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Managing a contract workforce in the financial management workplace.

This article addresses seven areas that government managers should consider when managing or preparing to manage a contract workforce.


When referring to the federal workforce, one probably thinks of civil servants--those approximately 1.8 million employees of the United States Government. The true picture, however, also includes a large contract workforce.

Although the number of contract personnel working in the federal workplace is difficult to determine, it is widely accepted that the number is growing. Recent articles have pointed out that in many agencies the number of government employees actually has declined while contract labor is booming.

In the financial management arena, contractors are delivering or supporting the delivery of financial services at all levels. In particular, contractor personnel are providing budget support, performing accounting activities, developing financial systems, and providing consulting services across the financial management disciplines. In some cases, the contractors lead the delivery of--and are solely accountable for--a financial product or system; in other cases, contractors provide manpower to augment a government staff. The February 27, 2006, issue of the Federal Times pointed out that blending contract personnel with the in-house staff gives the government manager an agile workforce that can respond to changing dynamics, budgets, and skill sets.

The contract workforce, like the in-house workforce, is made up of highly dedicated personnel; an overwhelming majority of companies are providing quality products and services. For the unfortunate cases where contractor-provided products or services fall short of expectations, those shortfalls often can be traced to a few issues that, if done properly, may help avoid the undesirable outcomes.

The following are seven areas that government managers should consider when managing or preparing to manage a contract workforce.

Contract Management Skills

Clearly Define Contract Objectives, Work Tasks, and Deliverables

Someone once said, "If you don't know where you are going, any direction will do." Make sure those firms bidding on your contract work know where you expect them to go.

Contract specifications should be as complete and detailed as possible. The more definitive the statement of work (SOW), the more likely the project will go smoothly--and stay within budget and on schedule. A clear SOW will reduce risk and minimize conflicts and false starts.

Beyond clearly defined SOW objectives, a growing number of government managers now avoid dictating the specific approach and labor mix for accomplishing the work. Where possible, let the firms bidding on your work propose solutions and define labor categories. Contractors working in both the public and the private sectors may be able to propose a more efficient and effective way of doing the job.

If government managers try too closely to control the approach, labor categories, and individuals working the project, the contractors may be relegated to the role of a temporary employment agency. Should that occur, the contractor will add little value to the solution, and the resulting situation could lead to lost time and inefficiency. For example, transitioning to a new management information system is a complex and challenging venture. Personnel needed for such an undertaking include program managers, change agents, systems engineers, hardware and software experts, trainers, and operational support personnel. As the new processes and system are put in place, the need for systems personnel and change agents will give way to trainers and operational support personnel who will ensure that the system is effectively sustained. Contractors need the flexibility to change out personnel as the project requirements evolve.

Maintain Fiscal Propriety

No government manager wants to be named responsible for or complicit in creating a violation of the Antideficiency Act. All too often, however, inappropriate procurement actions lead to such an outcome. Financial managers who seek to perform missions with contractor support especially need to consider how those goods or services are procured. Although pressured by what may be time-sensitive requirements, the financial manager must ensure that the need for speed doesn't lead to inappropriate use of Economy Act or military interdepartmental purchase requests that may appear to skirt the purpose, time, or amount limitations established in statute. This sensitivity regarding fiscal law also must apply to contract execution, which provides a good segue to the next step.

Closely Monitor Cost and Schedule

During contract execution, it is essential both for government managers and their contractor counterparts to ensure that costs are within budget and that service delivery is on schedule. Too often, we read about cost overruns, late deliveries, or poor-quality services. Sometimes these are unavoidable; but more often, cost or quality issues could have been avoided or mitigated with proactive cost and schedule management.

Requiring contractors to submit monthly status reports (that compare actual costs incurred to planned costs and also compare budget execution rates to schedule output) is essential to project success. The measurement of cost and schedule can be further enhanced by establishing performance measures that enable government and contract personnel to easily quantify how well things are going and more objectively discuss program progress.

Even simple processes, such as reconciling contractor invoices to mandatory activity reports, will assist the government manager in monitoring cost and performance. Regardless of the approach taken, it is better to stay in front of cost and delivery issues because they are very difficult to correct after the fact.

Provide Frequent and Honest Feedback

Even though the rules for managing a contract workforce are different from those used for government employees, government managers should try, within the scope of the contract, to manage and monitor contract personnel as they would in-house personnel.

Not only should the responsible manager address overall performance with the contractor, he or she also should share with the contracting firm's responsible manager any observations about the performance of each contract employee. Whether it is good or bad, contractor management needs to know about overall performance, especially if it is not up to standard or when individual contract employees are not performing as expected. The longer issues or problems go unaddressed, the more difficult it will be to achieve a successful resolution.

