By Steve Kelman

Blog archive

Talking post-award contract management with an industry veteran

Back in early October, I signaled that I was going to start paying more attention to improving post-award contract management in government. Following up on that post, I recently I blogged about a suggestion from a small-business government contractor about improving contract management through a way to develop better statements of work. I stated I hoped this would be the first in a series of conversations with industry and government people about ideas for improving government contract management.

We now officially have a series! Here I present the second installment -- a conversation with a long-time industry veteran who has worked on post-award management for government contracts for a number of large companies. Our conversation centered on managing change orders.

I started off the conversation by asking him what distinguished those in the government who were best at contract management in general and managing change orders in particular. The good people in government, he responded, excelled at ongoing engagement, communication, and discussion with the contractor. "They give us a heads-up when things are going even a tiny bit strange," he said, and look to work with the contractor to solve problems -- "not looking to get anyone in trouble, looking for an equitable way for everybody."

One example of creative problem-solving on a post-award problem that this contractor gave me involved a contract his company signed that called for a large number of other government agencies to provide information that could be consolidated by the customer agency. After the contract was signed, it became obvious that this was not possible, and the customer agency was afraid its whole effort would go up in smoke.

At this point, the agency and the company got people together to think about alternative ways to get the data the customer needed. The company brought in some senior experts to participate in the discussions (without a contract mod to pay for them). After much noodling, the customer and the government came up with an idea to get the data from a bunch of publicly available databases.

The solution having been agreed on, the customer and the company still had to agree on how much extra this would cost (the publicly available data wasn't free) and how significantly the schedule had to be modified. There were some tough negotiations, my discussion partner said: "There was a lot of back and forth, not just a meeting or two." Ultimately, though, the two sides were able to end up somewhere in the middle.

One of this industry veteran's most interesting observations was that in many agencies the default option -- the easy way out -- was to turn down contractor requests for contract modifications and to insist the originally agreed-upon work be done at no extra cost, even if conditions had changed. He felt that agency lawyers, and less-creative program or contracting people, were more likely to say no and try to stiff the contractor. (He did note, however, that some agencies were so short-staffed that change proposals often get approved automatically!)

I found this observation about government people stiff-arming change orders to be fascinating and, in an odd way, somewhat reassuring about the state of post-award contract management in government. I suspect that many outsiders to the process are more concerned about the government rubber stamping contractor change order proposals. The suspicion that these proposals tend to be approved without question is one of the reasons many worry about the state of contract management in the government, and fear the government is getting ripped off by the change proposal process.

I asked this individual whether contractors would love it if the government just accepted all the modifications the contractor proposed. In the long term, he replied, that was a problem even for the company. If the change order is just accepted, there's no documentation, and if a new government person comes in, he or she has no idea why the government is paying extra money. This can poison a relationship.

In a similar vein, he said that good contractors don't shun performance reviews but welcome them: "The best contractors insist upon it quarterly."

The best solution, in my opinion, is for the government to neither rubber-stamp nor stiff-arm contract modifications, but rather to work together with vendors to address problems that produce the requests. Some old-fashioned negotiation can then divide up the costs those changes entail.

I close this post the same way I closed my recent one with an idea about how to improve statements of work -- with two suggestions to blog readers.

One is that people join the dialogue by posting reactions to these suggestions on the blog comment space below. The second is that anyone -- be you government employees (contracting or program), industry, academia, and even non-American blog readers (I know this blog has non-U.S. readers, and many whose countries face similar contracting challenges) -- with ideas for how to improve government contract management should contact me about setting up an interview to talk over the phone. I can be reach via email at steve_kelman@hks.harvard.edu.

Posted by Steve Kelman on Dec 03, 2015 at 3:49 PM


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