Disaggregation of Contracts is the way ahead!

Disaggregation of Contracts is the way ahead!

commercial 300x295

HM Government advised Departments (following the Ocean Liner report in 2016) that they should move away from the traditional large and complex IT outsourcing contracts towards multi-vendor, disaggregated environments together with in-sourcing where appropriate and adopting a cloud-first principle.

Great, what do we do?

Disaggregation is complex and, as with all complex activities, it takes time and, more importantly knowledge.

As a minimum, view it as a business change activity.  This requires:

  • the right allocation of responsibilities and governance;
  • identification of the skills and capabilities you require to disaggregate to operate in the new world model;
  • a programme plan that captures the present situation and then maps the way forward through clear stages to the new world;
  • creation of a real-time risk register from day one.

Principles to be guided by:

  1. A business case that shows a full analysis of the options available to your organisation which should encompass the vision of the institution for its future IT requirements, for example, a needs analysis or service requirement by the department;
  2. You should have some form of gated procedure similar to HM Treasury Green Book for developing such a business case: as the maturity develops, so does the plan.
  3. Understand scale and pace and what is achievable in the time. It is unlikely that existing Contracts will end in a time frame that is convenient for your new approach;
  4. Do not re-invent the wheel. If you can acquire items through a Framework, do so. The time and delay of going to market for something available via a Framework is unlikely to be cost-efficient;
  5. Enable separation of services at future dates by contracting for discrete services, allowing you to terminate individual elements;
  6. Document ownership and management of data, especially where it is to be processed or stored. Ensure the US Patriot Act is taken into account if you intend to use a service provided by a US entity;
  7. Understand where and who is responsible for risk, liability and indemnities. It is wise to create a flow diagram of the process, identify who is accountable for each stage and how they hand off to another provider. You can then overlay the risk and liability profile for each step to identify gaps:
  8. Be clear who is responsible for the variation for each variable. For example, having to ring a help desk to change a password could incur a charge however this becomes a licence to print money if the supplier forces many changes on the organisation for “good security” reasons;
  9. Do not let the exit provisions be an afterthought. They must be detailed and agreed pre-signature, while you still have the power in the negotiation.

Programme Management and Governance

The team must be multi-disciplinary with subject matter experts in the appropriate field. For example, if it is an IT project you will need team-members from:

  • IT
  • Commercial
  • Project Management
  • Legal
  • HR

Base Line

Start by establishing a baseline. Your incumbent may not be happy to assist you; therefore, you will need to be prepared.

How do you prepare?

One approach would be to audit the Contract and all the change notes.  This will identify if:

  1. they have been fulfilling their obligations;
  2. if they have been doing more than required, this will help in future negotiations.

Wrekin Consulting can help with this through the utilisation of iPad technology and Contract Audit ®. You upload the Contract and all the change notes (it takes approximately 8 seconds to input a 120-page Word Document) the solution separates the Contract into its obligations. You allocate each obligation to the appropriate member of the team and this provides a worklist for them to discover if each obligation is being met. If they use an iPad, they can take pictures or upload documents as evidence of what they find out.

Initial discussions

Once you have the baseline established, you can set about designing the next stages and the various negotiation plans.

The first negotiation will be with the incumbent to decide how you will disaggregate the service.

You may think there are three principle choices for which you need a negotiating plan:

  1. Assumes the incumbent will act reasonably and you can negotiate a clear exit and the necessary support for re-tendering exercises;
  2. Assumes the incumbent does not seek to help but performs according to the letter of the Contract;
  3. A mixture of 1 and 2 saying they will assist but, in fact, acting to frustrate the operation.

Unfortunately, Suppliers often see this as an opportunity to earn more from a client desperate to move away and from whom they are unlikely to make such revenues in the future. They are likely to say: “the contract only requires us to work with one replacement contractor; if you wish us to work with more, we require additional payment.”  You have to overcome the supplier’s incentive not to co-operate and to do that you need to prepare yourself with the tools to encourage their co-operation.

The Commercial team should set out a series of negotiation plans and gain approval for them before any such negotiations. Such plans would make heavy use of the discoveries in the baseline review.  If they are demanding more money, you could trade, for example, service credits for the non-delivery of x to encourage them to do it for free.

Problems you may face

Organisations are often unrealistic about the investment that will be required and what can be done or achieved in the time and fail to allocate enough time and effort in pre-tender analysis, design, and planning.

First, start by re-using past investment analysis: how was this agreement awarded, was it successful or not, what were the problems?  Re-use the approach with appropriate amendments and learning from other projects.

Next, think in a different way. You have an idea of what the future could be like, but you cannot be sure.  One way to solve the problem is to find your newest graduates and give them the problem: tell them to treat it exactly like a piece of course work and ask them for arguments for and against all of the options based on many different types of solutions.  I guarantee the way they will approach it and the solutions they will come up with will make you think.  If it does not, then ask them to do it again!

