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Managing changes to requirements

This briefing looks at an issue that is fundamental to the success of any commercial relationship that is to succeed over time: the ability to accommodate change successfully. Managing the change at the end of the contract is perhaps the biggest challenge of all; this is addressed in Recompetition.

What are changes to requirements?

Changes to requirements can be small adjustments to existing service specifications, planned modular/incremental developments, major business change leading to completely new services - or anything in between. In the context of this briefing, changes are significant enough to require management involvement.

Why is it important to manage changing requirements?

The need to negotiate change is a continuing and ongoing component of service contracts. The ability to accommodate change successfully is fundamental to the success of any commercial arrangement that is to succeed over time; partnerships are increasingly seen as a way of coping with uncertainty, as their purpose is to accommodate change effectively and efficiently. The need to negotiate change is a continuing and on-going component of partnerships; it may be an important issue too in more conventional contractual arrangements. This briefing assumes a partnership arrangement, but the principles apply generally.

Maintenance of existing systems involves ongoing changes to requirements. It is a major cost that requires careful attention.

Who is involved

Business managers and service providers are responsible for identifying the need for change in response to user demand or changes in the business. Service providers manage the implementation and provision of new or updated services. There may be an 'informed customer' role providing the interface between the customer and provider. In addition, there may be programme/project teams who are involved in modular or incremental change.


Requirements for change
The requirements/drivers for change during the term of the contract can derive from a range of internal or external sources. Internal change could include:

  • evolving business requirements of the public sector partner - because of:
    - changes in the customer's roles/responsibilities resulting from constitutional change (for example, creation of assemblies under devolution proposals); statutory developments (for example, introduction of new state benefit or tax); boundary of responsibility changes
    -new business requirements (for example, introduction of resource accounting systems and associated working practices)
  • the organisational re-structuring of either party - because of:
    - rationalisation of departmental roles/machinery of government developments (such as the creation of DWP)
    -provider restructuring/merger or acquisition resulting in revised management, reporting and/or approvals chains.
  • significant revisions to the corporate strategy/business objectives of either party.

External sources of change could include:

  • developments in technology (things which were not possible become possible, and therefore desired, or necessary to maintain the 'market' efficiency of service provision)
  • economic trends which affect the profitability/value for money of the relationship - from the perspective either of the private or public sector partner
  • the need to provide electronic forms of service delivery to meet customer expectation.

You must ensure that changing requirements do not take the resulting contract:

  • outside the scope of the original OJEU advertisement
  • outside the permitted extensions to existing contracts allowed under the relevant regulations.


A single change control procedure should apply to all changes, although there may be certain delegated or shortened procedures available in defined circumstances - such as delegated budget tolerance levels within which a contract manager would not have to seek senior management approval. However, flexibility needs to be built into this procedure to deal with issues such as emergencies. A change control procedure should provide a clear set of steps and clearly allocated responsibilities covering:

  • requesting changes
  • assessment of impact
  • prioritisation and authorisation
  • agreement with provider
  • control of implementation
  • documentation of change assessments and orders.

Responsibility for authorising different types of change will often rest with different people, and documented internal procedures will need to reflect this. In particular, changes to the overall contract, such as changes to prices outside the scope of agreed price variation mechanisms must have senior management approval. In many cases it will be possible to delegate limited powers to authorise minor changes which affect particular services or Service Level Agreements using agreed processes.

Change during the term of a contract can be categorised as follows:

  • planned/routine change
  • proactive change programmes
  • unplanned change.

Planned change
This could include modular and incremental developments, such as planning for changes to user requirements, refurbishment of workspace, maintenance/enhancements to existing systems or planned technology refreshment. This type of change is most easily accommodated under, and is best suited to, formal change management processes. Well constructed contractual agreements should contain express provisions detailing:

  • the procedures to be adopted in initiating, discussing and delivering change through:
    -user group
    -change control boards
    - formal approvals processes etc
  • benefits management regimes
  • the procedures to be adopted for the escalation and resolution of disputes that may arise, such as:
    - defined escalation routes and timescales
    - alternative dispute resolution procedures (neutral advisors, expert determination, arbitration etc.)
  • the procedure for making amendments to the contract documentation:
    - QA procedures (including legal QA)
    -authorisations (individual authorised signing powers)
    -audit trail.

Proactive change programmes
Change need not necessarily always be reactive in nature; it can be initiated deliberately as a proactive approach. There could, for example, be an element of business transformation to drive forward a change programme. In this way the contract is used as a vehicle to deliver efficiency improvements and associated cost savings from the re-engineering of the customer's internal business processes - facilitated by the use of technology.

The details of approaches taken in each project to date have been different, but a typical partnership arrangement might be (in summary):

Step 1: provider proposes business change project to customer

Step 2: customer approves project on basis of agreed cost/benefit model

Step 3: provider develops and implements new service to support new business process (at provider's risk)

Step 4: implement and adopt new business processes

Step 5: both parties measure resultant cost savings to customer using agreed cost/benefit model

Step 6: provider's service charges calculated as a percentage of realised cost savings to customer.

Recent contracts show an emerging trend. Over the life of the partnership as a whole, the expectation of the parties, sometimes underwritten by contractual guarantees from the provider, is that the aggregate cost savings to the customer over the term of the partnership may in fact exceed the aggregate 'core' service charges payable by the customer. The viability/appropriateness of the approach outlined above of course depends on the nature of the partnership, the customer organisation (in terms of its receptiveness to change, potential for improvement in existing business processes etc), and the services to be delivered.

Unplanned change
Unplanned change is imposed on the partnership from outside (for example, resulting from a change in some aspect of the external environment). This is the most difficult type of change to manage and accommodate - it is also potentially the most damaging to the partnership. It can hit the partnership unannounced and require immediate action by both parties. At worst it can serve to invalidate the deal for one or both parties, resulting in an unplanned conclusion of the programme or even the partnership.

Unplanned change will test the strength of the partnership relationship, and the capabilities of its management. The response to un-planned change is crucial and must be structured. In response to unplanned change, the partnership (that is both parties in co-operation), must undertake the following analysis:

Step 1: understand and assess the impact of the change on the partnership - can this be dealt with under the existing change management procedures or does this require specialised management?

Step 2: escalate within both partner organisations as appropriate

Step 3: review the basis of the deal - does the original deal remain viable for both parties?

Step 4: assess the extent of change required to the deal

Step 5: negotiate the required amendments.

From the customer's perspective as the public sector partner a key decision point is often reached at Step 4 above. It may be necessary for both partners to make real, and sometimes significant, concessions in the resulting negotiations in order to make the deal work for the future. A complete audit trail of developments is essential to ensure public accountability, but you must be prepared to make bold judgments where necessary to ensure the survival of the partnership (subject to the overall deal remaining viable to the public sector partner). Your decision-making must be driven by clear business objectives of the organisation.

For further related material see the step by step presentation of the Contract Management Workbook and the Requirements Workbook

Further information

See the related briefings on Managing Change and recompetition; see also the contract management guidelines and document description for changes to the contract. For more detailed advice, see OGC's commercially published guidance:

ITIL Service Management

See the checklist for Managing changes to requirements