Tuesday, October 22, 2013

The Corruption of Contracts

Whether you are a public agency or a business, do you have your standard contract documents electronically locked up to prevent accidental or purposeful altering of the contract language without your knowledge?

Procurement and contracting documents may become corrupted internally within your organization or by those outside the organization.

Internal controls:  Does anyone own the standard contracts within your organization, or is each contract simply developed based on the last similar project you did, which may have had unique provisions that don't apply to the next contract?  Who has authority to make changes to standard language in a contract based on a specific project?  It's important to develop and then maintain standard language that can only be changed deliberately by authorized individuals.  Here are a couple of ideas and strategies to consider:
  • Centralized procurement:  If you have a central procurement and contracting function, they can maintain the standard language and adapt the documents for each project.  If this is your model, it is important that the electronic version of the document not be emailed to others, unless it is protected (see below) or a PDF version.
  • Password protected documents:  If your organization's procurement function is decentralized, you can post a Word, password protected version of the document on an internal or external web site or on a common access drive within the organization's computer network.  The document can be protected either in track changes or through fill in the blanks.  That means that either any changes to the document will show up in track changes or a user can only fill in certain information on the document but can't change anything else. 
  • Document changes:  Develop a mechanism to document and track the date and nature of changes to your standard procurement and contract documents.  This can be posted online for all to have access to.
  • Last revision date:   Include a "last revision date" in the footer of each document in order to help ensure that you are using the most recent version.
External controls:  Public agencies should be cautious about sending an electronic, non-password protected version of a contract to a contractor or consultant.  Inadvertent or purposeful changes can then be made without the public agency even being aware of the change.  It is a best practice to only send a track changes password protected or PDF version of the document electronically to an outside party.
Mike Purdy's Public Contracting Blog 
© 2013 by Michael E. Purdy Associates, LLC 

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