Overview

of the
Contract
Life Cycle
 Contract Life Cycle

Initiate Tender Bid Negotiate Manage Close

 CCM Life Cycle

PRE-CONTRACT (PRE-AWARD) PHASE POST-CONTRACT (POST-AWARD) PHASE

Initiate Tender Bid Negotiate Manage Close

AWARD &
CONTRACT SIGNATURE
 Employer
(Client)

Engineer Construction
Mian Contract
( Consultant) management
Vs Sub-
Contractor Contract
Sub-contractor
 Mian Contract Vs Sub-Contract
EMPLOYER
(CLIENT)

Contract

CONSTRUCTION or Main Contract

ENGINEER MANAGEMENT or Prime Contract

CONSULTANTS
CONTRACTOR Subcontract
(MANAGEMEN
T
CONTRACTOR)

SUBCONTRACTORS
Partnership:
Joint
Venture (JV)
or
Consortium
 Scope split is not necessary.
The work is done as if one
company does it.

Joint Constant percentage share

applies until the delivery of
Venture project.

Parties merge their resources

and act as a single party
while performing the work.
 Risk of performance is shared as
there is no scope split between
the parties and the work

Joint is done by merged resources. It is

one of the good reasons why
Venture Employers prefer JVs.

Cost, profit, and loss are shared

based on pre-determined ratios.
 Joint pricing is done while
bidding.

Joint Decision power is common

and decisions are made
Venture jointly.

A new legal entity is formed

which enables easier
accounting and taxation.
 Employer receives single
invoice from the formed
entity.

Joint Joint accounting and taxes

are applied under the
Venture formed entity.

This type of partnership

generally done between
civil contractors
Consortium

Clear scope split is required

Varying percentage share is applied

Each party manages its own resources.

Risk of performance is allocated to a party.

allocate the risk to the defaulting party.

Profit and loss are not shared. Only joint costs are shared. The joint costs
could be like the auditing expenses or the cost of managers working
Consortium

partners challenge each other to reduce its price

Consortium partners take their decisions independently.

Consortiums do not require to be incorporated as legal entity.

Employer receives separate invoices from each Consortium

member.
Separate accounting and taxes are applied and parties have no

liability on each other's account. Consortiums are generally formed

 JV (Joint Venture)
❑ Scope split not necessary
❑ Constant % share
❑ Parties merge resources
❑ Risk of performance shared
❑ Cost, profit, and loss shared
❑ Joint pricing
❑ Common decision power
❑ A new legal entity formed
❑ Single invoice to Employer
❑ Joint accounting and taxes
❑ Generally between civil
contractors
➢ Consortium
❑ Clear scope split required
❑ Varying % share
❑ Each party manages its own
resources
❑ Risk of performance allocated to a
party
❑ Profit and loss not shared. Only
joint costs shared.
❑ Independent pricing
❑ Independent decision power
❑ Not incorporated as legal entity
❑ Multiples invoices to Employer
❑ Separate accounting and taxes
❑ Generally when vendors are
involved
Typical Post-Contract Management Workload

Managing
Managing Managing
JV/Consortium
Main Contract Subcontracts
Agreement

Senior Contract Contract

Professionals Professionals
 Refer to. Typical+JV+Agreement

 Thank you
Roles and
Responsibilities
Roles and Responsibilities
Contract
management
responsibilities
matrix.
 is a good solution to
developed at the very
the question of “who is
beginning of a Project
doing what?”

to be performed to
is comprehensive list of administer a Contract
successfully
Responsibilities
tasks (main tasks and
sub-tasks) •is a good way of defining,
communicating, and
Matrix

assigning tasks to
individuals
 Can be done (by Contract
Administrator) for each
contract

Responsibilities is distributed to all involved

Matrix Project team members

periodically reviewed,
revised, and re-distributed
Refer to the matrix example
Who manages
the contracts?
 Contract Manager (most
common)
Contract Administrator

Typical Titles
Contract Specialist
Used for the
Role
Commercial Manager

Contract and Commercial

Manager
Contract
administrator
Main Tasks
 Develop and Maintain
Contract Management
Responsibilities Matrix

Contract
administrator Establish Contract Baseline
– Main Tasks

Form Contract
Requirements Action List
and Flow-Downs
 Develop Contract
Administration Manual

Contract
Establish Document Control
administrator Center
– Main Tasks

Do Contract Filing
 Train the Team for Commercial
Awareness

Handle Correspondences
Contract
administrator
– Main Tasks Administer Changes

Closely Monitor Project Schedule

and Cost Performance
 Handle Handle Claims

Contract
administrator Handle Handle Backcharges

– Main Tasks

Manage Manage Subcontracting and Subcontracts

 Attend All Meetings
Related to Contract
Contract
administrator
– Main Tasks Assist and Guide Project
Manager For Contract
Compliance
 Monitor Adherence to Insurance Provisions

