Turnaround
Planning for Underperforming Contracts
29
June 2026,
Iain C. Steel
Underperforming contracts are an uncomfortable reality for many
UK public sector organisations. It is not unusual for contracts
to drift quietly off course for months or even years before
action is taken. By the time many authorities intervene, the
value has already been eroded, and the relationships are
strained or broken, with limited perceived options other than
going back out to the market and keep your fingers crossed that
next time it will be better.
However, without taking the steps needed to understand the cause
of the underperformance, it is common for the same issues to
reoccur. Turnaround planning, when done properly is about
restoring control.
Why Public Sector Contracts Underperform
Contract underperformance rarely begins with a dramatic failure.
More often, it starts with small deviations that feel manageable
at the time. A missed service level is excused because of
staffing pressures. A variation is agreed informally to maintain
goodwill. Governance meetings are postponed and then quietly
dropped from diaries. Each individual decision may appear
reasonable, but collectively they create a widening gap between
what the contract was designed to deliver and what is actually
being provided.
Public sector conditions exacerbate this drift. In local
authorities, political sensitivities and the imperative to
maintain service continuity can discourage robust challenge. In
wider authorities, devolved budgets and complex internal
stakeholder structures can blur accountability for contract
performance. Over time, contract management becomes reactive
rather than deliberate.
The Procurement Act 2023 materially changes the context in which
underperformance is managed. Its emphasis on transparency,
auditability, and lifecycle thinking increases the visibility of
contract decisions and reduces tolerance for informal or poorly
documented arrangements. Turnaround planning must therefore be
approached not just as an operational exercise, but as a
governance and assurance activity.
Recognising When a Contract Needs Turning Around
One of the most common reasons contracts
deteriorate is that organisations delay acknowledging there is a
problem. Early warning signs are often rationalised away.
Performance reports are accepted without challenge. Supplier
explanations become habitual. Internal teams adjust their
expectations rather than confront the underlying issue.
Indicators that a contract may require formal turnaround
planning include persistent KPI failures, repeated use of
contract variations to address issues that were foreseeable,
escalating management effort without corresponding improvement,
and growing reliance on informal workarounds. Financial signals
may include unplanned spend, increased claims, or poor cost
transparency. Behavioural signals, such as defensive supplier
responses or disengaged internal stakeholders, are equally
important.
The Procurement Act 2023’s transparency requirements increase
the importance of recognising these signals early. Decisions
that might previously have been contained within a small group
may now be subject to wider scrutiny. Delaying action not only
increases operational risk but also weakens the organisation’s
ability to justify its choices later.
Establishing the Contractual Baseline
Effective turnaround planning begins with
clarity. Before solutions are proposed, the organisation must
re-establish the contractual baseline. This sounds obvious, but
in practice it is often overlooked. Teams will often rely on
collective memory or assumptions about what the contract
requires, rather than revisiting the actual documents.
Re-establishing the baseline involves reviewing the original
contract, specifications, schedules, evaluation criteria, and
any subsequent variations. The aim is to understand what was
agreed, why it was agreed, and how risk was intended to be
allocated. This provides a factual foundation for discussion and
prevents debates from being driven by anecdote or frustration.
This step is particularly important under the Procurement Act
2023. Where material changes have been made to contracts,
authorities must be able to demonstrate that these changes were
lawful, proportionate, and in the public interest. A clear
baseline allows teams to distinguish between what is a
legitimate evolution and what is really just unmanaged scope
creep.
Diagnosing the Root Causes of Underperformance
Turnaround planning fails when it focuses
solely on symptoms. Missed KPIs, service complaints, or budget
overruns are manifestations of deeper issues. Long term
improvement requires us to understand why performance has
deteriorated.
Root causes often fall into several broad categories. The
original contract may have been poorly designed, with
unrealistic service levels or ambiguous responsibilities. The
market may have changed, rendering assumptions obsolete.
Internal capability gaps may mean the authority lacks the skills
or capacity to manage the contract effectively. In some cases,
supplier behaviour may be opportunistic rather than incapable.
The Procurement Act 2023’s emphasis on planning and market
engagement encourages authorities to reflect honestly on these
factors. While this reflection may be uncomfortable, it is an
essential step. A turnaround plan that ignores structural issues
will deliver, at best, short-term improvement.
Designing the Turnaround Strategy
Once the causes of underperformance are
understood, a structured turnaround strategy can be developed.
This should address three interrelated dimensions: commercial,
operational, and relational.
From a commercial perspective, the authority must consider how
the contract can be used to drive improvement. This may involve
enforcing existing remedies, revising KPIs, or clarifying
variation mechanisms. The objective is not to be punitive, but
to restore alignment between payment, performance, and outcomes.
Operationally, the focus should be on how services are actually
delivered. This may require changes to processes, resourcing, or
governance arrangements. In some cases, the authority’s own
behaviours may need to change, for example by improving the
timeliness of decisions or clarifying escalation routes.
Relationally, turnaround planning must address the health of the
client–supplier relationship. Trust may be low, but
confrontation without structure rarely delivers improvement.
Clear expectations, regular performance forums, and documented
actions create a framework within which difficult conversations
can take place constructively.
The Procurement Act 2023 reinforces the need for discipline in
this phase. Where changes are proposed, authorities must
consider whether they constitute material modifications and
ensure appropriate transparency. This encourages more thoughtful
decision-making and reduces the risk of informal agreements that
later prove indefensible.
Governance and Senior Oversight
Turnaround planning should not be
delegated entirely to contract managers. Senior oversight is
essential, both to signal the importance of the issue and to
support difficult decisions. This does not mean
micro-management, but it does require clear governance
structures and defined decision rights.
For high-risk or high-value contracts, formal turnaround plans
should be approved at an appropriate senior level and monitored
regularly.
Strong governance also protects individuals. When decisions are
taken collectively and documented properly, the risk of personal
blame or reputational damage is reduced.
Knowing When Turnaround Is Not Viable
Not all contracts can be salvaged. One of
the most difficult aspects of turnaround planning is recognising
when continued investment of time and effort is unlikely to
deliver value. Indicators that turnaround may not be viable
include fundamental market failure, irreparable breakdown of
trust, or contract structures that cannot be modified without
breaching procurement law.
The Procurement Act 2023 does not make exit decisions easier,
but it does make the rationale for those decisions more
important. Authorities must be able to demonstrate that they
have acted proportionately and in the public interest. Early
planning for exit, including service continuity arrangements and
re-procurement strategy, is therefore an essential component of
responsible contract management.
Learning for Future Procurements
A well-managed turnaround should generate
learning, not just resolution. Understanding why a contract
underperformed provides valuable insight for future
procurements. Were assumptions unrealistic? Was risk allocation
appropriate? Did governance arrangements reflect operational
complexity?
The Act’s emphasis on lifecycle thinking encourages authorities
to close this loop. Lessons learned should inform procurement
strategies, template contracts, and training programmes. This is
how individual contract failures are converted into
organisational improvement.
Turnaround planning for underperforming contracts is one of the
more challenging tasks faced by public sector procurement and
contract management professionals. It requires commercial
judgement, political awareness, and the confidence to confront
uncomfortable realities. Done poorly, it prolongs failure and
increases risk. Done well, it restores value, protects service
users, and demonstrates effective stewardship of public funds.
Transparency, accountability, and defensibility are not
optional. The ability to recognise underperformance early and
respond decisively is an essential, and often defining, feature
of mature procurement practice.
(This article was first
published in the May / June 2026 edition of In-procurement
Magazine, pgs. 22-26).
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