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Contracting Out Government Services:Managing Contracts

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Practice Advice on Program and Service Delivery 

Contracting Out Government Services: Contract Management (OECD) 

Summary AdviceThe OECD recommends maintaining effective contract management practices and fostering competitive markets for contracting out by maintaining transparency in the bidding process and introducing employee training policies for contract management. 

Main Points: The OECD provides the following recommendations for fostering competitive markets:

  • Competitive supplier markets are key to achieving the benefits of contracting out. The government should foster competitive markets by recognising that its contracting out practices can play a major role in the development of markets for the relevant services.
  • This relates especially to the scope and duration of contracts. At either extreme, contracts may be so small and short that they do not stimulate interest, or so large and lengthy that only the largest suppliers can participate. Consideration should therefore be given to bundling various services into attractive "packages" that can be contracted out as a single activity, or, conversely, splitting an activity among more than one contractor in order to foster competition. A judgement has to be made each time, but it should explicitly take account of its competitive impact.
  • Avoiding over-specification in contracts is also important for fostering competitive markets. If the objective for the bidding process can be specified, rather than the operational aspects of an activity, the market may be encouraged to develop its own proposals and solutions.
  • Contracting out is part of the procurement function. It should be recognised that participating in the bidding process involves substantial time and resources on the part of the bidders. To the extent that this process can be simplified and shortened, a greater number of valid bidders are likely to participate.

The OECD recommendations for developing and maintaining the necessary skills for contract management are:

  • Effective contract management requires a new set of skills for many government organisations. Recruitment and staff training policies need to take account of this.
  • Organisations that contract out activities need to maintain their knowledge of the market and their technical knowledge of the activity. This is imperative in order to be able to communicate with the contractor on equal terms, and to be in a position to effectively tender the activity again. This is especially relevant in the case of contracting out complex activities.
  • It can be considered inappropriate to assign responsibility for the contract management function to staff members formerly responsible for in-house production, especially if they were part of an unsuccessful in-house bid.
  • It should be recognised that contracting out involves a learning process, with knowledge gained through the contract management enabling subsequent tendering of the activity to be carried out more efficiently.


Source: OECD (1997). OECD, “Best Practice Guidelines For Contracting Out Government Services",  Public Management Services, PUMA Policy Brief,
OECD Publishing at: . Last accessed March 5th, 2013.

Page Created By: Khilola B. Zakhidova. The content presented on this page is drawn directly from the source(s) cited above, and consists of direct
quotations or close paraphrases. This material does not necessarily reflect the official view of the publishing organization.

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