Handle Bonds and Guarantees

Contract
administrator Manage Warranties

– Main Tasks
Manage Close-out

Handle Waiver and Release of Lien

Contract Administration
Manual.
 ✓ Developed at the very beginning of a Project

Developing ✓ Provides all involved Project team members with

Contract
Administration
the guidance and check lists

Manual ✓ Serves as the main reference document for

contract and subcontract management

 Describes how things should be done
under each process and the
responsibilities of the team members
Defines interfaces with external entities
Developing
Contract
Administration is formed in full compliance with the
Manual contract

regularly reviewed, updated, and re-

circulated
Manual : Example
Document
Control Centre
(DCC).
 select a well qualified DCC
supervisor/personnel

Developing prepare a document

strong distribution matrix: who
receives which document?
(DCC).

ensure all involved team

members receive the
communication
 ensure proper record
keeping done (i.e. physical
conditions)

Developing
use software as possible to
strong add workflows
(DCC).

handle revisions
 monitor Project submittals
(drawings, specifications, etc.)

ensure “date received” is recorded

Developing
strong
(DCC). ensure documents are serially
numbered

ensure compliance to record

retention requirement
Thank you
Administering the
Contract
Mian elements
Contracts
packages
 Contracts packages

A. FORM OF AGREEMENT J. PROJECT INFORMATION MANAGEMENT

B. SPECIAL (PARTICULAR) CONDITIONS i.e Duration ,
percentage K. QUALITY MANAGEMENT
C. GENERAL CONDITIONS L. HSE MANAGEMENT
D. SCOPE OF WORK M. INSURANCES
E. SCHEDULE OF PRICES AND RATES, AND METHOD
OF MEASUREMENT N. NOTICE TO PROCEED, CERTIFICATE OF
COMPLETIONS AND ACCEPTANCES
F. PROJECT SCHEDULE
G. SUPPLIED ITEMS (IF ANY) – Free items O. WARRANTY CERTIFICATE
H. FORMS OF BONDS AND GUARANTEES P. LIST OF APPROVED BANKS
I. SUBCONTRACTORS, VENDORS, AND SUPPLIERS Q. TECHNICAL SPECIFICATIONS
LIST
R. DRAWINGS
 Clear access timely provided to us

Our proposed method of executing

Main Points the works not disrupted
to Identify
While Reviews, approvals, and inspections
Reading done in reasonable times

Scope is very clear

Acceptance requirements
and taking over well
defined
Main Points
Payments done in to Identify
reasonable times While
Reading
Sufficient periods given to
us for notices and actions
 Major risk events affecting
the work mentioned
Main Points
to Identify Party liable for design
While mentioned
Reading
Design is doable by
proposed work methods
 Conditions for change
orders well defined

Main Points
to Identify A party assigned for
While coordinating all others

Reading
Flow-down requirements
mentioned
Contract Baseline
 Contract Baseline: what we base our price

Elements of Contract Baseline:

•Scope of Work: Design Basis, Constraints, Standards, etc.

•Work’s Programme and Assumptions i.e. Duration of the
Contract works, sequencing of major activities, interface
milestones, etc.
Baseline •Price for Covered Scope: Quantities, Estimating
Assumptions, Profit ( Lump Sum contracts )
•Project Execution Plan
•Other Risk Allocated Points in the Contract: Site
Conditions, Laws

Deviations to be closely monitored

Examples for Deviations

✓ Unobstructed site > Existing underground utilities

✓ Changes in laws and regulations after contract signature

✓ Originally agreed schedule altered

✓ New design requirements and changes on the basis

Examples for Deviations

✓ Lengthy periods for inspections, increased % of inspections

✓ Extensive design review cycles

✓ Increased quantities beyond envisaged

✓ Adverse weather conditions beyond assumptions

Contract Filing
Contract Filing

✓ a good practice to access your files instantly

✓ done by Contract Administrator for each contract/subcontract
✓ is separate from DCC filing
✓ is used by Contract Management Team
✓ can easily be created on Windows directory
Example:
Contract Risk
Assessment
Contract Risk Assessment

✓ What is called “risk”?

o An uncertain event or condition that, if occurs, has a positive or negative

effect on one or more objectives. (PMI)

✓ Parties share the risks through contracts

Contract Risk Assessment

✓ Risks may arise from contract obligations or externally

✓ Risks need to be well identified and properly responded

✓ A Risk Register should be developed

Contract Risk
Assessment
✓ Risk response strategies
for Threats are:
o Escalate
o Accept
o Avoid
o Transfer
o Mitigate
 Contract Risk Assessment

✓ Risk response strategies for Opportunities

are:

o Escalate
o Exploit
o Share
o Enhance
o Accept
Example
Actions,
Notices,
Liabilities
Flow-downs
 ➢ Done while reading the full contract

