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The role of accountants in outsourced contracts
As recent high-profile failures show, accountants have a vital role to play in ensuring major outsourced contracts in both the UK and Ireland stay on track and within budget.
The outsourcing of key infrastructure projects and government services has gathered pace over the past decade, allowing greater access to resources and specialist expertise, and reducing risk. However, with increased reliance on external contractors has come a raft of problems. In the UK, the collapse of Carillion in 2018 and fellow outsourcer Interserve earlier this year underlined the difficulties that can arise when suppliers fail, with the government left scrabbling to find alternative providers.
There has been similar outcry in Dublin, where what should have been a good news story, the building of a new National Paediatric Hospital in Dublin, has become mired in controversy over spiraling costs. Health minister Simon Harris was forced to apologise to parliament this spring for not promptly disclosing his knowledge of cost overruns. These have inflated the price to €1.7bn from the €600m originally agreed by government with the main contractor, the Netherlands-based construction conglomerate BAM.
The following is a contribution from Crowe’s Shane McQuillan a partner in our consulting services team, to an article was first published in the May 2019 Ireland edition of Accounting and Business magazine. Shane works with a variety of clients in the private sector on tendering, service delivery mechanisms, governance structures and risk services.
Q: Is there a role for accountants and specialist consultants at firms like yours in large contracting projects both in the private and public sector?
A: Public sector procurement is an area in which there is a strong need for clear and sound professional advice.
The need to satisfy considerations of value for money and protection of the public interest means that
Accountants and consultants in firms like Crowe can play a value-adding role, ensuring that public agencies specify their requirements accurately and conduct procurement competitions in a way which will stimulate supplier interest and maximise competition. This ensures that value for money is delivered and the public interest is protected for these important projects.
It’s not all about driving the lowest price out of the procurement process. Often, value for money may mean going for a more expensive option that will deliver demonstrable benefits.
Properly supported by professional advice, those conducting procurement exercises can have confidence that they are making the right decisions in line with best practice and procurement law.
Q: From the point of view of both client and construction firm how can accountants get the tendering process right and how can they help keep projects on track?
A: It’s all about ensuring that there is a clear procurement plan and that objectives are fully defined.
For the organisation commissioning the contract, developing a very clear specification is essential, whilst also providing scope for the bidder to come up with innovative ideas and solutions. If the specification is too tight or prescriptive, it can result in competitions focused on commoditisation of the service offering and a “race to the bottom” in terms of price.
Accountants and professional advisers within Crowe can also help bidders to develop compelling tender offerings, not just in terms of price but also in terms of quality and innovation. Understanding the specification and the tender scoring system is central to success within the competitive process.
Crowe’s consulting department advises clients across diverse sectors, from local businesses and multinational organisations to public bodies and not-for-profit entities.
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Associate Director, Internal Audit & Consulting
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