Contract Compliance Reviews

November 30, 2012 No Comments by Sue Dess

Contract Compliance Reviews Inter-GrowthIn many Public Sector contracts, the Contracting Officer requires an annual review of the administration, operation and outcomes of the contract. This process is usually referred to as a “contract compliance review”. It incorporates an analysis that demonstrates whether both parties are meeting the obligations stipulated by the contract. This includes an assessment of whether the contract is working as it was originally intended, and can help evaluate how strong the business relationship between the contracting agency and the contractor is. Poor results on these annual reviews may result in sanctions or fines by the contracting agency. Therefore, an organization must be able to conduct a compliance review that provides a truthful demonstration services and business performance to the contracting agency and allows for appropriate corrective action to be taken.

To conduct a contract compliance review that can best protect your organization from sanctions or fines, provide leeway for appropriate corrective action and assist in retaining business in the future, it is essential to understand the nature and all components of the review, to prepare rigorously and thoroughly, to regularly convene internal stakeholders and to use project management tools to manage preparation activities and to conduct mock audits.

Conducting A Contract Compliance Review

Frequently, this preparation begins months before the annual review and incorporates several mock events. Some essential components of a contract compliance review include:

1)      Analyzing your financial history:

This including invoices, purchase orders, receipts, and payroll expenses to ensure that all payments and expenses are in compliance with the rates and scheduled terms stipulated in the contract. Frequently, an external auditing firm is used to prepare a formal analysis of the contractor’s financial documents. This enables you to demonstrate your stewardship of the contract’s funds and provides certification to the accuracy of your finance reporting.

2)      Evaluating the Policies and Procedures for all key business units:

Most contracting agencies require the contractor to update Policies and Procedures annually. Demonstrating your adherence to this standard indicates organizational skills and follow-through.

3)      Reviewing the total amount of work hours completed on the contract in a designated period of time:

This includes the key activities performed by all relevant staff members and key personnel. This can demonstrate that your organization is in compliance with contract requirements for staffing.

4)      Assessing whether project goals are being attained:

Some contracts specify certain target outcomes of key performance indicators that must be met. Demonstrating that your organization is meeting its performance goals is essential            to contract compliance.

5)      Detailing your organization’s workforce composition:

Contracts may have Equal Employment Opportunity (EEO) or Affirmative Action requirements, or may require that staff be members of unions. Demonstrating that your hiring and termination processes are in compliance with these requirements is an important component of this review. This can be demonstrated through a review of recruitment efforts, and summarizing employment applications received.  This verifies that your organization has made a good faith effort to comply with federal objectives for the recruitment of female and minority employees.

 

While demonstrating to a contracting agency that your organization is meeting all of the requirements of the contract you have been awarded, and preventing possible negative outcomes, a contract compliance review allows you to assess how appropriate the business relationship between an organization and a contracting entity may be. It is an essential tool for retaining and renewing contracts and for acquiring new business in the future.

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