Identifying ➢ Listing contract obligations requiring

Actions, action or notice
Notices,
Liabilities, Flow- ➢ Listing contract liabilities

downs ➢ Assigning individuals for proper risk

response with target dates

 ➢ Listing required flow-downs to

Identifying subcontracts

Actions, ➢ Periodically reviewed and updated

Notices,
Liabilities, Flow- ➢ Supporting staffing requirement

downs ➢ Contributing to overall Risk

Management in the Project

Examples:
Notice

Liability

Flow-down
Training the Team
Training the Team

✓ Conducted at the beginning of the project

✓ is based on Contract Baseline

✓ Keeps the project team:

o aware of the contract actions, notices, and liabilities

o alerted for deviations on contract obligations

o aware of their assigned roles in Contract Management Responsibilities Matrix

✓ Repeated periodically to update the team

Training the Team - Typical Issues to
Address

✓ Project’s stakeholders and contracting structure

✓ Team members’ roles and responsibilities

✓ Schedule and critical path

✓ Directions received from Employer and our contractual position

Training the Team - Typical Issues to
Address

✓ Changes and the approval procedure

✓ Scope (in-scope and out of scope items), avoidance of scope creep

✓ Known major risks for the Project and our liabilities

Training the Team - Typical Issues to
Address

✓ Payment terms and conditions

✓ Targets for profit and performance/efficiency levels

✓ Reporting requirements (specifically daily reports)

✓ Stop-work requirements

✓ Recovery and acceleration

Thank you
Subcontracting
Pre-bid Activities
Pre-bid Activities

✓ Aimed to inform bidders about jobsite conditions and clarify bid

requirements.

✓ What are main pre-bid activities?

o Pre-Bid Meeting: An opportunity for us to clarify what we required in the bid package and
answer any questions.

o Pre-Bid Site Visit: An opportunity for bidders to see the site in all aspects and familiarize
themselves with the local conditions.

✓ Bid Clarification Meetings can also be organized if deemed

necessary.
Tendering
Tendering Types

✓ The main types of tendering strategies are:

o Single-Stage Tendering (most common)

o Two-Stage Tendering

o Negotiated Tender

✓ Each tender strategy has advantages and disadvantages.

The main types of procurement routes

✓ Traditional Lump-Sum

✓ Traditional Re-measurement

✓ Design and Build (or EPC)

✓ Cost Reimbursable
The main types of procurement routes

✓ Construction Management

✓ Management Contracting

✓ Public Private Partnership (PPP)

Each type of procurement route addresses different requirements of a

project.
standard form of contracts

✓ There are many types of standard form of contracts

✓ The standard forms of contracts mostly used are:

o FIDIC (most popular)

o The Joint Contracts Tribunal (JCT)

o New Engineering Contracts (NEC)

o IChemE Contracts

✓ They have suites of standard contracts for different procurment routes

Tendering Process

✓ Tender package should be compiled by a team effort.

✓ It requires cross-functional collaboration to develop the documents necessary for

tender.

✓ The process is led by Contract Administrator.

Tendering Process

✓ Tenders can be simple or complex depending on the nature of work package.

✓ Tender packages should be issued together with the draft agreement and its

attachments.
Bid Evaluation
and Award
Bid Evaluation process

Thank You to
Bids Bids Bids Work
Unsuccessful
Received Evaluated Negotiated Awarded
Bidders
Bid Evaluation

✓ Bids are evaulated based on pre-determined bid evaluation criteria.

✓ Evaluation criteria are comprised of technical and commercial factors.

✓ Each factor has a score point and a weightage.

✓ Bid Evaluation Team is formed who opens the bids together.

Bid Evaluation

✓ Bids are initially checked for completeness, validity, and bid bonds.

✓ Each team member scores the bids independently.

✓ Bids getting the higher overall score are selected for negotiation.
Award

✓ Upon successful negotiation with the high score bidders, the award takes place
with the preferred bidder.

✓ After the subcontract is signed and insurance certificates and performance bond
are received, then the bid bonds of unsuccessful bidders should be returned.

✓ The signed subcontract original copy should be kept safely.

 Thank you
 Handling
Correspondence
Point of Contact (POC)

✓ Generally set forth in the contract

✓ Designated individuals (or individual titles) in both organizations
✓ All correspondence should be addressed to POC
✓ A good control on flow and distribution of correspondences
✓ Remind Employer to direct all its correspondence to your POC

Responsible Contract POC

Team Member Administrator signs and
drafts letter reviews sends letter
Initiating Letters

✓ Don’t forget: Letters are the main records for legal ramifications

✓ Check the correctness of information on the used letter template

✓ Clearly state the subject and the work area

✓ State the purpose of the letter in the first paragraph

✓ First conclusion comes, then the details

Initiating Letters

✓ Give contractual reference as much as possible

✓ Keep it short and to the point

✓ Details like data and tables better to be made attachments

✓ Eliminate irrelevant (not referred) data

✓ Be clear on the expected action

Initiating Letters

✓ Ensure that letter is addressed to Employer’s POC

✓ Ensure that letter is signed by authorized person (POC)

✓ Give serial numbers and date

✓ One subject per one letter

✓ Use simple language and commonly known words

Initiating Letters

✓ Present the ideas in a logic flow

✓ State expected response time, if any

✓ Be factual rather than fictitious

✓ Give full details of the references used

✓ List the attachments by numbering

 One of the most important duties of
Contract Administrator

All letters requiring an answer

Answering should be responded

Incoming
Letters If full answer is expected to delay,
an interim reply can be sent.

