Contract Management

Contract Management works from Cradle to Grave (of a project). It starts from forming a
contract till the job is completed/accepted (or terminated) and payments settled with final close
out. It affects all activities throughout the project life cycle.

Contract Management can be defined as a multi-stage process that goes on through the entire
duration of the contract and ensures that the parties meet their contractual obligations in order
to deliver the specific objectives provided in the contract.

The main purpose of contract management is to make sure that the objectives of the contract
(supply of goods, delivery of services or execution of works) are met in a timely fashion and
value for money is achieved. In practice this means optimizing the efficiency of the processes,
balancing costs and risks against returns and ideally aiming for a continuous improvement in
performance over the life of the contract.
Therefore, the ultimate objectives of contract management are: (i) Effectiveness and (ii)
Efficiency
Being effective is about doing the right things, while being efficient is about doing things right.

1. Effectiveness
The first and foremost condition of successful contract management is getting the job done.
This translates in the fact that the ultimate scope/objective of the contract is accomplished, i.e.:
(i) Goods are delivered/installed;
(ii) Services are performed;
(iii) Civil works are completed.

2. Efficiency
Just getting the job done is not enough for a successful contract management but there should
be a concern about how the job is getting done. The aim should always be to get the job done
in the best possible way. This means that the scope/objective of the contract is accomplished
within the agreed:
(i) Costs (budget);
(ii) Time (duration);
(iii) Quality (functional parameters).
(Note: Achieving efficiency should not be mistaken for an unrealistic chase for cost savings, or
unreasonable pressure to squeeze more output from the contractors for less money or less
time. These practices frequently backfire and may result in more time and resources being
misdirected towards a false objective).

Management Contract Management of relationships

of Civil Works Administration with contract parties, third
Contracts parties and stakeholders

Figure 1: Management of Civil Works Contracts

Effective contract management can ultimately create a powerful business relationship and
pave the road to greater profitability over the long-term.

Enablers of Good Contract Management

1. Contracts must be managed! - ‘Let and forget’ does not work.

2. Contract management needs to be planned - Participate in planning from the
beginning of the procurement process
3. Identify all documents which constitute the Contract.
4. Read your contract thoroughly and identify – including but not limited to: general
& special conditions, scope, deliverables, milestones, performance measures, important
dates and attached documents, payment arrangements, roles and responsibilities
5. Change control – changes only with authorisation
6. Ensuring consistency among various documents (updation)
7. Two way communication – mutual trust, timely sharing of plans and design, Less
dispute proneness
8. Monitoring and corrective actions – data collection systems, additional resources,
issues to be taken up with client
9. Management reporting – project performance reports, plan vs actual, involvement of
senior management
10. Document, document, document!
Overview of Role of Contract Management

A) During Tendering Stage

1. Understanding the legal commitment entered by contractor during tendering for a project,
by accepting the contract if awarded.

2. Studying the detailed clauses of contract document issued by client, including general,
special and particular conditions of contract.

3. Appreciating the impact of contract clauses on satisfactory execution of the project along
with legal and financial implications.

4. Responding to financial aspects of tendering processes, such as earnest money and bearing
the cost of tender preparation.

5. Obtaining necessary clarification for doubts about contract conditions during pre-bid
meeting or correspondence with the client.

6. Inquiring about project site conditions and obtaining adequate information about ground
conditions and geological data.

B) On Award of Contract

1. Agreeing to various terms and conditions of contract by careful scrutiny on award of

contract.

2. Attending to financial issues such as release of performance security and Bank guarantee if
mobilization advance is released.

3. Obtaining suitable EAR/CAR (Erection/Construction All Risk) insurance policy as

stipulated in the contract with additional features to protect its interests.

4. Submitting detailed planning schedule to the client as per contract conditions, covering
planning of men, material and equipment.

5. Conducting post-award site investigation to check any site variation with respect to data
provided by client to ascertain possibility of any genuine claim due to changed conditions.

6. Raising suitable invoices for release of mobilization advance by client against suitable bank
guarantee.

C) During Execution Phase

1. Monitoring the progress of project and reporting to the client in the agreed format every
week/fortnight/month.
2. Preparing monthly billing/Invoicing based on correct measurement of work as per correct
rules of measurement and unit rates.

3. Noticing any variation in the quantity and scope of work during bill preparation and
modifying the invoiced amount accordingly.

4. Recording any additional or extra over and above the basic scope of work and timely raising
the matter with client for rate agreement and billing

5. Raising claims based on client authorized changes made in the scope of contract after
obtaining the written amendment.

6. Providing detailed work-out and back-up documentation to substantiate the claim to obtain
client's acceptance.

D) On Completion of Project

1. Reconciling all certified and uncertified invoices during for final billing after checking for
any missed out work during earlier billing.

2. Settling claims arising out of all approved and agreed changes and variations which are not
displayed by client.

3. Preparing presentation to be made to Dispute Resolution Boards and/ or Arbitration to defend

and settle claims made during execution which were not disputed by client.

Contract Management is dependent upon carefully recorded facts during execution of the
project from start to finish.

These data base facts recorded by maintaining Project Diary serve as solid base for smooth
Contract Management.

Check-points are normally observed to create this data base with reference to external and
internal issues, along with interaction taking place with client, suppliers and contractors.

External Issues

1. Weather record - rain, temperature, humidity, fog and any other unusual natural
conditions, on any particular day.
2. Record of any adverse news or events likely to affect the project - strikes, riots or
hostilities; acts of God - earthquakes, landslides, floods, etc

Internal Issues

1. Record of
• work force with main contractors and sub-contractors everyday.
• major plant and equipment at site, owned, hired or provided by sub-contractors.
• main activities, such as, concrete and steel work done everyday.
• accidents - major or minor - including details of injury and damage to the property.
 2. Notes on
• unexpected ground conditions at site and action taken to overcome the same.
• correspondence with insurers and any claims raised with them.
3. Delays noticed in the receipt of material, consumables, plant and equipment.

Issues with Client

1. Notes on
• discussion with client's representative or engineer
• receipt of approved drawings or instructions.
2. Records of
• instructions or letters received from engineer or his deputy.
• request for attending measurements and failure, if any, to attend the same by client.
3. Dispatch of confirmation of verbal instructions from clients.
4. Requests to client for attending inspection and testing and failure, if any, to attend the
same.
5. Any communication regarding invoices, certificates and payments, etc. during
submission and approval.
6. All letters, notices required to be sent to client as per applicable contract conditions.

Issues with Sub-contractors and Suppliers

1. Transactions with sub-contractors/suppliers - sub-contract orders, letters and

communications.
2. Confirmation of verbal communications.
3. Measurement and inspection of sub-contracted work.
4. Record of
• invoices,
• certificates
• payments made to them.

Issues with Other Agencies

1. Feedback to bankers or financiers as required.

2. Visit to site by Government authorities, Press and any other publicity media.
3. Record of any other visitors and notes on discussions with them.

General Issues

1. Special marking of all events and records which may give rise to claim for extension in
time and for increased cost.
2. Copying the important records at site to Contract Department at Head Office for
comments from them and to create extra copy at H. O. in case of loss of record at site.
3. Record of discussions with senior management people from Head office for obtaining
guidance on policy matters.
4. Maintaining the safety of all records for future information and settlement of all claims.