Definition of Contract Compliance

by Dennis Hartman; Updated September 26, 2017

Federal, state and local governments have agencies to perform many of their full-time duties to the public. They also work with businesses and independent contractors, who provide services to the government for a fee. Contract workers are subject to specific government regulations, including anti-discrimination policies. Through contract compliance, a government can ensure that its contractors are not in violation of the terms to which they have agreed.

Meaning

Contract compliance is a form of contract management that seeks to ensure that government agencies, contract holders and, in some cases, grant recipients, are complying with government standards regarding equal opportunity employment. These terms are different for each government but generally include provisions that businesses must accept applications from women and minorities, that government offices must solicit bids for contract work from minority- and women-owned businesses and that organizations that receive grants from the government follow fair hiring, retention and promotion policies.

Administration

Each level of government is responsible for administering its own contract compliance. The federal government and state governments are heavily involved in contract compliance. Local governments, including cities and towns, also use contract compliance to ensure fairness in their communities and follow the guidelines that higher levels of government establish. For example, a city may need to have an office of contract compliance to qualify for certain state grants and funding.

Process

The process of contract compliance consists primarily of periodic reviews of existing contracts. The person in charge of a government's contract compliance office usually holds the title of contract compliance officer. The office may require grant recipients and contract holders to fill out surveys that ask about their hiring practices and workforce makeup, or investigate discrimination claims from business owners or job applicants who feel as though they are victims of discrimination.

Outcome

Contract compliance has the goal of promoting fair hiring at every level of government. It holds government agencies and contractors to the same standards that business owners must comply with when they make hiring decisions. Because governments are such frequent and large-scale customers for contractors, their business is a valuable source of revenue for contract holders and a potential source of significant unfairness if minority- and women-owned businesses are closed out due to negligence or bias.