Responses should be cross-

referenced
 Responses should cover the
full history of the issue

Answering Responses should address

Incoming the whole actions
requested by Employer
Letters

Check received date

stamps on all incoming
correspondences
 Establish the chronology
based on “received dates”
of letters

Answering Assign actions to

Incoming responsible team members
in a timely manner
Letters

Use a correspondence log

to track and reply open
letters
Keeping Correspondence Log

Correspondence Log
Log Update
Project:
Date:
Contract:

Received Target Reply

Letter Ref. No. Subject Assigned To Status/Remarks
Date Date
 ✓ Some letters should remain confidential
and be protected due to sensitive
contents like:
o personnel removal requests by
Employer
o pricing information
Confidentiality
✓ Confidential letters require:
o limited distribution
o maintaining in a secure location
 Thank you
Insurances
What is “Risk”


The possibility of an event
occurring that will have
an impact on the
achievement of
objectives.

Risk is measured in terms
of impact and likelihood.
Risk
Management
A process to identify,
assess, manage, and
control potential events or
situations to provide
reasonable assurance
regarding the
achievement of the
organization’s objectives.
 In some projects, Employer provides
Construction All Risk (CAR) insurance
and/or Marine Cargo All Risk insurance.

Employer When the whole works are not

undertaken by an individual company or
Provided the involved project is part of a much
Insurances bigger program.

Insurance information is best to be known

before bidding for the Project.
 Contractor to maintain its own insurances
for below deductible limits and/or
differences in conditions.

Employer Gaps in the coverage should be clearly

identified.
Provided
Insurances
Copies of the insurance policies provided
by Employer should be obtained as early
as possible and to be reviewed in-depth
by an insurance expert.
Our Own Insurances
 ✓ Insurance is a kind of risk mitigation
strategy for all insurable risks.
✓ Typical insurances required in a contract
are:
Our Own o Construction/Erection All Risk
Insurances o Third Party Liability
o Professional Liability
o Employer’s Liability
o Marine Cargo All Risk
 ✓ Ensure that no gaps in the coverage occur.
✓ Coverages for Subcontractors/Consultants
by naming them as “additional insured”.
✓ Waiver of subrogation can be asked from
Important the insurer.

Factors ✓ Ensure that there is no double up in the

insurance policies.
✓ Limits per single event or per aggregate
should respond to the requirements.
 ✓ Policy details should be carefully reviewed
and administered.
✓ Copies of the insurance policies are to be
provided to those named as additional
insured.
Important ✓ Policies are timely renewed prior to expiry
Factors (cont’d) dates.
✓ Policies should cover additional works
where it may become massive in some
Projects.
 The Basis of An
Insurance Policy
The Basis of An Insurance Policy

✓ One of the most important features of a policy is its form:

o Claims Made: A 'claims made' basis covers claims that are made and
reported during the policy period only and not once the policy period
is over, which restricts the time that is allowed to make a claim.

o Occurrence (Claims Occurring): A 'claims occurring' basis covers

claims that occur during the policy period irrespective of when the
claim is made, even if the claim is made after the policy has expired.
The Basis of An Insurance Policy
(cont’d)

✓ Check the basis of your Employer’s Insurance Policies.

✓ Define the requirements for your Subcontractor’s Policies.

✓ Timely notify the insurer of an event covered by the insurance.

“Subcontractor's
Insurances”
 Subcontractors/Consultants
should also be protected by
insurances.

No entry to the site without

Subcontractor's insurance coverage.
Insurances

Subcontractors to provide their

own insurances or they should be
protected by our own insurances.
Subcontractor's Insurances

should be mentioned in
Third Party Liability
the subcontracts.

Typical insurances
required in a Professional Liability
subcontract are:

Employer’s Liability
 Subcontractors should be provided the
copies of insurance policies and made
aware of the deductible limits.

Additional insurances for below deductible

limits or difference in conditions.
Important
Factors
Limits per single event or per aggregate
should respond to the requirements.

No exclusions to the coverage should be

accepted.
 Coverage period should be
in line with work execution
schedule.

Important Renewals and/or

cancellations should be
Factors timely notified.

Modifications to the
insurance terms should also
be monitored.
Initiating
Insurance
Claims
 First Action: Notify the
insurer (or the principal of
the policy) in time

Initiating
Consult with your insurance
Insurance broker about the event.
Claims

Start gathering the costs

related to resolution and
correction of the problem.
 Cost is comprised of all involved
parties: not only yours.

Initiating Cost should be the actual costs.

Insurance Insurers may not accept
Claims estimations.

Take photos and videos of the

event immediately
 Insurance pays the cost for fixing

Initiating
Insurance Deductibles and coverage limits
are based on single event, not
Claims combination of multiple events.

