Effective Partnering: An overview for customers and providers

If successfully implemented partnering is an immensely powerful tool that can contribute to successful project and programme outcomes and deliver significant improvements in value for money. It will only succeed where there is a mature approach to relationship management and it will require effort and commitment from both sides to make the relationship work. It should never be regarded as an easy option.

Introduction

This document summarises the key issues around considering, planning and creating a partnering relationship with an IT service provider. Its focus is not on formal procurement, contracts or service delivery management. Instead, it covers the critical factors in creating a strong working relationship built on mutual benefit - taking the right approach, creating the right behaviours, putting the right people in place and managing the arrangement in the right way in order to achieve a successful outcome for both parties.

The guidance is primarily intended for those leading the project and programme teams in the customer and provider organisations. It will also be of interest to everyone who may be involved in a partnering arrangement.

The first part of this document outlines the main considerations for partnering. The second part sets out essential questions on the partnering relationship that should be considered by the Senior Responsible Owner (SRO). These questions supplement The OGC Gateway Process: A Manager's Checklist and are designed to help SROs to self-assess the development of the partnering relationship at key points in the procurement lifecycle. Senior Responsible Industry Executives (SRIEs), the SRO's counterparts in provider organisations, will also benefit from this self-assessment process.

What is partnering?
Partnering is a form of collaborative working between customers and suppliers. This guide aims to demonstrate how partnering can be used between public sector organisations and IT service providers towards shared business aims to realise mutual benefits. In contrast with traditional 'arms-length' procurement and contract management approaches, partnering is characterised by a greater degree of openness, communication, mutual trust and sharing information. The aims of partnering arrangements are often expressed in terms of business outcomes rather than specific outputs or improvements; their success is particularly dependent on the people and relationship aspects.

The tone of a partnering arrangement differs from a traditional contract and the behaviours of those involved are different too. The management of a partnering arrangement is usually proactive rather than reactive. Both parties work together to identify optimum solutions and to anticipate and resolve problems in a constructive, collaborative way. The arrangement needs to be based on mutual trust and openness, a recognition that the relationship itself is as important as the contract and a conviction that partnering makes good commercial sense for this particular programme.

Why should the public sector consider partnering?
Modern commercial arrangements should be based on the following principles:

• a shared understanding of what the desired outcome is and which elements are to be provided by each party
• be focused on benefits - not just on time and cost
• have a shared understanding of which party is managing particular elements of risk
• (for long term contracts) be able to cope with changing customer requirements and technology developments
• be capable of implementing efficient and effective procurement.

Partnering extends these principles. For the customer organisation, a good partnering arrangement offers the benefits of proactive risk allocation, technical innovation, flexibility and improved value for money. For the IT service provider, the benefits include more involvement in management decisions, greater freedom to suggest innovative solutions, and better insight into the customer's business (as well as commercial gain). For both parties, shared business objectives and a collaborative approach to achieving them mean that the partnering approach offers significant strategic benefits. Partnering is about strength through collaboration. Building and maintaining a partnering arrangement will take much more effort and time than a traditional approach, not least because new attitudes and behaviours may have to be learned - and old ones unlearned.

When should partnering be used?
Partnering is not appropriate in every situation. It is a long term relationship, usually over five years and often much longer, where customers and providers adopt long term rather than short term views. Partnering may be suitable where there is a need for:

• business change, especially where innovation is required and/or the future is uncertain
• using new methods of service delivery (such as providing services online)
• flexibility in constructing teams, involving specialist skills or scarce resources
• outsourcing business processes or services, perhaps to allow customer staff to concentrate on core areas.

Partnering is unlikely to be suitable for:

• short term requirements where there will not be time for the provider to recover initial investment costs
• projects where the customer requires complete or significant control over the specification and service delivery, with little or no flexibility for the provider to propose new ways of doing things
• contracts where there is little or no scope for continuous improvement
• contracts where the customer requires an outcome, but cannot transfer key elements of control or major risks to the provider.

Rather than focusing solely on the benefits, costs and risks to the customer, partnering seeks to create a 'win-win' relationship, where both sides feel that the investments and concessions they have made, and the risks they have taken on, have helped them realise genuine benefits and achieve strategic goals.

