Managing Government Contracts with Automation
Contracts with government agencies require a high level of accounting accuracy and fiscal management. And with the level of today’s technology, government agencies prefer to award contracts to enterprises that have automated contract management to ensure this accuracy and facilitate more-efficient management.
When it comes to meeting the accounting, reporting, and operational requirements of government contracts, contract management software is virtually indispensable — and government agencies realize this.
A typical example of the expectations that government agencies have for contractors can be found in chapter six of the Montana Department of Transportation’s Contract Management Manual for Recipients of Federal Highway Safety Grant Funding. This chapter details the MDT’s fiscal requirements for contractors, and its not a short list.
Separate Project Records
Like most government agencies, the MDT places the responsibility for maintaining project costs on the contractor, and it requires those costs to be broken out by project. Even more challenging for contractors without contract management software is the requirement that all costs be justified.
It’s the contractor’s responsibility to support the allocation of payroll expenses to particular project. The contractor is also required to supply itemized invoices for each project-related cost, as well as to justify the cost as part of the contract agreement.
“All project transactions are subject to audit,” the MDT warns. “Failure to comply with the provisions of this chapter or any portion of this Contract Management Manual will result in audit exceptions, possibly subsequent loss of funds, and/or possible repayment of funds.”
The MDT stipulates that contractors must follow their normal procurement policies and procedures. This is a normal requirement, and it necessitates enterprise contract management software to provide the data to defend against any government claims that a cost is outside of a contractor’s standard costs. Trying to prove standard policies and procedures based on paper trails is an exercise in frustration, and most likely futility.
Of course government agencies will insist that all costs be in compliance with the contract, but considering the complexity of many government contracts, it can be difficult for contractors to be sure if a cost is allowed. With contract management software, there’s never any question because the software will automatically flag any non-compliant cost.
There will also be no question on the part of the government agency because the contractor will have readily available justification if the agency questions any cost.
The MDT manual includes a typical government-contract clause, requiring detailed source documents for every contractor cost. With enterprise contract management software, supplying this original source documentation is a breeze; without it, it can be a filing-cabinet nightmare.
The Intangible Benefit
Contract management automation enables a contractor to meet the many requirements of government agencies, but it goes beyond just fulfilling contractual obligations for accounting and reporting. Contract management software simply makes it easier for government agencies to do business with an enterprise.
With automation, an agency knows that it can rely on accurate, timely, and transparent accounting records. And what agency official wouldn’t prefer to work with an enterprise that proactively identifies possibly non-compliant or non-standard costs and requests approval before the costs are incurred?
Government agencies also keep up with the latest technological developments, and so they are sure to place value on the fact that a contractor utilizes contract management automation. They can see the evidence in other contractors they work withcontract management software not only aids in project accounting, it leads to more-efficient provision of services.
The reality now is that when dealing with government agencies, automated contract management isn’t so much a competitive advantage as a competitive necessity.