The Vital Role of Contract Management in Government Contracting
Federal, state, and local governments are rich sources of revenue for many suppliers and contractors, but working with government agencies can be complex due to their often-stringent reporting requirements, tight budget controls, and bureaucratic nature.
Enterprise contract management software can help organizations manage this complexity with less expense and minimized revenue leakage. Contract management automation not only reduces the costs of non-compliance and inefficiency, it can enable enterprises to identify and capitalize on all revenue opportunities allowed under contracts.
Of vital importance, contract management software can also help suppliers and contractors continue to get government contracts. Government agencies typically place great weight on the timely sharing of accurate data, the ability to accurately forecast costs and meet budget, and reliable adherence to government requirements. Enterprise contract software facilitates this consistent trustworthiness, which leads to repeat government business.
Particularly considering how budget-strapped many government agencies currently are, they are eager to award contracts to companies that have proven they can control costs, won’t bring unwelcome surprises, and make it easier on the agency employees responsible for the contracts.
The Responsibilities of Doing Business With the Government
Large government agencies usually have enough leverage to compel enterprises to accept much of the management responsibility for contracts. A typical example of the expectations that government agencies have can be found in the Montana Department of Transportation’s Contract Management Manual for Recipients of Federal Highway Safety Grant Funding.
The MDT lists 13 specific responsibilities of the contractors it selects for grant funding. Without exception, each involves effective contract management that’s not susceptible to the disorganization and human error of manual contract management. The specific responsibilities include meeting deadlines, accurately forecasting costs, coordinating activities with other contractors, keeping the MDT informed of contract activity, following the letter of the law, providing transparent accounting, and, of course, keeping costs within budget.
The MDT manual also provides insight into how automated contract management can make it more likely for enterprises to have necessary contract amendments approved. The MDT allows amendments in several cases, including significant changes to contract scope, cost items not included in the original budget, and budget overruns.
But approval depends on the contractor’s ability to makes its case — what the MDT terms as “circumstances and justification for the request.” This ability is greatly enhanced with the data aggregation, analysis, and reporting features of quality enterprise contract management software.
The MDT also considers “current and past performance” and “the timeliness and quality of claims and quarterly reports.” An enterprise with automated contract management will almost always perform better in both of these areas than a company still using manual processes.
The Costs of Non-Compliance
The MDT — like most government agencies — doesn’t put up with failures to meet contract terms. “If a project is not being implemented according to the terms of the contract, or if the contractor is violating state or federal laws, MDT’s program specialist has the responsibility to recommend cancellation of the project,” its manual unequivocally states.
The manual goes on to stipulate that it will withhold or disallow payments, reduce or end existing grant funding, and/or block future grant funding to contractors that don’t comply with terms, including timely, acceptable reimbursement claims, quarterly reports, and final reports.
Considering what’s at stake, contractors doing business with the MDT can’t afford to be without the dependable support of contract management automation, which constantly works to prevent mistakes that could jeopardize ongoing profitable relationships with the agency.
When working with government agencies, a smooth, reliable, and accurate contract management system is essential to maximizing contract profit and earning more government contracts.