Government contracts management is the process of administering an agreement to provide goods or services between a private party and a government entity to comply with expenditure, hiring, recordkeeping, and audit requirements as prescribed by the contract. These contracts typically have significant legal restrictions on the use of public funds regarding how the money is spent and the way a contracted party can operate. Stiff civil and criminal penalties can result from the misuse, mismanagement, or misappropriation of government funds. Contract management seeks to ensure that there is a person versed in the legalities and who keeps proper records to prove compliance in case of an audit.
A business or individual can enter into a contract with any governmental entity in any jurisdiction as long as the government is authorized to contract for goods and services from the private sector. In the U.S., a business can contract with federal, state, or city governments, as long as the business first goes through the process of becoming an approved vendor with each governmental authority. Government contracts are generally considered to be a secure source of revenue because of the low likelihood that the government will default on its obligation to pay, but the requirements to administer a government contract are so demanding that many small businesses do not have the capacity to comply with the legal and accounting obligations.
The primary concern of government contracts management is compliance. Every contract has its own parameters derived from public goals and objectives tied to the money. For example, a city government contract might require that at least 50 percent of the people working on the contract come from local communities. A state educational contract might include performance parameters, such as the attainment of a certain success rate. These contract-specific requirements must be tracked and documented, and some contracts require periodic reporting on progress towards these goals.
In addition to special requirements, a government contract includes the implied obligation to comply with that government’s regulations regarding the use of public funds. For example, a federal government vendor in the U.S. cannot discriminate in hiring and must comply with the federal standards for job safety. A business that has multiple contracts across jurisdictions has, in effect, multiple clients with multiple accounts, and each client and account has different needs. Each requires client account management services, which, in this context, is government contracts management.
A contracts administrator does not need to have a legal background, though it can be particularly helpful. Government contracts management is often broken up into legal and accounting responsibilities. The legal area ensures compliance with contract terms, such as hiring, safety standards, or insurance requirements. Accounting responsibilities include making sure that the expenditure of funds is in line with the budget or price proposal that was submitted to obtain the contract, and that government money is not commingled and is spent only on allowed expenses in authorized amounts.