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