The federal government stands as the nation’s largest entity in many ways. Among them, it’s the biggest buyer of goods and services. It spends some $700 billion a year through contracting.

The act of writing, issuing, monitoring and ultimately closing out contracts therefore makes for a major administrative task. More than just paperwork, good contract administration helps assure compliance, performance and stewardship of taxpayer dollars – both for the government and for contractors.

Kim Miller, the vice president of industry advisory at Icertis, knows all of this. She spent 26 years in government aerospace and defense contracting. She advocates approaching the modernizing of contracting from a cradle-to-grave viewpoint.

“We’re not just looking at the execution of an agreement and then the obligations and requirements of an agreement,” Miller said. “We’re looking at it from the very beginning, at the time of the acquisition and the campaign, and going through that entire process as well as from the contract closeout standpoint.”

Miller added that obtaining such a comprehensive view of the lifecycle of contract activities requires integration of the contracting system with enterprise resource planning (ERP) and other systems that track sales, purchasing actions, inventories and operations. Contractors, she said, should have integration between the buy and sell sides of their operations.

Miller added, “And then [information] flows into the sub contracts. The subcontractor do their closeout, making sure the purchase orders have all been received, invoiced and everything is accurate.” This assurance, she said, rolls up to the prime, eventually aiding accurate closeouts.

“The system is the enabler,” she said, “and it really looks at how do we track things like obligations, risk management and ensuring that we’re in compliance and closing out the contracts compliantly.”

Begin at the beginning

Good contract administration starts with a good contract, Miller said. A challenge stems from the fact that government and industry contracts typically contain scores or hundreds of clauses, not all of which apply to a particular exchange.

A contract writing system, Miller said, should make it easy to choose from a library of clauses to include only the relevant ones. On Icertis’s platform, she said, “you have that ability and flexibility to select the format and the template that is going to be used for the contract negotiation.” If there’s an objection from a customer or supplier, “you have the ability to provide alternate solutions for that clause.”

Miller said government and industry contracting people seek gains in efficiency, compliance assurance and risk mitigation from their contracting systems. Typical questions might be, “What are the ramifications of the inability to get parts from a certain supplier? Cost increases, and how do we utilize the contract to its fullest extent possible?” A comprehensive contract lifecycle management (CLM) system inculcates risk factors such as inflation, commodity interruptions, weather events – anything that could affect the supply chain and contractor performance.

“The ability to identify and integrate that risk within a life cycle contract management solution, providing a potential response or mitigation action based on the contract, is really a game changer,” Miller said.

Properly configured, the CLM system can provide active alerts when occurrences or conditions require attention. Otherwise, Miller said, static paper contracts tend to get tossed into file cabinets. Such lack of visibility can lead to higher compliance risks.

Efficiency comes from simply changing a manual paper process into a fully digital one, Miller said.

“When you have the contracting officers having to monitor the contracts for compliance and ensuring every aspect and obligation within the contract is performed, it’s very time consuming,” Miller said. “When you have a system do that for them, it really is an enabler and efficiency driver.”

Automation is possible when the CLM incorporates pricing, terms and conditions, statements of work, purchase requisitions and purchase orders, and related information, Miller said. That approach reduces errors, which can remain hidden until some issue comes up.

Agencies often miss the details of contract closeouts, which have legal and financial implications. But when “you’ve been continuously monitoring and tracking throughout the life cycle of that contract,” Miller said, “when it comes time for the closeout, you actually have everything pretty much completed. You’ve monitored and tracked performance throughout that life cycle, and you have that summary at the end.”

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