What would happen if one of your biggest client contracts were audited tomorrow? Would you be okay, or would there be "findings"?
There is no sense in leaving your biggest client contracts exposed to an unfavorable audit. With a relatively simple framework, and a little effort, you can fortify your most important contracts (e.g. your General Services Administration contract). Six Sigma defines a well-known and respected five-step process for improving processes and building quality products.
No, I'm not suggesting that you break out the black belts, stat-heads, and large wallet, but the basic framework can be transposed to fortify the fulfillment of any contract obligations. Let's go through the DMAIC (the basic Six Sigma process improvement framework) process, and see how it can apply to contract compliance.
Step 1 - DEFINEAs with all initiatives, you should clearly define what you're trying to accomplish, and establish a charter. Even if it's a small effort, I would call it a "project", so the first step would be to establish a Project Charter. Voice of Auditor (VOA) data should also be collected. This can be from external auditors, internal auditors, and anybody else that would have feedback on what needs to be done to improve contract conformance.
Step 2 - MEASURE
An Operational Contract is a contract that puts your legal contract in very unambiguous terms, with strict definitions around each term. The Data Collection Plan spells out the procedure for how you will collect your data for contract compliance. To baseline conformance, simply run through your Data Collection Plan and record the data.
There is no sense in leaving your biggest client contracts exposed to an unfavorable audit. With a relatively simple framework, and a little effort, you can fortify your most important contracts (e.g. your General Services Administration contract).
Step 3 - ANALYZE
After you have baselined your contract conformance, discuss what areas need to be improved, and brainstorm on possible root causes for why certain contract points are either out of compliance, or close to it.
Step 4 – IMPROVEOnce you know what your validated root causes are, systematically address them.
Step 5 - CONTROL
Once your improvements have been made, you need to run tests to ensure the fix will "hold." An Auditor's Test Plan is an extension of your Data Collection Plan. It should be created from an auditor's point of view, and integrate seamlessly with your Data Collection Plan. The results from executing your test plan should be recorded in your Control Plan. Your Control Plan spells out what should be expected from your testing efforts, and highlights when something is "out of control," or not acting the way it should.
The 5-Step Six Sigma DMAIC (Define, Measure, Analyze, Improve, Control ) process is an effective way to fortify the conformance of your most important contracts. Contact us today if you would like to chat more about your organization’s compliance.