Your suppliers are often blind to the reality of risks and gaps in their bid proposals when responding to opportunities. What can you do to try and resolve this?

  • When conducting competitive dialogues, ask for a rough order of magnitude as you go along, not for consideration or evaluation. It allows you to check everyone is in the same ballpark and if what is being quoted is in line with the budgetary estimates;
  • You can reset bidders’ minds in the process. For example, when one bidder is three times as expensive as the others, they are an outlier. Why? They have never dealt with the company, but the other bidders have, they are taking an approach to risk that is not reasonable. Do not tell them they are three times as expensive but you can, with permission of the Approvals Board, say something like “I am obviously not describing the risks associated with this contract correctly as you are not on the same continent for pricing, please go away and review your dialogue notes and ask questions at the next dialogue session.”

As a Commercial, you wish to be fair to all parties and get the most competitive bids across the line at the end of the process. To do that you have to make the suppliers see the reality and ensure the tender does not leave any gaps and is crystal clear on the requirements.

An example that might help achieve this is the creation of a joint RADIO log. Have the supplier show you the risks they have identified. Add to that list your own perceived risks, assumptions, dependencies, issues, and opportunities (RADIO).  Question them about how these are built into their project plan and are costed. If they do not materialise, then how do you share the cost-saving?

Lack of realism is often seen when transitioning away from legacy prime contracts, and the potential impacts this will have on the services. The audit suggested as part of the baseline will allow you to map all the obligations/tasks etc.  It will provide a picture of reality. You can then map this reality into your new world and see if there is a home for everything.

This action removes a frequent experience of organisations that design and delivery risks surface post-award when a crisis unfolds. Often the only option is to throw money at the problem as the supplier is saying it is not their responsibility and your organisation is suffering a publicity storm and reputational damage.

What should you do?

Learn from others’ mistakes

There was a large multi-national company whose Board wanted outsourcing, believing it would provide cost savings. Unfortunately, they experienced a lot of delay from the organisation as people did not want to lose their jobs. Eventually, the Board demanded action and the organisation outsourced its invoicing to organisation A and its accounts receivable to organisation B. Crisis ensued.  Organisation A issued the invoices but would not tell organisation B the details and organisation B would not disclose to organisation A who they had collected monies from. Both organisations claimed privity of contracts. The multi-national had to create a workaround until two change controls could be agreed.

Another large organisation sought to adopt a Service Integration and Management (SIAM) model for its IT organisation. It successfully awarded the Service Integration contract and TUPE’d its staff across to them. It then awarded the five pillars (data centre, network, end-user computing, back office software, front office software).  Unfortunately, now came the problem: the Service Integrator did not have the responsibility for standing up the pillars, just operating them. The organisation no longer had any staff capable of doing this as it had TUPE’d them. The Service Integrator agreed to do the work on condition they had no responsibility for delays, failures, cost overruns and that they were paid time and materials for the work of standing up the pillars at their full rates which were about twice the cost of the rates in the Contract.


We mentioned creating a Base Line earlier and it is from this that you should work. If you have captured every obligation and task in the existing provision of service, then you can map how they will be performed in the new world. More importantly, you can then work out were the demarcation takes place in the new world and the information/data/services that need to be transferred between the providers in detail. Then you can start upon drafting the schedules for the new tenders.

Unfortunately, many organisations fail to do the planning and start with the schedule drafting, running the tender and awarding the Contract and then discover problems as they try to disaggregate services. This inevitably causes problems with staff morale, as they suddenly find problems in doing their jobs. They also suddenly find that the problems are costing the organisation more in workarounds etc.

To quote the ancient phrase “fail to plan, plan to fail.”

Tasklist to a good disaggregation

  1. Document the vision of where you wish to get to. Compare it to other benchmarked solutions to give it a quick sniff test and ask if it is reasonable;
  2. Baseline where you are;
  3. Understand what the user experience of the staff affected will be in the future;
  4. Create a Risks, Assumptions, Dependencies, Issues, and Opportunities (RADIO) log from day one;
  5. Discuss the next stages with the incumbent;
  6. Create the lots that the service is to be disaggregated into;
  7. The document clearly how the various lots will interact and the data flow and responsibilities necessary to make the new service work;
  8. Create the tender documents and run your tender;
  9. Consider sharing your RADIO with the potential suppliers and have them document how they would overcome the various elements and add their details;
  10. Review and evaluate the tenders and award the agreements;
  11. Start on the journey to disaggregation;


Talk to Wrekin Consulting: we can help you in each of these stages as we have tools and solutions that can be provided out of the box to help you achieve your aims.


Comments are closed.