Practices for Effective Contract Management with a Focus on Joint Contingency Contracting in the Military

CONTRACT MANAGEMENT BEST PRACTICES 12

Best Practices for Effective Contract Management with a Focus on Joint Contingency Contracting in the Military

Abstract

Contract management is the process of actively monitoring and controlling the contract between a procuring entity and the contractor to ensure the delivery of reliable and cost-effective services. Effective contract management enhances operational efficiency, and helps to lower risk and uncertainty. The focus of this paper is joint contingency contracting in the military. Contingency contracting within the context of the military is the direct contracting support offered to operational and tactical forces engaged in the full spectrum of either armed conflict or non-combat contingency operations. The Department of Defense (DoD) has made some significant strides geared at improving contingency contracting operations over the years. During the Cold War, the Department of Defense (DoD) implemented substantial support personnel and logistics reductions, leading to increased reliance on contractor support. It is estimated that by 2012, DoD had over 250,000 contractor employees providing logistic support services to U.S forces undertaking humanitarian relief, peacekeeping, stability operations, and combat missions across southeast Asia and the Middle East. However, after-action reports from Iraq have shown that contingency contracting is still in its infancy stages and commonly marred by inadequate planning. Based on this background, the proposed study carries out a review of literature to identify the best practices for effective contingency contracting. The findings show that there is a need for the DoD to ensure that command and contracting structures are clear and that all parties understand the nature and extent of their authority. At the same time, there is a need to have clear policies and guidelines in regard to dispute-resolution, acquisition, and purchases as a way of enhancing accountability and transparency among parties. Finally, there is a need to ensure that the contract length is manageable to minimize the risk of stress and burnout among contracting officers.

Best Practices for Effective Contract Management with a Focus on Joint Contingency Contracting in the Military

Introduction

Contract management is the process of actively monitoring and controlling the contract between a procuring entity and the contractor to ensure the delivery of reliable and cost-effective service (Muhwezi & Ahimibisibwe, 2015). Effective contract management helps lower the factor of risk and uncertainty and enhances both financial optimization and operational efficiency (Muhammad et al., 2019). Poor contracting management could result in huge losses for the procuring entity. According to a survey by the Global Contract Management Association (IACCM), the average cost of poor contracting, as evidenced by missed milestones and slow negotiations, is 9 percent of an organization’s annual income and up to 15 percent of the contract value for large capital projects (IACCM, 2019). Most of these revenue losses can be avoided through improved contract management (IACCM, 2019).

This paper focuses specifically on joint contingency contracting in the military context. The Contingency Contracting Student Handbook defines a contingency as an emergency that involves military forces and is caused by required military operations or natural disasters, terrorists, or subversions (Defense Contingency Contracting Handbook, 2017). The US has in the past deployed troops to many foreign countries including Djibouti, Afghanistan, and Iraq, among others in response to the contingencies identified above. In most cases, these operations are precipitated by unforeseen events, which implies that troops have to be deployed rapidly. Contingency contracting officers (CCOs) are usually sent out with the military servicemen as a source of direct support (Defense Contingency Contracting Student Handbook, 2017). They are the only personnel authorized to enter into contracts on behalf of the US government during contingency operations carried out both locally and abroad (Defense Contingency Contracting Student Handbook, 2017). The CCO is responsible for procuring supplies and services that help to provide combat support, logistical support, and combat service support to deployed units (Defense Contingency Contracting Student Handbook, 2017). This is where the concept of contingency contracting comes in.

Contingency contracting is the process of obtaining construction, goods, and services from commercial sources via contracting means in support of contingency operations (Defense Contingency Contracting Student Handbook, 2017). It is the direct contracting support offered to operational and tactical forces engaged in the full spectrum of either armed conflict or non-combat contingency operations (Defense Contingency Contracting Student Handbook, 2017). The study seeks to identify some of the key best practices for effective defense joint contingency contracting.

Background to the Study

Throughout history, the US military has used contractors to provide direct support to military force engaged in contingency operations. During the Revolutionary War, for instance, the Continental Army contracted beef suppliers, wagon drivers, and other contractors that provided support through clothing, engineering services, and weapons (Thibault et al., 2009). During the First and Second World Wars, contracted services were provided by forward-deployed contract personnel who were responsible for organizing the shipment of goods and supplies from the US mainland to the various areas of war while they (the contractors) remained stateside (Kirstein, 2003). This arrangement was, however marred by delays, shortages and at times, surpluses (Kirstein, 2003).

Contingency contracting operations began to mature during the Korea War, when CCOs were brought into the picture (Kirstein, 2003). The CCOs were responsible for leveraging Japanese and local Korean vendors to provide support to the war effort (local procurement), thus reducing the need for shipments to be flown all the way from the US (Kirstein, 2003). During the Cold War, the Department of Defense (DoD) implemented substantial support personnel and logistics reductions, leading to increased reliance on contractor support (Kirstein, 2003). Contractor-support services had become a mainstay of US military operations by this time (Kirstein, 2003).

By 2012, the DoD had over 250,000 contractor employees providing logistic support services to U.S forces undertaking humanitarian relief, peacekeeping, stability operations, and combat missions across southeast Asia and the Middle East (Thibalt et al., 2009). In Afghanistan, Kuwait, and Iraq, for instance, the Army engaged multiple local firms in contractual arrangements to refurbish and repair military vehicles, provide interpretation services, communications services, and base operations support (Thibault et al., 2009). A 2009 report by the Commission on Wartime Contracting in Iraq and Afghanistan, however , identified that despite contractor support proving to be critical to the success of contingency missions; it was mostly carried out in an ad hoc manner and was inadequately incorporated into the culture and doctrine of the US military (Thibault et al., 2009). For instance, the report showed contingency planning before operations to be inadequate, which necessitated the standardization of contingency contracting processes across the DoD (Thibault et al., 2009). A study of best practices for effective contingency contracting in the DoD is thus warranted and timely.

