Addressing Compliance and Complexity Through Contract Intelligence
In the high-stakes world of aerospace and defense (A&D), contracts serve as far more than legal formalities — they are the operational backbone of mission-critical programs. Whether supporting multiyear government procurements, defense system integrations, or global supply chains, contracts define not just scope and schedule but also compliance, accountability, and risk.
Yet today’s contracting environment is more complex and unforgiving than ever, with greater scrutiny being placed on A&D contractors. According to the Defense Contract Audit Agency (DCAA), it issued 2,465 audit reports in Fiscal Year (FY) 2024. These audits span everything from cybersecurity readiness and cost accounting to labor regulations and data controls. The pressure on A&D firms to demonstrate airtight compliance has intensified dramatically, and with it, the risks of failing to keep pace. To address these challenges, A&D firms need systems that can adequately address the complexity and rigor of modern defense contracts.
The Need for Modern Systems
One of the challenges many contractors face is a reliance on outdated methods of managing increasingly sophisticated, high-value agreements. This includes the use of spreadsheets, email chains, and disconnected repositories to track critical information. Compounding the issue, inconsistent obligations, missed modifications, and siloed supplier data can make it nearly impossible to manage performance proactively.
The challenges A&D companies face start from the very beginning of the contract process. Federal contract capture is a fiercely competitive activity, where timing, coordination, and precision can mean the difference between securing a contract or losing out to a competitor. Missing deadlines or providing fragmented visibility into open solicitations can cost companies tens of millions of dollars in lost business. Without centralized, structured opportunity data, bid teams are often left scrambling across disconnected sources, highlighting the need for a platform that can meet these needs.
Even after winning the contract, complexity mounts. Resulting contracts can include hundreds of pages of requirements, including cybersecurity controls, cost accounting requirements, export restrictions, and labor mandates. All of these must be interpreted, documented, and enforced — not just internally, but across subcontractors. When A&D contractors manage these terms manually, they risk missing key obligations, potentially creating compliance gaps or problematic audit findings later in the process.
This becomes even more difficult once the program is underway. Government contracts are living documents, frequently updated with modifications affecting the administration, funding or performance. Without a unified system of records, many contractors struggle to keep project teams aligned with the current version of the contract. Deliverables can slip, budgets can become overrun, and performance metrics required by the government may fall out of sync with legacy internal tracking systems.
This reality has accelerated the need for a modern approach to contract lifecycle management (CLM). A&D companies require platforms that offer essential capabilities for their industry, such as the ability to structure contract data, surface compliance risks, integrate with other enterprise systems, and provide actionable insights throughout the lifecycle — from capture through execution to closeout.
Addressing Complexity and Data Organization in A&D Contracts
Subcontractor management adds yet another layer of risk. Major A&D programs often involve dozens of partners. Each subcontractor must receive and comply with the right flow-down terms, delivery schedules, and data security requirements. When flow-downs are handled via email or tracked in static documents, the chances of omission or miscommunication grow exponentially. That leaves the prime contractor exposed to liabilities beyond its direct control.
It isn’t just the complexity of so many subcontractors that can cause issues for A&D companies, though. One of the most underutilized elements in most contract management systems is data. Contracts contain rich intelligence about supplier performance, pricing trends, dispute patterns, and compliance health, but when that information is trapped in file formats that a system may struggle to read or when it’s scattered across departments, companies face obstacles in learning from past agreements or enhancing future ones. In a market where margins are narrow and compliance pressure is rising, this lost insight represents a missed opportunity for differentiation.
These pain points are frequent challenges for A&D contractors, but an end-to-end CLM platform can help deliver measurable results that address these issues, including:
| Feature | Measurable Business Impact |
| Automation and templates | Delivers faster drafting, fewer errors, lower costs |
| Centralized repository | Provides better access, fewer lost documents, improved audit readiness |
| Alerts and renewal tracking | Prevents missed renewals, support obligation compliance |
| Analytics and insights | Supports strategic decisions, risk spotting, and performance reviews |
| Collaboration and workflow | Speeds approvals, reduces silos, enhances cross-functional teamwork |
| AI-powered tools | Flags compliance issues proactively, reduces review time of agreement changes, and offers insights |
| Enterprise integration | Helps ensure seamless process from contract to order fulfillment |
In addition to these features, some CLM platforms have begun incorporating agentic AI that allows the system to understand context, learn from user interactions, and take authorized, independent actions on its own.
Embracing Contract Intelligence in Aerospace and Defense
The aerospace and defense sector has always operated with complexity. What’s changing now is that complexity is becoming unmanageable without the right digital tools. Static documents and manual workflows no longer suffice in an increasingly complicated landscape. To compete and comply in this environment, firms can benefit by embracing contract intelligence — systems that not only manage documents but reveal risk, drive alignment, and support better decision-making.
Organizations that lead on this front stand to gain more than efficiency — they can strengthen their posture with government customers, reduce audit exposure, and deliver greater value through every contract. In a market where contract lifecycle management is often seen as a cost center, those who turn it into a core capability position themselves to have the advantage.
Learn how BDO’s knowledgeable management consulting team can help you enhance your financial, operational, and technical capabilities.