Definition - What does Contractor Compliance mean?
Contractor compliance is an aspect of contractor management that is concerned with the extent to which a contractor is operating in accordance with the terms of their contract. It can also refer to the extent to which a contracted firm is actively taking steps to fulfill an agreed-upon task, service, or duty that it has not yet complied with.
The extent to which an employer has the right to monitor a contractor’s compliance (e.g., by assessing potential liabilities) may be written into the contract itself as a specific right or duty of the contracting party.
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Safeopedia explains Contractor Compliance
In addition to assessing conformity with contract provisions, compliance monitoring can also involve ensuring that the contractors being monitored are adhering to legal and other mandatory obligations that exist outside of the contract. Ensuring compliance to reduce safety risk can thus be understood as a process that concomitantly diminishes financial risk, reduces potential insurance liabilities, and minimizes exposure to legal risk.
The process of assessing compliance may involve looking at factors like the subcontractor’s insurance and verifying that any new employees hired by a subcontractor meet the qualification standards specified in the original contract. This validation may occur as part of a pre-qualification assessment.
In practice, much of the contract compliance process involves employers creating an organized framework that enables contractors to report their activities in a managed and predictable manner. This process may also involve active monitoring of activities to ensure the accuracy of contractors’ reporting and to detect any issues not addressed under the existing reporting program.
Many firms use third-party consultancy services in order to look for potentially undiscovered lapses in compliance and to find potential gaps or compliance loopholes within existing contracts.