Contracts between sellers and buyers have certain inherent underpinnings, not the least of which is trust the company selling goods or services is operating in agreement with the expectations of the government entity or business buying its products.
Having the right contract software, for example, can help such entities gain visibility into valuable spending and budget information throughout a contract’s lifespan, but it also can play an important role in meeting compliance and review processes. And this is especially important for government contracts where public spending comes into play and contracts are coming under increasing scrutiny.
In a recent commentary published in Daily Commercial News, government-procurement expert Stephen Bauld notes that a basic goal of performance assessment with government contracts is to encourage a supplier to align its performance with the organizational goals and objectives of the municipality.
“There is considerable reason to believe that performance levels improve simply because the supplier realizes that performance is being measured and evaluated,” he noted. “Other reasons for performance evaluation are to lead to more informed decision-making about the quality of performance that can be expected of suppliers—both individually and collectively.”
Various vendors, such as Ariett, offer cloud-based software to help accommodate such requirements. “New-vendor authorization and contract management are increasingly subject to compliance and review,” Glenn Brodie, Ariett president, said in a recent PYMNTS.com article. “A company’s procurement software must offer the necessary controls to meet compliance requirements.”
Some governments already have begun turning to electronic procurement systems to help in the vendor-selection and evaluation process. Last month, for example, the Village of Rye Brook, N.Y., joined the Empire State Purchasing Group, a BidNet eProcurement system that connects over 2,500 departments from 165 local agencies and provides a bid system for vendors looking to do business with local government.
Identifying hidden contract waste
Vendors who register can receive immediate notification of bids, requests for proposal, quotes, addenda, awards and advanced notice of term contract expiration. “Registered vendors receive customized solicitations matched to their products and services by all participating agencies on the bid system,” the village noted in its Empire announcement.
When such systems are used properly, measurement and evaluation tools can help identify hidden areas of waste and other cost drivers in the supply chain, Bauld noted in the his commentary piece on government vendor contracts. Eliminating them can help municipalities reduce their order cycle time and possibly cut inventory levels, he said.
Risks also can be identified earlier and improvements achieved, yet buyers may continue to have quality-of-service concerns without the appropriate measurements and evaluations. “A more rigorous approach measures supplier and contractor performance against a standardized set of criteria that (as far as possible) are capable of objective measurement,” Bauld noted, recommending use of experienced assessors for the best results that produce a complete picture of a municipality’s suppliers and contractors.
Municipalities relying upon past vendor performance face two conflicting realities, Bauld noted. For one, performance evaluations must be systematic and fair to have any validity, and contractors must have an opportunity to respond to any assessment given. Moreover, he said, municipalities introducing a contractor-performance scheme must find the worker resources required to make the system work.
“In principle, a comprehensive system of contractor evaluation is worth the time invested because a considerable portion of staff time is currently invested in dealing with precisely the type of bush fire that a good system of evaluation will mitigate,” Bauld wrote. “Unfortunately, such advice may be likened to the suggestion that the solution for the problems of the poor is for them to save more — it does little to explain how.”
As such, assessments should take into account the scope and nature of products purchased from a supplier or contractor, the particular requirements to which the contractor was subject, the circumstances in which the supplier was made and any other relevant or extenuating circumstances, Bauld wrote.
Government contracts are becoming both increasingly complex while at the same time more efficient through eProcurement software. Performance measures are playing more of a role as well, helping boost the quality of vendor performance.