AI in contract management

Ryan Donley at Icertis explains why the use of AI in contracting is key to the UK’s £45 billion bet in cost savings

 

Every day, 45,000 letters arrive at the Driver and Vehicle Licensing Agency (DVLA). Somewhere in the mix, someone is waiting for a license, a refund, or an approval, delayed not by intent, but by outdated systems and inefficient processes. Elsewhere, the Department for Environment Food and Rural Affairs (DEFRA) is still managing over 500 different services with paper-based forms.

 

With nearly half of central government departments still reliant on paperwork and fragmented systems for everyday operations, these anecdotes are symptoms of a larger challenge facing the UK public sector.

 

Despite the best efforts of hardworking civil servants, billions are lost each year to inefficiencies woven into the fabric of government operations, according to the UK government’s State of Digital Government Review, released earlier this year.

 

That’s why the UK government has set its sights on a bold target: saving taxpayers £45 billion annually through the adoption of AI and digital technologies. This would help free up civil servants, local councils, the National Health Service (NHS) and other government bodies to spend more time supporting the people they serve.

 

The key to meeting this ambitious cost-saving target is AI in contracting.

 

 

The hidden costs of contracting

Contracts sit at the heart of strategic initiatives, yet they are too often forgotten in digital filing cabinets and overlooked as one of the largest untapped opportunities to enable strategic financial outcomes. As a result, government bodies can take nearly twice as long as their private-sector counterparts to complete contracts. These delays translate into missed deadlines, revenue leakage, noncompliance, and ultimately wasted taxpayer money.

 

It’s no small inefficiency either. Across industries, including the public sector, nearly 30 percent of the workforce is involved in contract management processes for their organisation, with contract data housed in an average of 24 different systems. This leads to widespread challenges in transparency and collaboration. 

 

 

AI as a transformative enabler

Overall, it’s estimated that 4 to 7 percent of public sector spending could be saved through unrealised savings and productivity benefits via the implementation of AI solutions. This is where AI-powered contract intelligence can unlock financial value.

 

Imagine AI agents embedded within government systems, trained to understand the rules and obligations governing contracts. These agents don’t just process forms – they flag risks, enforce terms, and surface opportunities to save and find revenue.

 

With agentic AI acting as a force multiplier to scale resources and support commercial goals, public sector agencies can drive operational efficiencies, increase win rates, gain insights, and improve performance across all their contractual relationships.  For example, AI-powered contracting supports post-award contract management, where value is typically lost because government agencies lack the resources to ensure commitments are fulfilled.

 

Whether it’s monitoring supplier performance, managing obligations or identifying bottlenecks, AI gives government agencies the tools to operate safely and securely at speed and scale.

 

 

Momentum in government

Signs of progress are already emerging, and the government has started to make changes to how it manages contracts. For instance, the proposed abolishment of NHS England and the consolidation of track and train services under Great British Railways point to broader efforts to reshape how the UK government manages the contracting landscape. This signifies a major opportunity for government-led efforts to make public sector contracts more efficient, cost-effective and aligned with overall strategic objectives.

 

The potential benefits these efforts offer are promising, but achieving the UK’s £45 billion cost-saving target doesn’t just rest with the UK public sector alone. Much of the nation’s critical infrastructure and essential services, particularly in sectors like aerospace and defence, transportation, and health, are delivered through long-term partnerships with private contractors. These public-private relationships are often governed by complex, long-term agreements where alignment and accountability are critical.

 

To deliver meaningful impact, both sides must operate from a single source of truth. An AI-powered platform can enable this alignment, ensuring that the objective of every agreement is realised at each stage of the contract lifecycle.

 

For AI to truly deliver on the UK government’s ambitious savings goal, the way the public sector negotiates, monitors, and enforces its commercial relationships must be reevaluated through the lens of technology. With AI-driven contract intelligence, government leaders will gain the visibility, control, and agility needed to spend smarter, respond faster, and manage risk organisation-wide.

 

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Ryan Donley is Vice President of Public Sector at Icertis

 

Main image courtesy of iStockPhoto.com and VioletaStoimenova