What does 'comply or explain' refer to in contract management?

'Comply or explain' is a principle primarily associated with corporate governance and management practices, and it emphasizes the accountability of organizations in meeting certain standards or regulations. In contract management, this principle indicates that entities should either fully comply with specific mandatory regulations or, if they choose not to comply, provide a thorough explanation of their reasons for non-compliance.

This approach fosters transparency and allows for flexibility while still holding organizations accountable. By adhering to this principle, organizations can demonstrate that they take compliance seriously while also allowing for exceptional circumstances where strict adherence may not be feasible. For example, if a company decides not to follow a particular regulation due to specific operational challenges, providing an explanation helps maintain trust with stakeholders.

In contrast, the other choices do not accurately reflect the essence of the 'comply or explain' principle. While mandatory regulations play a crucial role in compliance, avoiding legal obligations, establishing new contracts, or recommendations for avoiding compliance do not encapsulate the central idea of accountability and transparency found in the 'comply or explain' framework.