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If we can extract anything positive from the corporate scandals during the first decade of 2000, it would be the robust pillars of contract management such as accountability, fairness, transparency, quality assurance, leadership and stakeholder management that now support business transactions of the corporate world.   

This trend began escalating toward stronger contract management and today locks arms with two more growing developments in compliance regulations and document and record management.  It’s all good for many reasons tied to professional growth and smarter business practices.

One example: audit and compliance regulations including industry standards still constantly evolving are designed to avoid corporate collapses driven by fraud, corruption, and malpractice. And contract management is now driven by the need to regulate and make business transactions more transparent, efficient, and sustainable, resulting not only in protecting the interests of shareholders and stakeholders, but probably more importantly in protecting the interests of employees and their families.

As a result, contract managers (CMs) are playing a larger role in today's corporate and government contracting behaviors, and this is the main reason why the profession is growing and becoming more competitive every year.

Secondly, document and record management policies and procedures represent a challenge to many of us contract managers. It arises from the fact that document and record management within an organization is usually controlled by many functions influencing performance such as IT, compliance, audit, and legal. When document and record management policies and procedures are well defined and practiced for all such performance areas, a positive difference can result for an organization -- making it more transparent and protecting it from unwanted demands from an external audit or scrutiny, litigation, or regulatory procedures.

It’s obvious then that every CM must be fully aware of the importance of performing best practices in regard to document management and record management, regardless of whether the product or service being provided or the organization's activities are regulated or not. If an organization lacks well defined document and/or record management systems or procedures, a well prepared CM should always implement, at least, the minimum standard for both practices to protect the business and its shareholders, stockholders, management, and employees.

Even if you as a contract manager are sure that your organization, product or service does not fall under a regulated regime (always consult with legal), you never know when it may enter in the spectrum of a regulated activity or be part in the future of a major litigation or external audit.

Within our CM world, you will find nothing more regulated than contracting with the US government. So, take extra precaution in observing Federal Acquisition Regulation (FAR) provisions1 regarding Contractor Record Retention policies and procedures (FAR Subpart 4.7).2 

As well, don’t forget that CMs dealing with government contracts must pay extra attention to the terms of the contract dealing with additional record retention obligations -- particularly those terms specifying retention periods that may be found in different subparts of the FAR, or terms that have been amended or updated by competent government agencies or imposed by other applicable laws. Even more complicated could be calculating retention periods, especially during contract performance within multiple fiscal years. So we must use utmost care and diligence while dealing with government contracts.

As part of one ugly truth -- some organizations and their management, being  focused mainly on how to be more efficient and productive, may care more about how to quickly access a document and extract its content (document management), and forget or pay less attention to the importance of keeping records properly (records management). Understanding the difference between document management and records management is critical, but even more important is to understand how both practices should complement each other.

In other words, if your business, product or service is not regulated, you may want to have a document management system that incorporates certain record management practices. However, if your organization, products or services operate in a regulated environment (particularly when dealing with the government), your document management system should be incorporated into your record management system (or at least be compatible or be able to interact with it).  Either way, your organization must have record management policies and procedures.

The differences between documents and records are very simple, but many of us mix them up. Documents (written, printed, or electronic matter that provides information or evidence include physical and electronic data that support the existence of a contract or transaction) represent, express and support your organization's daily business operations.

Documents continuously evolve; they may change during a particular period. From the moment a need is identified and the solicitation phase has started, until the contract's close-out phase, the documentation of this particular transaction or contract has been constantly evolving.

In contrast, records (evidence about the past, especially an account of an act or occurrence kept in writing or some other permanent form) do not evolve.  They are final and simply represent unaltered recordings of a transaction or contract. They represent or provide evidence of activities, commitments, decisions, and other management activities.

Once we have understood the difference between documents and records, document management can be viewed as a systematic process that enables documents to be properly created.  Keeping all the different versions during the negotiation process categorized, organized, shared, and easily retrievable by other team members or internal stakeholders is an example. Document management provides efficiency to the administration of the contract and also provides support to the organization after contract closeout in the event of an internal or external audit, claim or litigation. However, a document management system may not recognize compliance obligations related to record retention that are imposed by law, regulation, industry standard, or internal policy.

Record management is mainly composed of completed documents, fully executed contracts and certain supporting documents in accordance with the record retention policy implemented of the organization as required by law, regulation, or industry standard. Record management is strictly related to archiving documents and contracts, and their subsequent disposal according to the respective record retention schedule. This record retention schedule or policy includes classification, storage, security, custodian, preservation (including certain original documents), retention period, and deletion or destruction criteria. Record management shall be the result of a well-defined policy and procedure implemented by an organization, particularly by those operating in regulated environments. Government agencies, industry regulators, auditors, lenders, partners, vendors, and even the judiciary system, may request full disclosure of its record management policy or to warrant their existence and applicability.

So, although there are important differences between both document and record management systems, in reality, document management is an integral element of the record management system. Organizations should avoid having conflicting document and record management systems.  On the contrary, they should ensure that they interact by being fully compatible. The market offers many software solutions for both management systems, and many offers management systems that include both.

To summarize, contract managers must strictly observe, apply and enforce document and record management. It is critical not only to comply with the law, regulations, and applicable industry standards, but recognize that they are also essential to properly supporting the contract functions within an organization.

It helps to keep record of the reasons behind actions you took, and document the studies and analysis you performed to justify the acquisition.  It’s important as well to document any decision you made throughout the negotiation process that drove the final contract execution. This is why contract managers play probably the most important role in securing proper administration and application of these two management functions. Contract managers must innovate and proactively apply document and record management standards in their organizations where these management functions do not exist, or are poorly developed, or simply are not properly followed.

 

ABOUT THE AUTHOR

Arnaldo is a legal advisor and contract manager with more than 20 years of experience dealing with contracts and business transactions related to the oil & gas industry. Arnaldo obtained his law degree from Universidad Catolica Andrés Bello in Caracas, Venezuela, and holds a Master Degree in International Legal Studies from the Washington College of Law, American University, Washington, DC. Arnaldo is a member to the National Contract Management Association (NCMA), holding certifications as Professional and Commercial Contract Manager, and a member to the International Association for Contract & Commercial Management, holding the status of Advanced Practitioner (CCMAP).

END NOTES

  1. Federal Acquisition Regulation. ... The FAR System governs the "acquisition process" by which executive agencies of the United States federal government acquire (i.e., purchase or lease) goods and services by contract with appropriated funds.

 2. Subpart 4.7 Contractor Record Retention

 

Topics: contracting excellence, communication, IACCM, document/record management

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