Literature Review

Researchers have conducted multiple studies to determine the best practices for effective contract management. For instance, Muhammad et al. (2019) sought to examine the relationship between contract management and performance characteristics using a sample of 100 professionals drawn from the fields of project management, architecture, engineering, and quantity surveying, among others. The study findings showed that contract length had a significant but negative effect on project quality (Muhammad et al., 2019). The study also found effective dispute resolution between the contracting parties and mutual acceptance for the product or service to be significant influencers of project quality in contracted works (Muhammad et al., 2019).

These findings were replicated in another study by Muhwezi & Ahimibisibwe (2015), which found that the quality of a project depends on the nature of interactions between contract management teams and contractors of the disposing and procuring agencies. For this reason, the study concluded that one way to improve contractual engagement in public procurement is by adjusting laws to allow reasonable interaction between the disposing and procuring entities (Muhwezi & Ahimibisibwe, 2015). A similar finding was reported in yet another study by Komakech (2021), which sought to examine the relationship between contract management and service delivery at a local jurisdiction in Uganda, East Africa. The study found that contract management was more effective when there was good communication between the contracting entities, prompt resolution of disputes, and regular reviews to ensure continuous improvement (Komakech, 2021).

Studies focused specifically on joint contingency contracting in the military are limited. However, the few studies that exist provide insights that align with the rest of the literature. For instance, the Defense Contingency Contracting Student Handbook (2012) posits that a clear contracting and command authority is one of the crucial elements of success in contingency contracting. Contracting authority is the legal authority to enter into legally binding contracts on behalf of the US, while command authority is the authority and responsibility to use available resources for the support of assigned missions (Defense Contingency Contracting Student Handbook, 2012). The lines of authority (command structure) and limits of the said authority should be clear, allowing the contracting officers to exercise sound, unbiased business judgment as well as contract oversight (Defense Contingency Contracting Student Handbook, 2012). This supports the view by Muhwezi & Ahimibisibwe (2015) that the nature of interactions among the parties is crucial for effective contractual engagement.

Another study conducted by RAND Corporation analyzing the effectiveness of the US Air Force contingency contracting supports the same idea (Ausink, Castaneda & Chenoweth, 2011). However, in addition, the study found that clear acquisition and reporting policies were equally crucial in ensuring smooth flow of operations in contingency contracting arrangements (Ausnik et al., 2011). According to Ausnik et al. (2011), policies need to clearly stipulate what contracting officers are required to buy, how they buy it, and the contractual instruments used in the purchase, including purchase orders, blanket purchase agreements, and vendor contracts, among other things. Further, the study supports Muhammad et al.’s (2019) view that the length of the contracting period has a negative effect on the quality of deliverables. In the authors’ view, this is due to stress from the work carried out by contracting officers providing support to the military during contingency operations (Ausnik et al., 2011). For this reason, the researchers advise that contracting personnel are deployed for a maximum period of 6 months, after which they are allowed to return home for 6 months, before they can be eligible to deploy again (Ausnik et al., 2011).

Findings

The literature review identifies several factors that could significantly influence the effectiveness of an entity’s contract-management strategy. These include contract length, the degree of acceptability of the product/service by both parties, the effectiveness of the dispute-resolution mechanism, the nature of communication/interaction between the contract parties, and frequency of compliance reviews. Contract management is likely to be more effective if the contract is awarded an optimum timeframe that is not unnecessarily long, if the product/service is acceptable to both parties, if disputes among parties are resolved promptly, and if there is constant, positive interaction and communication between the parties. Of these, regular interaction or communication emerges as the salient theme and the most significant determinant of the success or failure of an entity’s contract-management strategy.

To ensure positive interactions with contracting officers in contingency operations, the DoD needs to ensure that the command and contracting structures are clearly set out so that contracting officers adequately understand the lines of authority as well as limits of that authority. Having clear command structures will go a long way towards minimizing conflict between contracting officers and other partners, thus enhancing positive interactions. Another strategy that could help in fostering positive interactions is ensuring that there are clear purchase and acquisition, as well as dispute-resolution policies. It is important that these are well-understood and accepted by the contracting officers (Ausnik et al., 2011). Crucial elements to include in these policies include what contracting officers are required to purchase, how they are required to purchase it, and the relevant supporting documentation for purchases including vendor contracts and purchase orders (Ausnik et al., 2011). This helps to ensure transparency and accountability and minimizes the risk of fraud.

Finally, as is the case with any contractual engagement, contract length has been shown to be a fundamental determinant of effectiveness (Muhammad et al., 2019). For contracting officers in contingency contracting assignments, this could be due to stress and burnout associated with the nature of work. As such, it may be advisable to engage contracting officers for a manageable period, say 6 months, and then allow them to return home for another 6months before they can be redeployed. To minimize stress, the DoD could also conduct surveys and interviews with contracting officers to determine their perceptions about the work and to obtain feedback on how much time is needed to perform contracting work (Ausnik et al., 2011). Such insights would provide a view on the staffing requirements, thus helping to minimizing the risk of stress among contracting officers.