Contract management within the government involves navigating common challenges for all large organizations, as well as specific considerations beyond those faced in the private sector. Federal contracts are subject to the Federal Acquisition Regulation (FAR) System, which guides acquisition planning, contract formation, and administration. Federal agencies must comply with strict, detailed guidelines that regulate spending, contract evaluation processes, and other aspects of the contract management lifecycle. State and local agencies are subject to certain federal or state laws, but may not be bound to follow FAR regulations when it comes to dealing with contracts.
State and local government agencies may look to FAR regulations as a template to structure contract management guidelines, or they may take advantage of the relative freedom they have to determine their own processes. Meanwhile, contractors for local, state, or federal agencies may benefit from evaluating their end of the contract management system to improve their chances at successful project completion or a renewed contract. This article will introduce key areas to consider in evaluating a government contract management system.
Risk Mitigation Processes
The National Contract Management Association stresses the importance of an integrated approach to risk management. Often, the NCMA reports, risk management methodology is fragmented, with departments such as financial, manufacturing, professional services, and engineering formulating their own internal methods. Without a well-defined, cost-effective, comprehensive risk management system, a government agency is vulnerable to gaps in risk management planning and implementation.
While there is always a possibility of unforeseen occurrences, the NCMA is optimistic about an agency’s potential to mitigate risk. They assert that, “If a government agency or contractor develops and practices opportunity and risk management as an integrated aspect of all its business activities...then most risk factors can be identified, quantified, and mitigated.”
Capturing knowledge throughout the contract management lifecycle provides necessary information to enhance risk management methodology. Conducting effective contract reviews before, during, and after contract completion provides an opportunity to capture essential information. Besides adopting a system that supports effective contract review, the other essential step is sharing knowledge between multiple departments to build an integrated, comprehensive system.
Project Team Assignment and Communication
Government contracts often involve a large team of people associated with the project. Procurement officials, advisors, engineers, project consultants, operations managers, notetakers, and the mayor or other governing official may comprise only a partial list of the internal team overseeing a project. Add the contractor’s team, and it can become confusing to track who is responsible for executing specific tasks laid out in the contract. Communicating updates clearly and quickly, and assigning tasks appropriately, is essential to reduce miscommunication.
In ideal circumstances, the contractor selected to complete the project has exceptional contract management skills in addition to expertise in the contracted service. In practice, government agencies cannot rely on contractors to manage contracts effectively. A study by accounting and advisory firm Baker Tilly found that only half of federal contractors have formal contract management training. Sixty percent use Microsoft Excel, rather than a sophisticated software tool, to track contracts.
What this means for contractors is that adopting a more advanced, responsive contract management system may afford them an advantage over the competition. Demonstrating an ability to monitor a project closely and adhere to deadline, cost, and compliance regulations is an important factor in working with a government agency. If a more robust approach to contract management is deemed likely to improve supervision and fulfillment of the contract terms, it’s worth investigating options to improve in this area.
For officials working within government agencies, the results from the Baker Tilly study may provide incentive to streamline internal contract management strategies to compensate for any potential shortcomings on the contractor’s part. Scheduling review meetings before key decisions in the contract lifecycle may help clarify next steps. Automating updates and linking project leaders to specific tasks and documents may improve access to necessary materials.
Cost and Opportunity Management
A government contract management purchasing agent in Massachusetts shared a case study in successful contract management. The city of Woburn was eligible for a $250,000 grant. The problem was that eligibility was contingent on completion of a streetlight upgrade on a seemingly impossible schedule. The city government conducted internal and external reviews, assessing local contractor availability and evaluating why progress had gone slowly during the initial phase of the project. Opting for a sealed bid method of procurement, promoting the opportunity in the contractor community, and asking smart questions about equipment and credit line capacity helped local government officials find a qualified contractor quickly, saving time and money. Ultimately, the project was completed on time and $90,000 under budget. It became eligible for the $250,000 in energy grant funding.
Not all contracted projects go this smoothly, but proactive attention helped local government officials in Woburn act on a significant opportunity. A contract management system’s ability to optimize cost-effectiveness isn’t only a matter of catching a particular contract before it goes over budget. Evaluating speed of contract access and sharing, workflow processes for screening potential contractors, and review protocol provides important insight into an agency’s ability to take advantage of cost-saving measures and opportunities.
Contractor Evaluation and Contract Renewal
Federal government agencies evaluate contractors according to a specific process called a Past Performance Evaluation. State and local governments may not be subject to the same guidelines, but follow state and local laws, regulations, or recommendations when it comes to evaluating contractor performance.
The State of Idaho Department of Administration, for example, has developed a flowchart that guides contract lifecycle management, including troubleshooting non-compliance issues and incorporating amendments to the initial contract.
Closing or renewing a contract is an opportunity to record an evaluation of the contractor as a reference for future projects. This need not be restricted to evaluating the same contractor’s future bids in light of past performance. A contract that goes particularly well, or particularly badly, contains information local government officials can use to determine what kinds of questions to ask during the procurement stage that might lead to successful project completion.