(cont’d)
Multiple events might be similar in
nature but considered as
individual single events occurring
at different locations.
 Prepare a comprehensive report
of the event which can be
Initiating provided to the loss adjuster
appointed by the insurer.
Insurance
Claims
Non-recovered portion should
(cont’d) be charged to the party
causing the event.
 If covered by your insurance
policy, Subcontractors may
want to make use of your
Subcontractor policy.
Insurance
Claim Subcontractors should be
allowed to make their claims
even if the event is due to
Subcontractor’s failure.
Bonds and
Guarantees
Bid Bonds

✓ Requested to honor bidder’s bid at tendering stage

✓ If the bid is not honored by the bidder, then the bid bond might be forfeited.

✓ Its value may range 2-5% of the estimated value of the work package.

✓ A template form should be provided in the tender documents

✓ Bind bond is returned after the award.

Performance
Bonds
 Ensures that the obligations undertaken
will be performed and requested
almost in all contracts.

Ensures that lower-tier companies are

paid in full.
Performance
Bonds
Its value is usually 10% of the contract
price.

Its value is re-adjusted according to the

final contract price.
 A template form should be
provided in the tender
documents and/or as attached
to the contract.

Performance Performance bond is usually

returned after the warranty
Bonds period.

It is a good practice to request

Performance Bonds from your
lower-tier companies at the
beginning of their works.
Performance
Bonds
(cont’d)
Warranty and
Retention
Bonds
Warranty and Retention Bonds

Ensures that warranty

obligations are fulfilled Requested in some
after the work is contracts.
completed.

A template form should

Its value is usually 5-10%
be provided as
of the final subcontract
attached to the
price.
contract.
 Warranty bond is usually returned after the
warranty period.

Warranty
and Retention Bond may function as Warranty
Bond.
Retention
Bonds
It is a good practice to request Warranty
Bond (or Retention Bond) from your lower-
tier companies if the whole withheld cash
money needs to be released.
Keeping
Bonds and
Guarantees
Log
 ✓ All bonds and guarantees, either received
or submitted, should be closely monitored.
✓ One of the most important duties of
Contract Administrator
Keeping Bonds
✓ Requirements for notification on renewal
and Guarantees and/or expiry should be fulfilled in a timely
Log manner.
✓ The original copies of the bonds should be
safely kept ideally by Accounts Department.
 Keeping Bonds and Guarantees Log
(Cont’d

Bonds and Guarantees Log

Log Update
Project:
Date:
Contract:

Type of Original or Submiting Contractual Return Terms and

Document Ref.No. Issued Date Issuing Bank/Institution Amount (USD) Expiry Date Notice Period
Bond Extension? Letter Ref. No. Conditions
Thank you
Types of Contracts
Types of Contracts
✓ There are three main types of contracts with respect to pricing:

Cost
Unit Price Lump-Sum
Reimbursable

✓ Each type has advantages and disadvantages.

✓ Selection of the type of contract is linked to Employer’s need and decision.

✓ Subcontract types can be determined in parallel to the main contract type.

Acceptance of Works
Performed”
 Contracts define the acceptance
and/or rejection of the work.

Notice of completion should be

raised in written.

Acceptance of Works Performed

Parties should conduct joint
inspection to witness the
intermediate and/or final work
completion.
Formal acceptance should be
received in written.
 Some contracts allow the
acceptance with outstanding
minor work.

If rejections are received, the

Acceptance of Works Performed
contract is reviewed against the
scope of work and remedial
action is taken accordingly.

Works are under Contractor’s

care, custody, and control until
take over.
Types of
Contracts
“Drawings and
Calculations,
Specifications”
 ✓ Contracts define the technical submittals
subject to Employer review and approval.
Drawings and ✓ Drawings, calculations, and specifications
Calculations, are the main types of submittals.
✓ There should be certain durations for
Specifications Contractor’s preparation and submission of
the documents.
 ✓ Employer’s review and approval duration
Drawings and (as well as number of review cycles) should
be defined in the contract.
Calculations,
✓ No of copies, size, and format of the
Specifications document should be defined in the contract.
 “Material and
Equipment Approval
Requests”
 ✓ Contracts specify the requirements for

material/equipment submittals.

Material and ✓ Samples and the certificates are typical

Equipment minimum requirements.
Approval
✓ It may not be possible to find the
Requests
material/equipment as exactly specified.
 ✓ Deviations could be possible and subject to

Employer’s approval.

✓ Getting Employer’s written approval for the

Material and
material/equipment will avoid future
Equipment
Approval disagreements.

Requests ✓ Buying material/equipment without

Employer’s approval is risky.

“Request For
Information
(RFIs)”
 ✓ Some information might be missing,

conflicting, or unclear among the project

documents.
Request For
✓ Lack of clear information can cause cost
Information
(RFIs) and time impact.

✓ RFIs are raised in a timely manner in

written form for such purpose.

 ✓ RFIs should be clear and detailed with

drawing/specification attachments.

