Contract Management becomes top priority for the White House

December 13, 2010

Daniel Gordon, procurement policy administrator at the Office of Management and Budget

Dan Gordon, administrator of the Office of Federal Procurement Policy, has announced a range of initiatives to improve contract management practices between suppliers to the US Government and the way that Government Agencies administer and manage contract performance and obligations.

“Contract Management is front and center in our focus”, Gordon declared at a recent meeting on procurement reform.  Gordon and the Obama administration intend to root out negligent behavior in government acquisition by having agencies better manage the contracts they award.

“A company will no longer get a contract and then never again hear from the agency about the work”, Gordon said.  “Further the government won’t turn a blind eye toward schemes or well-known shady business partnerships”.

There are many examples of poor contract management practices in Government and organizations like the Project on Government Oversight (www.pogo.org) have made a significant impact in raising awareness of the need to not just negotiate contracts with third party suppliers, but also to track performance and monitor compliance to contracted obligations once the contract has been signed.

As contracting becomes more complex and more litigious (a recent study by Fulbright and Jaworski showed that the majority of corporate litigation matters now arise from contract-related disputes), it is crucial to keep track of what has been committed to in a contract.

The old world of throwing more resources at the problem of  contract oversight will not work anymore.  Qualified contract management resources are hard to find and manual tracking of contract milestones and obligations was too error-prone anyway.  What is required is a balance of technology solutions that support the contracting process and human oversight to enforce contracted terms and conditions.

Choosing the right technology solution is critical. Many Finance or ERP based contract database solutions fail to realise that government contracting demands automation and control at every stage of the contracting process from the creation of the contract, through to the tracking of obligations and the tracking of vendor performance. 

Some contract management software solutions, like Dolphin Contract Manager, automatically integrate with the Federal Acquisition Regulations (FAR/DFAR) list and allow government procurement managers to efficiently create contracts and ensure that commitments and obligations are effectively managed once the contract has been executed.

We believe that true transparency in government contracting can only be really achieved when you have total control over your contracts and obligations.  It is time for government agencies to embrace technology solutions to help them to achieve this.



UK coalition government looks to improve contract oversight in public sector

November 20, 2010

One of the first actions of the new coalition government in the UK led by David Cameron in May 2010, was to enact new legislation to compel central and local government organisations to disclose details of all expenditure and contracts worth in excess of GBP 500 (USD 800).

In an environment where contract commitment management has been lax and almost non-existant (the National Audit office claimed that the central government wasted GBP 300 million each year on IT and Telecom contracts alone in 2009), this will prove to be a major challenge for local and central government organisations.

There is much fear at the local government level that this new legislation, aimed at “Labour’s secretive and wasteful contracts regime”, will add significant cost and workload at a time when budgets have are being cut as part of the Government’s austerity measures.

Proper contract oversight is always recommended, but never has there been a greater need in the Public Sector to get a handle on contracts and commitments.  A Freedom of Information search relating to contract search should take a matter of seconds to comply with, if an organisation has proper control over contracted milestones and commitments.  With more and more public services being outsourced (the BBC claims that Capita has gained outsourcing contracts worth in excess of GBP 3 billion in the public sector), it is becoming more and more difficult to adquately manage contract spend and obligations.

Now is the time for public sector organisations in the UK to evaluate the benefits of using technology solutions to manage and control contracts more effectively, so that adequate funds are put aside in the new financial year.  Contract Management software solutions play a key part in an organisation’s governance, audit and compliance regime.  In the public sector, there is a real need to extract more value out of contracts with external suppliers and service providers as budgets and tax revenues decline; as well as the requirement to avoid costly reputational damage when poor contract oversight is exposed through Freedom of Infromation requests or via the media.

Dolphin Contract Manager from Dolphin Software provides best-of-class contract management functionality across the entire contracting process to allow organisations to keep track of supplier performance, contract spend and control over contracted obligations much more effectively than can be achieved through manaual means or managing contracts by spreadsheet.

Download BearingPoint Consulting’s authoritative 2010 Contract Management study from www.dolphin-software.com to assess how contract management software can benefit your organisation.


Pentagon to withold payments to vendors with poor contract management systems.

January 28, 2010

Business Week Magazine reports this week that the Pentagon is proposing a rule in the Federal Register that will prevent or withold payment to defense contractors where poor contract management and oversight can be identified.

The proposed rule would give the Pentagon the right “to withhold a percentage of payments under certain conditions, when a contractor’s business system contains deficiencies.”

The rule would cover most defense contracts, as well as other contracts that reimburse companies for costs or pay incentive fees for hitting cost and schedule targets, or those that base payments on time, materials or labor hours.

This is seen as a move by US Defense Secretary Robert Gates to tighten up contract oversight practices to reduce contract overspending.

This clearly means that government contractors are going to have to have much greater control over their contract management processes and how they manage Federal Acquisition FAR and DFAR clauses and obligations.  Government contractors should urgently consider the deployment of contract management systems that will help them to streamline their contract processes and provide greater oversight in to contract obligations.  Solutions like Dolphin Contract Manager, provide full contract lifecycle management funcitonality as well as FAR and DFAR clause and Obligation Management.


Contract oversight for US Government contractors in the spotlight.

January 26, 2010

In the latest in a long list of poor contract governance and oversight examples relating to US government contractors, a report will be published early next week by the Special Inspector General for Iraq Reconstruction.

Stuart Bowen, Special Inspector General for Iraq Reconstruction, will strongly criticize the US State Department for failings in contract management and contract oversight in relation to the award of a contract to DynCorp International to provide training services to the Iraqi Police force.  The report suggests that some $2.5 billion has been wasted through poor contract management practices.

