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An Open Book approach

Benefits of an Open Book approach

Many Customers are now seeking to extend the way in which cost is managed through Open Book arrangements that provide complete cost transparency. Ian Williams has significant experience

in this area. The benefits that this approach has provided include

• Constant innovation driven by all parties looking to cut costs not enhance value, and then sharing the savings
• Greater focus on expenditure and forecasting
• Improved budgetary control
• Ownership of cost throughout the entire team – physical and virtual
• Reduction in administration compared with value driven arrangements

The Open Book Approach

Central to any Partnering Arrangement is the confidence the partners have in each other’s commitment to share general business information, including cost information. Open Book Accounting is one of the tools available to achieve this. Reasons for employing an openbook approach vary, but most would agree that it supports the principles of Best Value, the ethos of partnering and has the potential to generate those often elusive cost savings.

However, the phrase Open Book Accounting should not be misunderstood. It is not a defined term but more a generic expression describing a level of access to accounting data that would not normally have been available under a conventional procurement method. The level of access must be agreed on a case-by-case basis to reflect the circumstances of the partnering arrangement and the need for access to certain data to monitor performance or benefits arising

Establishing an Open Book Approach

Arrangements vary and depend largely on the nature of the service and length of contract, but their purpose should always be to

• permit performance to be monitored
• meet initial tender promises and costings to be given developmental consideration by both sides, especially in longer term contracts
• ensure that future expenditure and investment is agreed and discussed to ensure that efficiency gains are accounted for in a suitable manner

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Although becoming more widespread, some partnering organisations still shy away from this method of accountability and risk management. There are many reasons for this, but in our experience it comes down to the fear factor - on both sides. Sometimes it is difficult to give the necessary time required to develop this more trusting level of relationship. There is also an apprehension especially in the Public Sector that  adopting open book arrangements will be used to drive up prices at a time when expenditure is tightly controlled. Some service providers are shy of opening their books as they fear their practices will not stand up to scrutiny.

In our experience, most organisations want services to operate well, but operate to tightly controlled and limited budgets and would value ongoing input into service development and continual improvement.

This is exactly the sort of environment that open book arrangements help create.