Sustainability through contract drafting and management: by improving drafting and management practices for vendor contracts, state and local governments ensure their continuing ability to provide all necessary and appropriate services to the public.

• Author: Motza, Maryann
• Position: Best Practices

Cost overruns by governments at all levels capture the publics attention, and during times of severe financial pressure, governments face funding and revenue issues that affect their fiscal sustainability By improving drafting and management practices for vendor contracts, state and local governments can ensure their continuing ability to provide all necessary and appropriate services to the public.

Since the 1980s, governments have increasingly relied on private-sector contracts to accomplish procurement activities from project definition and vendor selection through contract close-out. Many such contracts, however, have resulted in change orders and cost overruns that imperil the governments' fiscal sustainability. This article examines and summarizes a number of best practices and standards that can help governments better manage contracts and, in turn, help provide for their fiscal sustainability)

FUNDAMENTALS

Managers Need to Manage. The GFOA's online Fiscal First Aid recovery model notes: "Layers of control may have built up over time that are costly to maintain and of limited effectiveness. For example, budget analysts from the budget office should not be used to cajole operating departments into following their budgets. Managers must be held accountable for managing their budgets within expected guidelines."

This is the core solution to ensuring fiscal sustainability. Government managers need the encouragement and support of elected officials if fiscal sustainability is to be achieved and maintained long-term. (2)

Procurement Professionals Need Support. Procurement professionals need to understand the goals a proposed project is intended to accomplish so they can help program managers avoid contract administration problems later in the project. Procurement staff cannot properly prepare requirement documents such as performancebased statements of work without sufficient planning and input from program managers who are familiar with the needs of the public. Enhancing and improving management control improves accountability. (3)

Contractors Now Perform Mission-Critical Functions. Today's public-sector organizations manage an increasing number of contractors and suppliers that perform mission-critical functions for the jurisdictions. Thus, public-sector core competencies now include the procurement and contract management processes, and public-sector organizations should measure the performance of their critical procurement processes. (4) Ensuring that procurement professionals are properly trained and are empowered by upper management will help governments better control and manage costs.

Projects and Contracts Should Meet the Public's Needs. When contracting for services, government officials need to start with the following question: "What problem is the agency seeking to solve?" And throughout the vendor selection, contract drafting, and contract management process, they need to ask, "Is the project solving the problem?" Continual monitoring and follow-up are essential through contract close-out.

If at any stage the project is not solving the problem, government officials should reassess the project and determine: 1) if the current contract can be salvaged without going over budget or beyond the timeframe originally established; 2) what contract amendments are needed to salvage the project, or whether the project should be re-solicited and the process started over; or 3) if the costs (in terms of both time and money) exceed the benefits of the project, in which case it would be best to scrap the entire...