PPN 004: Open Book Contract Management · first published 17 February 2025
This Procurement Policy Note (PPN 004) sets out how central government departments, executive agencies, and non-departmental public bodies (NDPBs) must apply Open Book Contract Management (OBCM) — a process where the buyer scrutinises a supplier's costs, margins, and accounting data to ensure value for money. It was originally issued in 2016 and has been updated in February 2025 to reflect new terminology from the Procurement Act 2023 and Procurement Regulations 2024, which apply to procurements started on or after 24 February 2025. The update is not a change in policy — the underlying obligations remain the same. OBCM is typically used on large, complex, high-risk contracts and is applied using a four-tier framework that scales the level of scrutiny to the risk and complexity of each contract. If you are a small business supplying on a large or complex central government contract, your buyer may require you to open up your cost and margin data under this framework.
WHO THIS APPLIES TO
THE ENKII VIEW
For SMEs, OBCM is most likely to apply if you hold or are bidding for a high-value, complex central government contract — the tiered framework means lighter-touch scrutiny at lower risk levels, which limits the burden on smaller suppliers with simpler contracts. However, if you do land a Tier 3 or 4 contract, you will need robust cost-tracking and financial record-keeping to demonstrate "allowable costs," so investing in that capability now is a practical competitive advantage. The document is primarily a buyer-facing obligation, but suppliers who understand the framework and can engage confidently with open book processes will be better placed to build trust and retain government contracts.
1. Build and maintain detailed cost records that clearly separate allowable costs (appropriate, attributable, and valid contract costs) from other business costs — so you are ready if your buyer invokes an open book requirement.
SMEs holding or bidding for complex, high-value central government contracts — OBCM Tier 3 and 4 contracts require suppliers to open up cost and margin data; the framework centres on agreeing and tracking 'allowable costs', so having clean, auditable records is essential to avoid disputes.
2. Check whether the contract opportunity references OBCM requirements and, if so, identify which Tier applies — lighter scrutiny at lower tiers means you can calibrate how much financial transparency infrastructure you need.
SMEs bidding for central government contracts commenced on or after 24 February 2025 — The tiered framework means OBCM obligations scale with contract risk and complexity; understanding your tier early helps you avoid over-investing in compliance or being caught unprepared.
3. Review your existing contract terms against PPN 05/16 (the predecessor note) rather than this updated PPN — the Procurement Act 2023 does not apply to contracts awarded before that date.
SMEs already holding central government contracts awarded before 24 February 2025 — The document explicitly states that the Procurement Act 2023 'does not apply to procurements commenced before 24 February 2025 or to contracts awarded prior to this date', so the old rules still govern your existing contracts.
4. Familiarise yourself with the concept of 'allowable costs' and ensure your finance team or accountant can produce reports that distinguish contract-attributable costs from general overheads, ahead of any buyer-initiated open book review.
SMEs supplying on or pursuing Tier 3–4 central government contracts — OBCM tools at higher tiers are 'built around agreeing and tracking allowable costs'; suppliers who cannot produce this data risk commercial disputes or being seen as non-cooperative by the buyer.
5. Contact the Crown Commercial Service (CCS) Helpdesk (0345 410 2222 / info@crowncommercial.gov.uk) to ask for the standard OBCM templates and clarify what your buyer is required to apply.
SMEs uncertain about OBCM obligations on a specific contract — The PPN directs all enquiries and requests for standard templates to the CCS Helpdesk, making this the official first port of call for supplier-side questions.
Every rule below quotes the official document verbatim.
This PPN applies to all central government departments, their executive agencies, and non-departmental public bodies (referred to as 'in-scope organisations'). (All central government departments, executive agencies, and NDPBs)
“This Procurement Policy Note (PPN) applies to all central government departments, their executive agencies and non-departmental public bodies. Such bodies are referred to as 'in-scope organisations'.”
In-scope organisations must note and apply the provisions of this PPN from 24 February 2025. (All in-scope organisations)
“In-scope organisations should note the provisions of this PPN from 24 February 2025.”
The Procurement Act 2023 and Procurement Regulations 2024 apply only to procurements commenced on or after 24 February 2025; contracts started before that date fall under the previous legislation and PPN 05/16. (All in-scope organisations)
“The Procurement Act 2023 and the Procurement Regulations 2024 apply to procurements commenced on or after 24 February 2025.”
The update to this PPN does not constitute a change in policy or a new call for action — existing obligations remain. (All in-scope organisations)
“This update does not constitute a change in policy or a new call for action but in-scope organisations should continue to apply any ongoing obligations set out in the provisions of this PPN.”
OBCM uses a tiered framework (Decision Tool, Application Model, and 5 Tools) to determine the proportionate level of open book scrutiny based on risk and complexity of each contract. (All in-scope organisations applying OBCM)
“Decision Tool used to decide the optimal benefit/cost Tier of OBCM application; Application Model which identifies the proportionate set of tools and processes for that Tier; and 5 Tools used in OBCM processes and collaborative behaviours.”
The full suite of OBCM tools should only be applied to more complex contracts, typically those in Tiers 3 or 4. (In-scope organisations managing Tier 3 or 4 contracts)
“The Tools should only be applied fully for more complex contracts (typically in Tiers 3 or 4).”
Allowable costs — those that are appropriate, attributable, and valid within the contract — are the central concept used in OBCM to assess whether costs incurred are reasonable. (Suppliers on Tier 3 or 4 OBCM contracts)
“They are built around agreeing and tracking allowable costs: those that qualify as being appropriate and attributable and so valid costs within the contract. A clear definition of allowable costs is then used in assessing whether the costs incurred are reasonable.”
OBCM should only be applied where the additional cost of doing so is justified by the perceived level of benefits and risk. (All in-scope organisations)
“Open Book should be used on those contracts where the additional cost is justified by the perceived level of benefits and risk.”
Third-party support for reviewing contract portfolios is available to in-scope organisations at an estimated cost of approximately £15,000 per organisation. (In-scope organisations choosing to use third-party portfolio review support)
“The services of a 3rd party provider will be made available to review existing portfolios of contracts and in-scope organisations can choose to take advantage of this at their own cost, which is estimated to be in the region of £15k per in-scope organisation.”
Implementation of OBCM requires a multi-disciplinary team combining finance, commercial, and subject-matter expertise; in-scope organisations are recommended to ensure adequate resources are available. (In-scope organisations implementing OBCM)
“Implementation of Open Book Contract Management requires a particular combination of skills and capabilities; the approach brings together finance, commercial and subject matter specialists.”
This briefing is enkii's interpretation of the official document — the official text always governs.
Source document © Crown copyright, reused under the Open Government Licence v3.0 via the GOV.UK Content API. enkii tracks every Procurement Policy Note and briefs changes the day they land — see all briefings.