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Contract Management: Getting It Wrong Carries Massive Cost

August 31, 2011

Lax accountability, poor planning, inadequate competition – and $30bn of waste in contracts. Those are the findings of a commission that will shortly report to the US Congress on spending in Iraq and Afghanistan.

The US has invested more than any other country in having a uniform approach to contracting and has poured millions of dollars into training and process standardization. They even have a ‘professional association’  that safeguards these standards and supposedly unites the government Contract Management resources with those of suppliers …..

So does this suggest that contract management is itself a waste of time and effort – or is it that Federal Contracting rules, practices and organization are at fault?

IACCM sees plenty of evidence that contract management can deliver considerable value. The fact that contracting remains poor in many organizations is mostly due to either a lack of rigor or the view that contract management is more about process than it is about judgment. In some organizations, it is transactional and inconsistent. There is no clear definition of role, responsibilities or enterprise process and strategy. In others, there is clear definition, but the role is focused on compliance and ensuring adherence to the rules.

Where contract management flourishes is in organizations that have understood it is not just about implementing rules, but is also about exercising judgment. That is where ‘commercialism’ comes in – good contracting is about doing more than implementing instructions in accordance with the rule book; it is also about making sure those instructions make sense and are sustainable. Of course, Contract Managers won’t make the decisions; but they should be raising the right challenges and forcing the executives and experts to think about what they are doing.

We must hope that this report prompts the Administration to consider fundamental reform in its approach to contract management. It should avoid the temptation to add further to the bureaucracy of review and approval. It should not hire hundreds more ‘contract professionals’ to oversee the outdated and ineffective FARS and DFARS. That is not the answer. In fact, it is arguably the extent of current review and approval that stifles good judgment. It renders every individual feeling powerless and insignificant. If any organization wants better results from its contracts, it should think about how to increase accountability for producing good contracting instruments and procedures. It should also ensure someone owns the development of contracting competence and has the tools to oversee its implementation and practice.

2 Comments
  1. Jim Alstott permalink

    Sadly, the summary of the report I saw called for more auditors! Not better contracting officers 😦
    All US government contracting officers I’ve interacted with in the past few years are running scared. The are focused entirely on having an audit-proof contract file, and not exercising good judgement. I cannot blame them.

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