The pursuit of the small contract
by Rupert Hodgson, sourcingfocus.com
Small outsourcing contracts are rising while larger contracts are being issued in smaller numbers. Low price contracts have become prevalent within the public sector as it focuses on offering contracts for delivery of services to SMEs, while large outsourcing contracts have fallen significantly in 2012.
Whitehall have been pushing the use of small contracts in order to mitigate against project failures as well as their use as part of a cost cutting measure. The government have attempted to move away from using large corporations to deliver on big contracts to instead splitting multiple contracts between firms to deliver on one project while promoting value for cost.
Smaller contracts have risen at the expense of more costly larger contracts. Data released by the Information Services Group (ISG) showed that large contracts valued at over €20 million had dropped by 32 percent year-on- year in Europe, the middle-east and Africa.
The increase in these smaller outsourcing contracts and the slowdown in the employment of larger contracts, have resulted in part from the delayed impact of the Eurozone crisis. Constraints and guidelines from Whitehall from the fallout of the 2012 budget have also constrained the public sectors finances, with smaller contracts favoured for their value for money.
While small contracts have been favoured due to their flexibility, quick turn around and cost, all in the climate of financial pressures on government departments, ISG predict that contacts of €20 and over will increase in the second half of 2012. The government pressure to source smaller contracts from multiple firms has also been questioned with figures showing that 92 percent of contracts still remain with large corporations.
While smaller contracts have been acclaimed for reducing risks, costs and delivery times of projects, the coming months are expected to see a rapid rise of large figure contracts as markets stabilise from the aftereffects of the Eurozone crisis and large firms increase dominance of public sector contracts.
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