Wrangling Complexity in Government Contracting with Contract Intelligence

August 7, 2023 By George Sellner

Contracts are the foundation of all government contractor relationships, both with government agencies as well as subcontractors. Whether it’s aerospace, defense, infrastructure, professional services, or another government sector, contracts define the expectations, obligations, and deliverables for every agreement.

Take, for instance, a contract for a fighter jet for the DoD. A contract of this scope comes with a stack of requirements handed down from the Pentagon. The contract will span thousands of line items and sub-line items, volumes of clauses, and hundreds of modifications fulfilled by a prime contractor and perhaps dozens of subcontractors. The project will take years to complete, and every step of the way, there are a slew of regulatory and auditing hurdles to clear. 

contract_lifecycle_of_a_fighter_jet

Suffice it to say, from solicitation to close-out, efficient contract management is essential to navigating complexity and coming out the other side with a profit.

Yet efficiency is often not the case with contracts.

While government contractors (GovCons) are optimistic about business development and win rates—62% of organizations doing business with the Federal Government expect their government sales revenue to increase in 2023—success is anything but a given. Contractors also report an increase in audits and cost overruns, with contract compliance and performance emerging as a serious pain point in operations.

Contract management headaches and heartache

Effective contract management will make or break a project, but it’s an area in which many organizations still struggle. Below are some of the most common sources of frustration.

Contract capture

Because contracts can be lucrative, competition is fierce, with numerous companies vying for a limited number of projects and funding dollars. GovCons must look for new opportunities to bid on continuously. And it requires a lot of research and networking (read: time and energy) to identify, qualify, track, and manage the opportunities that lead to contracts. If information is housed in multiple, disparate systems managed manually, or isn’t kept up to date as details change, it could mean the difference between a win and loss.

Building proposals

GovCons must fully understand and be able to fulfill all solicitation requirements—and put a competitive subcontractor team in place to make it happen. Interestingly, only 66% of organizations are confident that they can address acquisitions with complex requirements. Proposals must demonstrate a contractor’s in-depth understanding of the requirements and clearly prove to the government that they are capable of fulfilling those requirements on time and within budget.

By using a standardized process to develop fully compliant proposals, contractors are more likely to deliver on those commitments and align themselves with the overarching missions of the agencies they work with, positioning themselves as preferred partners for future projects. 

Only 66% of organizations are confident they can address complex contract requirements.

Compliance 

Regulations and requirements, including adherence to FAR/DFARS and other agency supplements, security and DCAA audits, and labor laws, are inherent to federal contracts.

In fact, the average number of audits per contractor now sits at 25, up from 13 in 2022.

Something as simple as an overlooked marking instruction on a deliverable can lead to a deliverable rejection, which then turns into a delay in invoicing. Needless to say, any delay in invoicing directly affects the bottom line financial performance of a company. 

Subcontractor management

Government contracting is a true team sport, meaning prime contractors must negotiate contracts with a large number of subcontractors and then manage those relationships to get a project completed. To minimize errors and speed up processes, mandatory clauses, line items, and obligations on prime contracts must be flowed down to ensure everybody is moving in lock step towards the end goal. Managing such flow downs manually is extremely labor intensive and prone to human error and oversight. 

Status tracking

Once a contract is awarded, efficient project management is essential to staying on schedule and budget. Yet, managing the current state of the contract is a major challenge for many GovCons. When line items, clauses, or schedules are modified by the government (which is often), organizations must deliver against the most recent modification. Poor visibility into how changes impact deliverables and timelines contribute to why 25% of projects go over budget or off schedule.

Contract Intelligence as competitive advantage

The reality is that disparate, disconnected contracting systems and manual processes like spreadsheets can’t deliver the visibility, efficiency, and agility today’s GovCons need to hit their BD and revenue goals while meeting the dynamic needs of their federal customers. Contractors need a single source of truth that provides clarity on the intent of the contract at any and every point in time. 

That’s where Contract Intelligence comes in. Contract Intelligence is a new breed of technology that uses AI and other advanced software to digitize contracts, structure contract data, and then integrate that data into enterprise systems. By automating and standardizing contract management and delivery processes, GovCons gain operational efficiency, reduce risk, and drive stronger contract performance across the entire contract lifecycle. And that means more deals won and a healthier bottom line.

By automating and standardizing contract management and delivery processes, GovCons gain operational efficiency, reduce risk, and drive stronger contract performance across the entire contract lifecycle.

A contract intelligence tool powered by state-of-the-art artificial intelligence provides numerous advantages to a GovCon. By identifying potential pitfalls and inconsistencies within contracts that increase risk—such as non-compliance with regulations or conflicting terms and automatically flagging these issues—contractors can take corrective measures promptly, reducing the likelihood of contract disputes or compliance breaches. 

Compliance and regulatory adherence are assured by monitoring contract performance, tracking key milestones, and notifying contractors of upcoming compliance requirements such as Limitation of Funds notifications. 

Streamlining and accelerating contract management workflows by automating manual tasks such as data entry, document classification, and contract search reduces administrative overhead, allowing contractors to allocate resources more efficiently and focus on higher-value tasks. It also minimizes the risk of human error, improving accuracy and reducing costly mistakes during contract management. 

And finally, contract intelligence provides contractors with advanced analytics and reporting capabilities. Contractors can make data-driven decisions by extracting insights from contract data, such as pricing trends, performance metrics, and contract duration analysis. These insights enable contractors to optimize their contract strategies, identify areas for improvement, and enhance their competitiveness in government procurement processes.

Rising to the challenge

In the complex world of federal contracting, the winners will be those who rise to the challenge and seek new sources of efficiency and risk management. Contract Intelligence empowers government contractors with better visibility, efficiency, compliance, and decision-making capabilities. By leveraging AI and automation, contractors can gain a significant competitive advantage in navigating the complex landscape of government contracts and procurement processes. Learn how Icertis is helping GovCons wrangle complexity and get ahead with Contract Intelligence.