Request For
✓ Employer should reply RFIs on time to
Information
avoid delays in the project.
(RFIs)
✓ RFIs and incoming replies should be

tracked in a log.
“Developing
Baseline
Schedule”
Developing Baseline
Schedule
✓ A schedule is the most valuable tool for managing the
project.
✓ All parties coordinate their work according to this
schedule.
✓ The first schedule approved by Employer is called
“baseline schedule”.
Developing Baseline
Schedule
✓ This is the most important submittal in a
project.
✓ Actual progress is always compared to
baseline schedule.
✓ Maintaining the baseline schedule is the
prime responsibility of Contractor.
 ✓ Slippages on the schedule may or may not
be compensable by Employer.
✓ Baseline schedule should include the
following information, as minimum:
o Start Date of the Work
o Contract and Project Milestones

Developing o Access Dates

o Duration of the Main Tasks
Baseline
o Sequencing of the Works
Schedule
o Interface Dates
(cont’d) o Completion Date of the Work
 ✓ Schedule should be achievable by

considering available resources.

✓ Floats should be allocated for potentially

Developing
critical activities.
Baseline
Schedule ✓ An approval by Employer is required for
(cont’d)
baseline schedule.
Project Status
Reports
 ✓ There is always a requirement for reporting

the project status.

✓ Such is done either through weekly or

monthly reports, or both.

Project Status
Reports ✓ Status reports include an executive

summary, progress achieved, and issues.

 ✓ The information should be provided

objectively.

✓ Updated schedule is usually attached to

the reports.
Project Status
Reports ✓ Status Reports later serve for supporting

claim entitlements.
Compliance to
Health, Safety,
and
Environment
(HSE)
Requirements”
 ✓ All contracts specify the HSE requirements:

Zero-Accident Policy.

✓ Not only the contracts but also the

Compliance to
applicable law may have certain
Health, Safety,
and requirements.

Environment
✓ HSE performance should be closely
(HSE)
monitored.
Requirements
 ✓ Penalties apply in case of performance

failures.

✓ HSE reporting can be very strict and

Compliance to
frequent.
Health, Safety,
and ✓ Contract Administrator should ensure that
Environment
this reporting is done properly by HSE
(HSE)
Team.
Requirements
 ✓ Non-compliance to HSE requirements may

result in contract suspension or even

Compliance to termination.
Health, Safety,
✓ Lenders are very particular on getting the
and
Environment HSE statistics of the project.
(HSE)
✓ Employer’s request beyond contract
Requirements
(cont’d) requirements may constitute a change for

cost and time impact.

 ✓ Special attention is required if there is
Compliance to
hazardous material at site.
Health, Safety,
and ✓ Stopping the work is the best option until

Environment Employer gives a clear instruction.

(HSE)
Requirements
(cont’d)
“Quality”
 ✓ All contracts specify the quality
requirements.
✓ Quality means compliance to
specifications, drawings, and applicable law.
✓ Projects may have moderate or higher level
quality requirements
Quality ✓ Quality inspections should be witnessesed
by Employer.
✓ The type of contract affects quality
requirements and Employer involvement.
 ✓ If Employer bears more risk in the project,
then Employer involvement in quality is
higher.
✓ Contract Administrator should ensure that
quality management is properly done by
Quality (cont’d) Quality Team.
✓ Employer's implementation of additional
quality requirements may constitute a
change to the contract.
“Warranties”
 ✓ All contracts specify the warranty

requirements on materials and

workmanship.

✓ Most of the warranties are required to be 1-

Warranties 2 years after the works completion.

✓ There might be special warranties as well

requiring longer durations.

 ✓ Contract Administrator should be well aware

of these requirements and flow down the

same to the suppliers’/subcontractors’

terms.

✓ Warranty requirements might be in the

Warranties
technical parts of the contract if not in the

commercial section.
Warranties (cont’d)

WARRANTY

SUBCONTRACTOR’S/
MANUFACTURER’S SUPPLIER’S
INSTALLER’S
WARRANTY WARRANTY
WARRANTY
 ✓ For big projects, managing warranties could be

complicated.

✓ A warranty list should be developed and maintained.

Warranties ✓ Gaps in the warranty coverage may result in claims from

(cont’d) Employer.
 ✓ Extended time for completion or any down times

due to defect rectification may require warranty

extension.

✓ Lower Tier companies may request

Warranties
(cont’d) compensation for such extensions.
Thank you
Claims
Identifying
Claims
 ✓ When there is a disagreement on the

entitlements, formal claims can be filed.

✓ A claim may consist of additional compensation

Identifying and/or time extension request.

Claims ✓ Claims rely upon contract entitlement clauses,

the actual records, the baseline schedule,

notices, etc.
 ✓ Claims are submitted after carefully thinking

about the relationships and dispute resolution

Identifying processes.
Claims
✓ Experts might be needed to prepare large size

claims and defend them.

