ACQUISITION AND PROCUREMENT: Contracts Included Key Provisions to Reduce Risks, but the Company Lacks an Efficient and Effective Contract Management System

February 22, 2018 |  Audit Reports

Our audit objectives were to assess whether key contract provisions aimed at mitigating legal and financial risks were included in high-value, high-risk active contracts, and to assess the company’s contract record-keeping practices to identify opportunities, if any, for improvement. We have redacted the sensitive data from the report.

Our work showed that all 20 of the high-value, high-risk company contracts we reviewed contained key contract provisions that successful organizations commonly use to mitigate risks-such as warranties, insurance, indemnifications, and bonds. However, we found that internal controls for managing contracts are weak because the company lacks a contract management system.

To address an identified internal control weakness and reduce its financial and legal risks, we recommended that the company document and initiate a plan for the timely completion of the steps necessary to fully define user requirements for a contract management system, determine how best to meet those requirements, establish roles and accountability for system implementation, secure the needed resources, and establish a project monitoring process to implement a cost-effective solution for enhancing the management and oversight of its contracts.

In commenting on a draft of this report, the company’s Vice President, Senior Managing Deputy General Counsel, stated that the company agreed with our recommendation.

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