Contract compliance makes sure grant recipients, government agencies, and contract holders are complying with the standards set by the government regarding equal opportunity employment. This means accepting applications and soliciting bids from minorities and women and ensuring organizations receiving government grants follow fair practices when hiring, retaining, and promoting.

Overview of Contract Compliance

Contract Compliance Process

Contract compliance involves periodic reviews of existing contracts that may require contract holders and grant recipients to provide information about their hiring practices and overall workforce makeup. It may also involve the investigation of discrimination claims from job applicants or business owners who feel they've been discriminated against. 

Contract Compliance Outcome

The goal of contract compliance is ensuring the promotion of fair hiring practices at every level of the government. Government agencies are held to the same standards as business owners when making hiring decisions. 

Governments use contractors frequently, resulting in a valuable revenue source for contract holders. For this reason, it is important that there be no unfairness due to negligence or bias regarding minority and women-owned businesses. 

Aspects of Contract Compliance

  • Strategy
  • Processes
  • Policies
  • Individual obligations
  • Specific performance
  • Conformance with regulation
  • Internal operations
  • External relationships

A compliance system that works properly also knows when compliance must change, as well as the thought processes regarding it. 

As an important area in the performance level of a business, contract compliance is designed to increase efficiency and reduce risks. To do this, contract compliance management must be involved in many aspects of contract management. 

While compliance management is essential, it is equally important that the best practices are in place that allow insight when opportunities or a need for change is apparent. 

Strategically, this means maintaining the integrity of the processes for monitoring and contract management; making sure contract terms are in alignment with approved corporate policies and practices; and overseeing or developing standard templates for contract and monitoring compliance.

The transitional level could include reviewing and approving any proposed variations that affect the standard process, terms, or policies. It may also include monitoring the contract for obligation performance of its specified terms. 

At both levels, compliance management may include inputting relevant information into a control system; identifying variations of compliance; recommending changes regarding compliance, rules, terms, or policies to reflect changes in market conditions, opportunities, and trends; management reporting, and changes in initiatives. 

Best Practices for Contract Compliance Management

Some of the processes that focus on the best practices for contract compliance management include the following: 

  • Having a clearly defined contract compliance process in place. 
  • Providing a central repository for maintaining/holding contracts is recommended. 
  • Making sure there are controls in place to monitor non-compliance.
  • Ensuring the definitions of compliance are also monitored and adjustments are made to accommodate changing conditions in the business or marketplace.
  • Establishing goals and metrics.
  • Defining, communicating, and managing specified contract metrics.
  • Creating an infrastructure that ensures contract compliance visibility in areas such as buyer turnover, volume discounts, currency change and conversion, and clerical errors.
  • Having transparent quantifiable measurements in place to measure underperforming areas. 
  • Doing regular contract audits to identify the source of non-compliance issues.
  • Clearly outlining the roles and responsibilities of the employees involved in overseeing contracts in regard to contract compliance.
  • Maintaining a well-organized operation with the implementation of a comprehensive contract management system to ensure contractual obligations are fulfilled. 

Standardizing the Process

Having a standardized workflow that encompasses creating, amending, and approving contracts is essential because it reduces the repetitive contract creation cycle. 

A standardized contract management process is recommended using the appropriate technology in the form of contract management software, which reduces many tedious aspects of contract management. 

Keeping Up with Changes

Contract compliance boils down to following the rules and regulations of federal, state, or local laws or agencies. One of the key elements of any company, regardless of the industry, is staying up-to-date on the legal requirements in their area.

To do this, a company should retain the services of legal counsel or another expert who has the experience with contract compliance. The individual's goal will be to keep the company apprised of any pertinent legal changes that may affect the company's contract(s).

If you need help with contract compliance, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.