The typical government contract management process is complex and resource-intensive, bringing along high delivery expectations and strict regulations that can sometimes put organizations under overwhelming pressure.
The consequences of non-compliance, poor performance, and delivery delays can be far more severe in government contracts than in deals with private entities.
This makes a Contract Lifecycle Management platform a mission-critical tool, as it is designed to help you stay compliant and achieve success with high-stake contracts like this.
Let’s look at the crucial things you need to know about government contract management, compliance, and critical features to look out for in a CLM while managing government contracts.
What is compliance in government contracts?
Compliance refers to the act of conforming to regulations, laws, standards, or guidelines established by governing bodies, organizations, or industries. It involves a set of processes that ensure individuals, businesses, or entities adhere to specific requirements to maintain legality, ethical practices, and regulatory obligations.
Government contracts typically involve significant amounts of taxpayer funds, putting contracting government agencies under scrutiny by the local media and general public.
Any case of non-compliance, unethical behavior, or underperformance by contractors will often reflect on the agencies’ projects, negatively impacting the public's confidence and resulting in negative media attention.
To avoid this, government bodies are particularly strict about compliance, and contracting organizations are under immense pressure to conform to all laid-out policies and regulations.
"While it doesn't always get the love it deserves, a robust compliance function is an important part of risk reduction at companies of any size. As such, in-house lawyers should get behind the creation of a compliance group if there isn't one or enhance the existing one whether it sits in the legal department or not."
~ Sterling Miller, CEO and Senior Counsel, Hilgers Graben PLLC
Ten Things: Building a Strong Compliance Department
Some government contracts also involve the use of sensitive public information and technologies that need protection. In that case, contractors must prove compliance with all necessary security standards, expressing their commitment to safeguarding classified information, intellectual property, and critical infrastructure from unauthorized access or misuse.
Also read: What is Contract Compliance? The Ultimate Guide
Compliance corner: Government contract management and key federal regulations
“A strong compliance [strategy] moves a company from reactive to proactive in detecting and preventing wrongdoing.”
~Sterling Miller, CEO and Senior Counsel at Hilgers Graben PLLC
Ten Things: Building a Compliance Department
Government contracts are subject to a wide variety of regulations and guidelines, and the applicability of each rule depends on the specific type of contract, federal agency, and circumstances.
Do ensure you carefully review the solicitation documents and consult with compliance professionals if needed, to ensure full compliance with all applicable requirements and regulations.
#1 Federal Acquisition Regulation (FAR) clauses
The Federal Acquisition Regulation (FAR) is a set of rules and regulations that govern the acquisition processes for goods and services by federal agencies. The FAR includes a comprehensive set of clauses that cover a broad range of topics, like contract administration, payment terms, intellectual property rights, labor standards, environmental regulations, and many others. Contractors doing business with the federal government are required to acknowledge and comply with applicable FAR clauses incorporated into their contracts.
#2 Cost Accounting Standards (CAS)
Cost Accounting Standards (CAS) are a set of accounting regulations that apply to federal contracts exceeding the applicability threshold of $2 million.
The CAS establishes standards for estimating, allocating, and reporting costs associated with government contracts.
Contractors subject to CAS are required to submit a Disclosure Statement to the government. This statement provides detailed information about the contractor's cost accounting practices, policies, and procedures.
The CAS aims to ensure consistency, transparency, and accuracy when assigning costs to government contracts.
#3 Equal Employment Opportunity (EEO) and Affirmative Action
Contractors with federal contracts exceeding a certain dollar threshold (typically $50,000) are required to comply with Equal Employment Opportunity regulations, which prohibit discrimination based on race, gender, religion, nationality, disability, or veteran status.
Affirmative Action goes a step further by requiring contractors with federal contracts worth $150,000 and above to create and implement affirmative action plans that outline specific steps for recruiting, hiring, and promoting individuals from underrepresented groups.
Both regulations seek to ensure that every contractor is taking proactive measures to promote balance, diversity, and inclusion in their workforce.
#4 Whistle-blower protection clauses
Contractors working with government agencies are subject to various whistle-blower protection laws, which encourage employees to report fraudulent activities or misconduct without fear of retaliation.
