The Universal Need for More Oversight of Contracts

5-9-2016 | by Ben Fleshman

Auditors of the city of San Diego issued a statement on April 21 which proclaimed the many weaknesses in the city’s contract oversight and contract management procedures. The auditors reviewed 50 municipal contracts, and then took a magnifying glass, so to speak, to 6 of them. This close examination turned up a whole host of difficulties with their contract administration, including difficulties with procurement, execution, pricing, and a cacophony of other problems.

Unfortunately, this mishandling or inattentive treatment of contracts is not a singular event. Properly managing contracts has become a rather serious issue for a large proportion of companies. Many companies struggle with procurement, drafting, execution, compliance, and renewal. It is estimated that 10% of all contracts go missing entirely. What, then, can be done to reduce the issues surrounding contract oversight and management? Contract lifecycle management (CLM) software is the key to establishing a new level of control over your contracts and reducing the issues with contract oversight. Let’s use the case of San Diego as an example.

What Happened in San Diego?

One of the most prevalent problems was San Diego’s contract oversight structure. Simply put, there wasn’t much administrative oversight actually happening. According to the Times of San Diego website, “The structure led to a situation where some contracts were not properly executed; work in another started before the deal was finalized; purchase orders were not properly tied to the contracts; extensions weren’t completed before agreements lapsed; and invoices were paid without verifying that the pricing spelled out in the contract was followed.”

Accompanying these problems with execution, it appears that there were serious difficulties with procurement and authorization procedures that were not followed. Not only did staff fail to take advantage of discounts from vendors for early payments, but the auditors noticed that 10-15% markups had been added above the department–approved pricing.

All of this boils down to a matter of leadership. City management failed to enforce proper contracting procedure. Employees and staff were not going through the proper channels for contract approval, and this led to money that was lost to mark ups, possible overpayment for invoices contracted, loss of business, and other things.

What was the auditor’s suggestion for fixing the problem? They recommended that “the city’s executive management, led by the chief operating officer, should take a lead role in systematically addressing contract administration and oversight problems.”

Contract Management Software

The auditors for the city of San Diego suggested that administrators establish standards of performance and expectations, train contract administrators to properly execute and monitor contracts, and then perform ongoing evaluations to ensure compliance.

The need for more oversight, as well as the proven track record for the benefits of good software naturally leads one’s thoughts to the possibility of digital solutions.CLM software provides an easy way for contract administrators to manage a company’s contracts and ensure company–wide procedural compliance. Among the other benefits of CLM software, the administrative oversight tools will grant executive administrators, and their appointed managers, an extra measure of control in the contract lifecycle.

Train Contract Administrators to Properly Manage Contracts

Using contract management software is simple, and easy. Contract administrators won’t require much training in order to use the tools available through CLM software. The intuitive nature of the software makes it easy to draft, negotiate, sign, monitor, summarize, and report on contracts. This allows administrators to quickly transition from an inefficient system to an efficient one and begin improving contract oversight almost instantaneously.

Establish Universal Standards of Performance

CLM software makes it simple for administrators to establish and implement universal standards of performance, contractual language, and procedures. Legal language libraries, as well as standard contractual limitations and templates, can be created and stored in the cloud, where any employee drafting a contract can quickly reference the policies to ensure compliance. This reduces the inconsistencies in contract terms and execution throughout the company. Standardized procedures can be established and monitored electronically.

Monitor and Evaluate Contract Administration

Administrators can also view each contract individually to monitor for procedural compliance, review contractual terms and obligations, and determine the progress of each contract at the click of a button. This means that administrators will be able to review more contracts on an individual level, thus making them more aware of the procedural compliance and internal control of their company.

For more information about how contract management software can improve your company’s administrative oversight, visit www.concordnow.com