Negotiate don't litigate as your outsource contracts crumple

From Rail Franchises through School and Hospital PFIs to ICT “Frameworks”, outsourcing contracts of all types are facing similar problems with regard to disputes resolution. The collapse of in-house relationship management skills (from the departments of state and their agencies to local government) has been matched by a similar hollowing out in thier delivery partners. 


Some of the situations will be as complex as that after the implosion of the Maxwell pension schemes: when “alternative disputes resolution” (ADR) processes were used to ensure the residual funds were used to pay pensioners, not lawyers and insolvency practitioners.


Others will be simpler.


At a time of financial stringency it is essential to ensure that budgets are used to deliver service not fight pyrrhic battles in court, let alone to pay off those responsible for failing to take effective action to resolve the situation – whether they created it or not.


Some of those in the private sector face similar problems but their routines are better established, from the top down.


CEDR was launched nearly 20 years ago with the support of the CBI and has now handled several tens of thousands of 20,000 disputes, average value £3.5 million. It is a not-for-profit and anticipates far more “business” than it can handle. It therefore spends a significant amount of effort organising training on dispute avoidance and is about to pilot a major new course in this space. 


It was said of the Maxwell pensions case that it was so complex that many lawyers would have gone broke because there was not enough left to pay them. There are similar situations with some of the current financial services collapses. ADR is therefore also popular with top lawyers. They can make in a day what they might otherwise bill for a week, at the same time as saving their clients years of fees – which would have had to be extracted from what was left after the receivers had taken their cut.


Given the scale of savings that HMG is planning and those in the private swctor are having to make in order to survive at all, and given that so many suppliers are in breach of incomprehensible and impossible contracts, this is an idea whose time has come.


It will be driven by those who wish to deliver profitable customer satisfaction – not just win the business or blame game and move on.  These are also the managers (and organisations) who will survive the slump – so sorry – recession.   


Remember that next year willl see the largest influx of new MPs since 1833. Many will come from “non-traditional” backgrounds (i.e. not the Westminster village of semi-hereditary tribal loyalists). Nothing will be sacrosanct – not even Whitehall feifdoms – when they get to grips with what they have inherited.