurement and contract management phase if you have a common set of contract terms that apply to all suppliers. This can be a challenge when services are purchased through existing frameworks, as you will be limited in the scope of changes that can be made to framework terms. However, we can advise on the supply risk associated with adapting the framework and mitigating strategies.
  • Map it. The more upstream work that can be done to understand existing service delivery, future requirements, and service interfaces, the better. Having a clear and robust specification before going to market will save you a lot of hassle down the road. Hiring a service integrator can help you where you no longer have a retained function.
  • share the pain. Consider including contractual mechanisms to incentivize vendors to work with the Department and/or its other vendors. This could include:
    • Signature by suppliers of a “partnership charter”, establishing a common governance forum to identify and resolve interface issues and key performance indicators (KPIs) at the program level;
    • Incorporate collaboration requirements into your procurement documents; and or
    • A component of the award is dependent on the supplier demonstrating positive behaviors in their relationship with the Department.
  • man that. Consider how you will finance the purchases and their subsequent contract management. Undertaking a capability assessment can help create a plan to improve the capabilities of the successful team. There are a number of tools we can provide to facilitate the transition from the procurement team to the contracts team, including contract training, contract manuals and obligation tracking tools.
  • Give a hand to the “future you”. As with the transition, there are some things you can do to help the “future you” with other replenishments. As part of new contracts, consider requiring suppliers to:
    • Use standard and compatible technological components unless otherwise agreed with the Department;
    • Use a compatibility mechanism for service lines to communicate with other service lines (e.g. APIs); and
    • Provide and execute an exit migration plan.