The procurement

The SRO's perspective
The Senior Responsible Owner (SRO), as the senior representative in the customer organisation, will need to give as much weight to the desired relationship as to specific service requirements and to be clear about these objectives of the procurement from the start. In addition to establishing their technical and organisational suitability for meeting the business requirement, potential partners will need to show that:

• they understand the customer's business and can align their priorities with the SRO's priorities
• the requirement falls in their core business area, and will be a genuine priority for them throughout the life of the contract
• they have the people in place who can help create and maintain the kind of relationship the SRO is looking for
• they have worked as partners with other organisations (ideally)
• they understand what shared aims, mutual benefit and a joint approach to risk will actually mean for the arrangement.

The SRIE's perspective
The Senior Responsible Industry Executive (SRIE), as the senior representative in the provider organisation, will need to ask reciprocal questions about the customer organisation:

• do they understand your organisation's business and can they align their priorities with your own?
• will the partnering arrangement be a genuine priority for them throughout the life of the contract?
• do they have the appropriate relationship management systems and people in place who can help create and maintain the kind of relationship that they seek?
• have they practical experience of working in collaboration with other organisations?
• do they understand what shared aims, mutual benefit and a joint approach to risk will actually mean for the arrangement?

Key roles
The Senior Responsible Owner (SRO) is the individual in the client organisation who is responsible for ensuring that a project or programme of change meets its objectives and delivers the projected benefits. The SRO should ensure, among other things, that the relationship with the supplier is actively managed.

The Senior Responsible Industry Executive (SRIE) role mirrors the SRO role in the provider organisation. The SRIE works in partnership with the SRO to ensure more successful delivery of IT-enabled change programmes in government.

The primary objectives of the SRO and SRIE roles are:

• to be focused on the achievement of the desired business outcomes
• to be open with each other about issues, problems, constraints and politics within their respective organisations.

Key features of the partnering approach
The key features of what the partnering approach is seeking to achieve must be set out in both the requirement and the formal contract - both partners must be clear about what they want and fully understand what is being proposed from the earliest stage and throughout procurement. Plans for how the risks will be managed must be made clear.

Traditional procurement concentrates on an examination of what the provider would do for the customer, with far fewer commitments in return; partnering focuses on what you could achieve together. Compromises may be required from either party and each should stress their organisation's willingness to take a collaborative approach at all stages.

At the outset of the relationship, the customer's and supplier's objectives are unlikely to be aligned; incentives have to be designed to achieve this. Contracts that reward providers for helping deliver business objectives, but without attempting to transfer risks best managed by the customer, are an essential foundation for a good partnering arrangement.

Partnering principles
Partnering principles should guide both parties' actions throughout the procurement process and into contract management. There must be top management commitment from the start and throughout, from both parties. The right people need to be in place from the start who can build and maintain open relationships. As well as technical and business understanding, they will need to draw on abilities in communication, diplomacy and problem solving. They will need strong interpersonal skills, tact, patience, honesty and the ability to form strong professional relationships. A partnering approach takes time to plan so that the right people are in place from the start. You may need to consider how behaviours at many levels of the partnering organisations need to change in order to make partnering a success.

Practicalities of managing the relationship
Both parties will need to think about the practicalities of managing a relationship that is built on trust. The public sector must have the necessary controls in place to provide evidence to demonstrate that the provider has delivered the agreed level of service. The provider has to be confident that unreasonable demands will not be made. There has to be reasonable compromise to ensure that the public sector complies with its requirement to demonstrate openness, equity and value for money without imposing undue bureaucracy on the provider.

Even at the outset of the arrangement, you should consider how it will end. Exit strategies and plans for recompetition should be developed at an early stage, so both parties understand what will happen at the end of the contract.

Establishing and managing the relationship

Partnering arrangements mean differences in both corporate relationships and individual relationships. The way the two organisations regard each other is crucial, and above all else there must be mutual trust or the relationship may break down.

Trust needs to be developed - there will be little evidence of it on Day 1 although there will be plenty of good intentions. Trust has to be built and 'earned' through the right actions, behaviours and performance. There needs to be reality in the relationship and acceptance that there will be a steep learning curve. It is important to have the right people in the right place and this may require hard decisions about removing people who are hindering the relationship.