It is well known that there is a chronic shortage of qualified contract management personnel in the US Government.  Last year President Obama called for the recruitment of 19,000 new contract managers to improve government contract oversight with external vendors; but technology can also play a part in making government contract management more effective.

US government contracts are governed by a strict set of rules and regulations, called Federal Acquisition Regulations, or FARs.   FARs contain both clauses that need to be included in government contractor agreements (and in some cases, flow down to sub-contractors) as well as guidelines and regulations that need to be adhered to to.

Contract Management software solutions, like Dolphin Contract Manager, facilitate the effective management of FAR (and Department of Defense – DFAR) clauses and regulations through its unique FAR Clause Library and FAR Obligation Management functionality.  When coupled with contract milestone data management and management reports and alerts, contract managers are able to gain much greater visibility and control over contracted commitments and critical milestones.


Contract obligation management

January 10, 2010

If you were to disect the contents of an average contract, you will likely find a mix of  legal clauses, terms and conditions … and obligations.  Obligations that either you want a supplier or vendor to comply to, or obligations that you commit to from a customer or other third party.

Why is it then that contract obligations get such poor air-time from legal departments and other stakeholders who are tasked with contract management activities.

From Dolphin Software’s experience, Microsoft Excel appears to be the de facto contract data repository for most in-house legal departments, where key contract milestone data is held in a spreadsheet in an attempt to provide more structure and control over the tracking of contract terms and conditions.  Spreadsheets become limited in their ability to manage contracts when the volume of contract data gets too much, when managers expect to be proactively rather than reactively alerted to a key contract event or when you need to find the original or electronic copy of the contract in a hurry.

So what about contract obligations data and information – are these held in these spreadsheets alongside contract milestone data, like key dates, contract parties, monetary values, etc.?  In most cases, the answer is no.  This is probably due to the fact that the owner of the spreasheet is rarely the same person who is personally responsible for executing or overseeing the process of contract obligation management.

Contract obligations can include anything from service level agreements and delivery times to customer service targets and can be directly linked to penalties for non-performance; or even bonus payments for achieving targets.  This is what NASA has to say about contract obligation management:

Unrecorded or inaccurate obligation record keeping can distort the accuracy of available appropriation balances.  Failure to record obligations and adjustments in a timely manner increases the risk of overobligation and the risk that program officials will not have accurate information to use in decision making.

A contract obligation may be identified by a legal specialist or a contract manager, but in most cases the responsibility for ensuring on-time delivery or vendor invoice accuracy is not that of the contract manager, but of other business colleagues. 

Effective contract management systems should be able to provide greater visibility and control over the contract process by not only providing a more logical environment to manage contract documents and milestone data, but also an environment where contract obligations can be tracked and adhered to.

Contract Management solutions, like Dolphin Contract Manager, allow obligations to be allocated to business users, who are then automatically alerted when a relevant obligation is due.  Best-practice procedures and KPIs can be linked to contract obligations and these should form part of a comprehensive programme of contract obligation management.

 
 

 


Contract Management on the government’s radar

June 29, 2009

329px-Official_seal_of_the_American_Recovery_and_Reinvestment_Act_of_2009_svgSince the creation of the US government Stimulation Package, or American Recovery and Reinvestment Act 2009 to be precise, there has been a noted increase in activity and interest in the discipline contract management.  Interest in Contract Management has largely been driven by pressure from the public to force government agencies to provide greater transparency and justification for the vast sums of taxpayer’s money being spent to bolster the fragile economy.

It may have been a coincidence, but the topic of contract management in the military has also come to the fore in recent weeks, with the publishing of a highly critical report by the Wartime Contracting Commisssion on the wastage of public funds in Afghanistan and Iraq, where billlions of dollars have been unaccounted for and certain defense contractors, like KBR Inc., have scooped millions of dollars in performance bonuses because of poor contract oversight.

“One example of wasted money cited by the commission involves construction of a $30 million dining facility at a U.S. base in Iraq scheduled to be completed Dec. 25. The decision to build it was based on bad planning and botched paperwork. Yet the project is too far along to stop, making the mess hall a future monument to the waste and inefficiency plaguing the war effort”, says Richard Lardner of the Associated Press.  The US Army is due to withdraw from that location before that date.

With a bit of luck, increased visibility in to contract management issues at these governmental levels will be akin to new technological developments in the car industry through Nascar or Formula One, where the benefits technological developments infiltrate down to production vehicles; so in the world of contract management, hopefully greater attention on contract management issues at a governmental level will infiltrate down to other government organizations on a local level, and companies in the private sector.

The role of Contract Management software in Government contracting oversight
Contract Management in the public sector remains a  largely manual and inefficient process.  President Obama and the UK government have already gone on record in recent months bemoaning the lack of skilled and qualified resources to provide effective contract oversight needed to track government contracting.

Contract Management software solutions are not, in general, designed to eliminate people from the contract management process, but can provide significant efficiency gains and greater management information to allow more effective contract oversight and management.

Contract Management systems effectively allow organizations to track and manage contract obligations, spending and commitments, as well as helping to streamline the contract drafting, review, external negotiation and archiving process.

Many people and organizations understand that they need to manage and control their contract processes more effectively, but few are aware that there are robust technology solutions to streamline this effort.  Contract Management software systems should generally provide the following core areas of functionality:

  1. Contract Authoring, to streamline the contract creation process
  2. Internal approval workflows
  3. Central electronic contract repository
  4. External secure workspaces for contract negotiation
  5. Reporting and analytics, to track and manage contract milestones and commitments

With greater attention on where and how taxpayer’s money is spent, government agencies that contract with external parties to provide services to the public will need to become much more efficient in the way that contracts are created and managed in the future.