Nine Key Times an Oil and Gas Company Should Consider a Contract Compliance Audit [White Paper]
June 16, 2021
Oil and gas companies have faced an array of market challenges in the past 15 months. COVID-19 has greatly affected the global energy sector, slashing demand with heavy travel restrictions and government-imposed lockdowns. Due to slowed or disrupted shipments and enforced social distancing requirements in the manufacturing space, the need for oil and gas was significantly lower, as the demand and the ability to meet the demand weakened. With the overall reduction in energy demand, the prices and stockholder investment of oil and gas have slumped.
Due to the changes in the industry, oil and gas companies must be quick to react and adapt. With the ongoing compilation of new restrictions and operational complexities, production costs, and quick swings in the market, companies are battling an increased number of challenges and risks. However, sometimes the greatest risks are those that go undetected.
For instance, given the daunting complexity and remote locations of many oil and gas projects, companies often must turn to third-party firms to help provide necessary equipment and deliver complex services. While the resulting supplier relationships can be beneficial, they are highly susceptible to contract non-compliance.
In fact, with the intricate nature of multi-year contracts with non-hydrocarbon vendors, non-compliance is easily overlooked and can quickly erode both transparency and an organization’s margins if left undetected.
In this white paper, we discuss nine of the most common scenarios and indicators—either intentionally or unintentionally—that signal it’s the right time for oil and gas companies to conduct a contract compliance audit. Following are three of the nine indicators:
- If you are making a major spend or investment, such as building a new production facility or launching a global advertising campaign, prudent management of contract compliance at project inception will help ensure ultimate success. Whether it’s your own company or a third-party among the manufacturers in your supply chain, mergers and acquisitions (M&As) are a major financial and operational investment for a company to process and navigate. With a well-designed contract compliance audit in place, your company can avoid falling into common risks that come with the M&A process.
- When contract terms are complex, compliance becomes more difficult. In these cases—especially contracts with non-hydrocarbon vendors that provide parts, materials, and services—audits are invaluable for ensuring compliance with contract terms and operating procedures.
- If your organizational structure is decentralized, resulting in contract “ownership” residing in various business groups, it is easy for each of those groups to assume that compliance is managed by another part of the organization. Audits provide an opportunity to ensure compliance protocols are consistent across the organization.
A well-timed contract compliance audit can uncover significant financial savings, including overbillings and unused funds, as well as improve efficiency, transparency, and internal controls.
To learn more about the importance of a well-timed audit, the three scenarios highlighted above, and the six others that should prompt a contract compliance audit, download the full white paper today.
Need to call an experienced auditor to look at your contracts? Or do you want to learn more about how contract compliance audits can help improve third-party transparency, accountability, and efficiency? Contact SC&H Group’s Contract Compliance Audit team here.