At the individual level, each one-on-one relationship should be peer-to-peer, with individuals chosen on the basis of their suitability for their role. Senior managers, too, must show their commitment, with the SRO actively involved on the customer side and their industry equivalent, the SRIE, involved on the provider side. At the management board level there should be mutual commitment.

The figure below shows the recommended governance arrangements.

How open should the relationship be?
Single/joint project board?
Single risk register?
Visibility of potential problems?
Open book accounting - on both sides?
Single project budget and account managed together by customer and provider?
360° staff reporting - on both sides?

Fig 1: Managing in the Partnering Relationship

A strong partnering arrangement starts with well-designed contractual clauses, but is then about establishing appropriate attitudes and behaviours (see Annex A for a checklist of the attitudes and behaviours required). One of the key benefits of effective partnering is being able to raise issues or areas of concern at an earlier stage, thereby making them easier to resolve. The roles, responsibilities, processes and mechanisms that will enable the relationship to grow and change need to be in place from the start. Some options and suggestions are as follows.

A 'partnering agreement': this is usually created as a 'charter' to complement the formal contract terms. A partnering facilitator leads a workshop that helps both parties together to set out the principles, attitudes and ideals that will characterise the arrangement. These could include the degree of openness, the spirit in which problems will be handled, the desired 'tone' of the relationship, principles for communication, the behaviours of staff and so on. It should be consistent with the Government Procurement Code of Good Practice (see Further information). Subsequently there needs to be a series of team building and charter development meetings, starting with the active involvement of the SRO and SRIE. These meetings will take time and money but are essential to the success of the partnership.

Incentives: increased benefits and savings for the customer justify additional supplier profit; for both parties, there could be profit share in return for improved efficiency and so on.

A shared risk register: this ensures complete understanding for both parties about risks to implementation and ongoing service delivery, and enables a joint approach to managing risks. Clarity of who is responsible for and manages which risks is also essential.

A joint project board: a joint project board would be chaired by the SRO, with the active involvement of the SRIE as technical adviser or even Senior Supplier.

Open book accounting: there could be open book accounting for both parties, together with other measures that continually evaluate and demonstrate value for money, not lowest price. Actual costs and agreed profit margins are made visible, while also creating an understanding of the customer's budgetary restrictions. The degree of 'openness' needs to be carefully considered at the outset.

Collaborative performance management: a constructive, collaborative approach to setting targets and (in particular) baselines can help to build awareness of what can and cannot be achieved.

Defined roles for relationship management: as well as nominating individuals or teams for service delivery management and contract management, both parties should create relationship management roles. Their job will be to keep the relationship open and constructive, identifying problems early and moving to solve or escalate them as necessary.

Means of communication: formal and informal communications should focus on dealing with exceptions and resolving problems together, promptly. For example, when a problem occurs each party could be required to explain the issues from the perspective of the other party. Staff from both parties should be involved where key business decisions are taken that affect the relationship and service delivery, especially where innovation is a key feature.

Organisational learning and sharing knowledge: it is important to ensure that lessons learned stay learned, and are passed on to others. Continuity of staff can preserve corporate memory; there should also be the means for embedding learning from the arrangement into future working practices and attitudes.

Common pitfalls

The wrong people
Choosing the wrong individual for a crucial role could derail the whole arrangement. In some situations, interpersonal skills could be more important than technical understanding.

Lack of cultural readiness
All the people in both the customer and supplier organisations who will be involved must be ready to make partnering work. Although the benefits of partnering may be clear and achievable, the organisation may not be ready to work in new ways, or to be able to change in a short time.

Unclear objectives
If the objectives of the arrangement for both parties are not clear at the outset, no amount of management effort will make the partnering relationship successful.

Inadequate performance measurement
The level at which services are currently provided, or the baseline from which improvements can be measured, are crucial to the way in which providers' performance will be assessed but can be very difficult to establish at the outset. In addition, finding relevant benchmarking measures that make meaningful comparisons between providers or suppliers can be hard to achieve.