In most relational situations, there are the known problems and (most likely) unknown problems. Timely and frank performance feedback between the government and the contractor will help identify and resolve those problems. Organizations and individuals, both contractor and government, don't like bad news and, at times, want to defer acknowledging such news in the hope that it will resolve itself or simply go away. Occasionally, this approach may work, but it is more likely to get worse over time. Timely, open, non-judgmental discussion of such issues is in the best interest of both parties. Conversely, when there is good news (such as when the contract is ahead of schedule or under budget or when a new technical solution has been developed), timely feedback provides wide acknowledgment of the good news and helps motivate the entire staff.

Assimilate Contract Personnel into the Team

As previously mentioned, a government manager's staff will likely include both government employees and contract personnel. The key for the government manager is to blend both groups into a cohesive team.

Within constraints dictated by security, fiscal law and protection of sensitive information, government managers should include appropriate contract personnel in staff meetings and strategy and planning sessions. Contract personnel need to clearly understand the mission, goals, objectives, and values of the government entity they have been engaged to serve, just as they do their own employer. There is no substitute for truly understanding the organization and its priorities and challenges.

Contract personnel will also be more effective if they know and understand the government organization's customer base and the customer's expectations. If the organization's mission is to provide improved finance and accounting service to customers, then the contractor should know who the customers are and their expectations and the problems that need to be addressed. If, for example, the project is to improve accounts payable operations, the contractor needs to understand the organization's service standards and the various issues necessitating the project in question--process, procedure, and/or system problems that are inhibiting performance and customer satisfaction.

By assimilating the contractor staff, the government manager ensures that both government and contractor personnel hear feedback, project direction, new guidance, and other important information directly from key managers. The combined government and contractor project team thus will operate from a common knowledge base that should leverage the brain power of both government and contractor personnel.

Communicate and Cooperate

Implicit in this discussion is the imperative to communicate and cooperate; however, communication and cooperation may take the back seat when everyone is focused on getting the job done. Although usually unintentional, such an outcome nevertheless can adversely impact operations. Contractors bring contracting specialists, program managers, and corporate leadership to discussions. The government brings functional managers, acquisition managers, contracting specialists, and their respective leadership chains to the projects. These specialists in varying disciplines must trust each other to promote and permit effective communication. There needs to be intentional sharing of vital information. Changes in due dates, new concepts, new team members or personnel assignments, revised tasks or contract requirements, and many other factors typically must be disseminated rapidly throughout blended teams.

It is better to communicate too much than too little. Allowing rumors to grow and circulate creates both inefficiency and wasted time. It is very helpful when both contractor and government managers keep rumors from starting or quickly resolve them once they surface. For example, a rumor that contract funding is going to be cut or that the project is to be canceled may well bring progress to a virtual halt. By quickly clarifying the situation and providing a complete explanation, management will help keep the respective staffs focused on performance.

Develop Training for Managing a Contract Workforce

Management training courses need to prepare government managers--not just contracting officers--to deal effectively with a workforce that includes both government and contract employees. Knowing the rules for managing contract labor is particularly important when contract personnel are supplementing the government workforce. We probably all have been in meetings or have seen office settings where it is difficult to distinguish between government and contract personnel. Despite the transparency, responsible managers need to understand that the rules are very different for managing the contract employee who is sitting at a work station next to a government employee.

There are numerous courses available (some mandatory) that teach government managers how to manage government employees. It is more difficult, however, to find management and supervisory courses that prepare government managers to oversee a contract workforce. Professional organizations, such as the American Society of Military Comptrollers and the American Management Association, and agencies with major training organizations, such as the U.S. Department of Agriculture, could provide valuable awareness and training for this new and growing management challenge.


Contract support is a large and growing segment of the financial management landscape. From high-end financial consulting to transaction processing, the private sector now plays a major role in the delivery of financial services to federal clients. Government managers of blended workforces need to employ effective management, communication, and mutual understanding to ensure that the goods and services provided under contract are of the highest possible quality.

Ron Speer, CDFM

Ron Speer is the president of JPAssociates Inc., a company providing high-end financial management consulting services. Prior to his current position, he was the auditor general of the Air Force. He is a member of ASMC's Washington Chapter.

Ed Kearney, the president of Kearney & Company, Dennis Samic, a vice president with CACI; and Gary Hahn, a senior consultant with JPAssociates Inc., contributed to this article. They are members of ASMC's Washington Chapter, Aviation Chapter, and Mile High Chapter, respectively.
COPYRIGHT 2006 American Society of Military Comptrollers
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Author:Speer, Ron
Publication:Armed Forces Comptroller
Date:Jun 22, 2006
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