These clauses are typically included in government contracts to promote transparency, accountability, and the integrity of the contracting process. They create safe environments for employees to report any wrongdoing they witness, whether it's related to financial irregularities, safety violations, or any other form of misconduct.
#5 Agency-specific regulations and guidelines
Different government agencies may have their own set of regulations and guidelines that are applicable to their procurement processes. For example, the Department of Defense (DoD) has the Defense Federal Acquisition Regulation Supplement (DFARS), which supplements the FAR and contains additional requirements for defense contracts.
These regulations provide additional requirements and instructions that contractors must adhere to when doing business with a particular agency. Each agency may have its own unique practices and priorities, and its regulations reflect those specific needs.
Key features of CLM tools for government contract compliance
Considering the complexities associated with government contract management and the need to stay on point with every aspect, having the right CLM is mission-critical. You need a CLM with the right functionalities to enhance every part of the contract management process and ensure you never fall into non-compliance.
Also read: 8 Top Contract Management Software Platforms
#1 Contract authoring and template management
“The absence of contract templates leads to non-standardization and makes contracts prone to errors. The legal team, therefore, is required to delve deep into contracts and proofread all clauses with a fine-tooth comb to identify and rectify the simplest of human errors.”
~Igor Poroger, Director of Legal, EMEA, Vectra AI
How CLMs Empower Legal Teams in B2B SaaS Companies
A CLM should have robust functionalities to help organizations generate fully-fledged contracts quickly without falling short of compliance requirements.
SpotDraft, for instance, makes contract authoring more efficient by offering a slew of valuable functionalities, including but not limited to the following:
- Intelligent drafting: Collects a few inputs from the author and automatically generates contracts populated with the right clauses and terms
- Collaborative editing: Offers a fully-featured document editor similar to Word, which allows stakeholders to collectively review and provide inputs on the contracts through the internet
- Template management: Allows you to accelerate future contract creation processes by templatizing your pre-existing library of contracts. It allows you to modify these templates to suit changing business needs and stay compliant with prevalent government regulations
#2 Clause and regulation tracking
Government contracts come with several regulations that require strict compliance. These regulations are constantly evolving, and tracking them can be a daunting task. Your CLM should have capabilities that make this process easy.
SpotDraft allows you to create a library for all your standard clauses so you can easily map them to specific regulations. That way, you can easily update these clauses to reflect any regulatory changes.
#3 Compliance monitoring and alerts
The best CLM tools allow you to easily monitor compliance and get alerts for important milestones and deadlines.
Falling short of any obligations in a government contract can have far-reaching effects, ranging from substantial revenue losses to heavy penalties. So, you must ensure you're constantly aware of every obligation and its associated timelines.
SpotDraft makes this easy by letting you set automated reminders for important tasks and deadlines. That way, you will stay on track with your obligations.
Additionally, SpotDraft offers an API you can leverage to connect your existing tools to its ecosystem. That way, every cross-functional contract-related activity will be carried out within the platform.
This is particularly useful if your organization has a compliance automation system (e.g., Fortinet) for constantly monitoring systems for compliance. Through the integration API, you can merge your automated compliance monitoring processes into every other activity in the CLM's ecosystem.
#4 Audit trails and document management
A good CLM tool comes with a central repository that allows you to consolidate all your contract documents and data into one secure location, ensuring easy access and organization.
It also comes with audit trailing functionalities, helping you track every modification that has occurred on the contract throughout its lifecycle. This provides the much-needed transparency that's required in government contract management.
SpotDraft has some of the best repository features in the industry, offering searchability, end-to-end encryption, customizable views, and role-based access, among others.
Alongside its robust audit trail and storage functionalities, SpotDraft has an intuitive reporting tool you can use to generate compliance reports for audits and reviews.
Don’t get caught in the compliance sandstorm
Government contracts can be super-rewarding, but they also come with unique experiences and challenges. Because these contracts involve public funds, they are subject to extensive regulations, compliance requirements, and severe penalties for violations.
However, the proliferation of CLM tools has given organizations most of the things they need to stay on track with compliance and manage contracts more efficiently, resulting in significantly lesser violations, and more contract awards.
Need to get a clearer view of how SpotDraft can help you manage your government contracts better? Request a personalized demo.