“Types of
Claims”
 ✓ The following are the main types of claims
in a Project:
o Acceleration Claim: This is the case
when an acceleration instruction is
received.
o Disruption Claim: This is the case
when the productivity/efficiency is
Types of Claims adversely affected due to Employer’s
interference or excessive changes.
o Delay and Extension of Time Claim:
This is the case when the actual
completion goes (or potentially will go)
beyond the contractual milestone
completion date.
 ✓ FIRST STEP: Send an appropriate notice
in time.
✓ Actual costs should be segregated per
each claim subject.
✓ Time extension should be based upon Time
Identifying Impact (Delay) Analysis (TIA) acceptable by
Employer.
Claims (cont’d)
✓ Subcontractors may have claims which
might be included while submitting the claim
to Employer.
✓ There is no standard format for a claim
submission.
 Identifying Claims (cont’d)

1. Introduction

2. Information Given Before the Contract Signature

Merit
3. Work Program (Baseline Schedule)

4. What Went Wrong

Effect
5. Impact on the Project
Worth
6. Itemisation of Costs

7. Conclusion
“Acceleration
Claim”
 ✓ Some contracts define the work
acceleration as a change under certain
conditions.
✓ Defined or not, if an acceleration is ordered
explicitly (directed acceleration) or implied
Acceleration by not giving a time extension
(constructive acceleration), then the
Claim associated costs should be compensated.
✓ An acceleration is done either for
recovering the delay or shortening the
project delivery duration.
 ✓ Typical cost heads for an acceleration claim
are:
o increased cost for overtime work
o increased cost for weekend and/or
Acceleration holiday works
increased cost for increased manhour
Claim (cont’d)
o
(lower productivity) due to inefficieny
o whole cost of added supervision
 ✓ whole cost of added tools, plant and
equipment, scaffolding, PPE
o increased cost for short term direct
manpower employment
o whole cost of additional jobsite and HSE
Acceleration training
✓ If acceleration is voluntary to save from
Claim (cont’d) preliminaries costs,
then no acceleration claim should be
submitted.
“Disruption Claim”
 ✓ The most difficult retrospective (backward
looking) claim to prove and defend for lost
productivity or inefficiency.
✓ Some contracts do not allow disruption
claims explicitly.
Disruption ✓ There is no standard method to calculate
Claim the loss but one is selected and tried based
on the available contemporaneous
documentation in hand.
 ✓ There might be several factors affecting the
efficiency, so it’s not easy to isolate the
factors caused by Employer.
Disruption ✓ Efforts, which results in a weak or global
Claim claim, might be wasted.
 Disruption Claim (cont’d)
✓ The methods for estimating the lost labour productivity can be classified as follows
(SCL Delay and Disruption Protocol 2nd Ed):

Productivity-based methods Cost-based methods

❖ Project-specific studies ❖ Estimated vs incurred labour
o Measured mile analysis ❖ Estimated vs used cost
o Earned value analysis
o Programme analysis
o Work or trade sampling
o System dynamics modeling
❖ Project-comparison studies
❖ Industry studies
“Delays and
Extension of
Time (EOT)
Claim”
 ✓ Events may occur in the project which may
delay the contractual milestone completions.

Delays and EOT ✓ Some contracts specify entitlements when

the milestones may be extended.
Claim ✓ A claim is prepared for compensation of
actual costs and time extension for the
extended period.
 ✓ There are two types of delays depending on
responsibility:
o Non-Excusable Delay: Delays caused by
Contractor. No money and no time
extension.
Delays and EOT
o Excusable Delay: Delays caused by
Claim Employer. Time extension and may be
cost compensation.
✓ Delays are analyzed for the time impact on
the critical path.
✓ Generally, no money or time extension is
given for concurrent delays.
 ✓ The EOT claim heavily relies upon
the schedule analysis. So, the
schedule should be very well
maintained.
✓ Employer may have the right to apply
liquidated damages (or actual
Delays and damages) if there is non-excusable
EOT Claim delay.
Admissible Cost: “the
(cont’d) ✓
compensation for prolongation
caused other than by variations is
based on the actual additional cost
incurred by the Contractor.” SCL
Delay and Disruption Protocol 2nd Ed
 ✓ “Compensation for prolongation
resulting from Employer Risk Events
will primarily comprise the
Contractor’s extended use of time
related resources notably its site
overheads.” SCL Delay and
Delays and Disruption Protocol 2nd Ed
EOT Claim ✓ Only the actual cost during the
delayed period (not extended period)
(cont’d) should be claimed.
✓ The delay analysis may result in later
completion date than the actual:
Contractor’s mitigation by
accelerating.
“Time Impact
(Delay)
Analysis”
 ✓ This is an expert level task.
✓ Contract Administrator can contribute to the
selection of the best analysis method.
Time Impact ✓ There are three main references widely accepted
and used in the sector:
(Delay) o Delay and Disruption Protocol, 2nd Ed., by Society
Analysis of Construction Law
o 52R-06: Prospective Time Impact Analysis – As
Applied in Construction, by AACEI
o 29R-03: Forensic Schedule Analysis, by AACEI
 ✓ Delay impact is determined in two different ways:
o Prospective (Forward Looking) Delay Analysis:

Time Impact likely impacts on a completion date by past

progress or events

(Delay) o Retrospective (Backward Looking) Delay

Analysis: actual impacts of the delay events on the

Analysis ✓
actual/as-built critical path.
Prospective Delay Analysis: First Cause, Then
(cont’d) Effect
✓ Retrospective Delay Analysis: First Effect, Then
Cause
Time Impact (Delay) Analysis (cont’d)
“Negotiating
and Settling
Claims”
 ✓ Claims are not settled with their submitted
values.
✓ There is always some negotiation and
Negotiating and challenge while settling them.
Settling Claims ✓ Negotiation should be a fair and equitable
resolution.
 ✓ After validation of all aspects of the claim, a
settlement amendment agreement can
cover the whole negotiation.
Negotiating and ✓ Be careful not to waive your past and/or
future rights which are not negotiated.
Settling Claims
✓ Unsuccessful negotiations should be
resolved by the dispute resolution process
written in the contract.
Thank you
Closing-out Contract
“Employer's
Acceptance, Taking
Over, and Transfer
of Liability”
Employer's Acceptance, Taking Over, and Transfer of
Liability

✓ Every contract has provisions for Employer’s

Acceptance and Taking Over.
✓ Acceptance and Taking Over could be for part or
whole of the works.
✓ Employer may wish to occupy the facilities
(“Beneficial Occupancy”) before taking over where
the Employer takes the possession of the part or
the whole of the works.
✓ Employer may either start to use the facilities or
turn it over to others for use or for other purposes.
 ✓ Together with the occupancy, Employer:
o takes the responsibility for maintenance
o is responsible for damage to work
o is responsible for the increased cost if
the non-completed works are affected.
Employer's o accepts early start of warranties on
equipment
Acceptance,
✓ A protocol needs to be agreed and signed
Taking Over, before occupancy.
and Transfer of ✓ Photos/videos taken at the time of turning
Liability (cont’d) over may be very useful for future
reference.
 ✓ After Final Inspection and Punch List, then
Employer’s Acceptance happens and
Taking Over Certificate (TOC) is issued to
Contractor.

✓ Other criteria to be fulfiled prior to obtaining

TOC:
Employer's o delivery of as-built drawings
Acceptance, o handing over all warranty certificates
Taking Over, o providing spare parts
o site cleaning
and Transfer of
Liability (cont’d) ✓ Following Taking Over, the liability is
transferred to Employer, the retention is
released (part or whole), insurance
coverage ends, and defects liability period
starts.
“Contract and
Subcontract
Closeouts”
 ✓ Every contract/subcontract has specific
close out requirements.
Contract and ✓ Among these requirements, generally the
following subjects are referred:
Subcontract
o Settlement of final account
Closeouts o Demobilization of resources
o Removal of temporary facilities
 o Site cleaning
o Disposing scrap
Contract and o Handing over surplus material
Subcontract o As-built documents
Closeouts o Retention of records
o Release and Waiver
“Liquidated
Damages”
 ✓ Liquidated Damage means the agreed
amount of money (or %) to be paid per day
to Employer in case of late completion or
non-achievement of performance criteria.
Liquidated ✓ LDs are generally negotiated and settled at
the end of a project.
Damages
✓ A reasonable cap of 10% of the Contract
Price usually defined in the contracts.
✓ LD is a good alternative to pay the actual
damages and results in lower bids.
 ✓ Some contracts include Delay Penalties
which might be enforceable in the laws of
Liquidated contract.
Damages ✓ Failures require good documentation.

(cont’d) ✓ Variations/time extensions should be taken

into account while calculating the delayed
days.
“Release and
Waivers”
 ✓ Settlement of final accounts can be very
painful.
✓ But once the final accounts is agreed,
Release and Release and Waivers document should be
Waivers signed before the final payment and/or
release of bonds/retention amount.
 ✓ It is a good practice as such serves to
ensure that:
o Employees and sub-tiers are paid
o There will be no liens
Release and o Release any further claims other than
Waivers the agreed ones
o All entitlements are paid except for the
agreed final payment
✓ Legal review is essential before signing any
release documents.
“Warranty
Obligations”
 ✓ Warranty requirements are generally
specified in the contract.
✓ If not seen in General Terms and
Warranty Conditions, the technical specifications may
contain this requirement for each
Obligations system/equipment.
✓ Warranties are handled in coordination with
Employer and Suppliers.
 ✓ Employers generally develop their desired
warranty statements towards the end of the
Warranty project.

Obligations ✓ Warranty certificates should satisfy the

Employer but not to increase the planned
cost.
 ✓ Warranty starts at a certain time (after a
contractual step like Taking Over) and ends
after a period.
Warranty ✓ Subcontracts and Purchase Orders should
Obligations reflect the same contractual terminology to
avoid confusion.
(cont’d) ✓ Best practice is to develop a warranty list at
the beginning and keep monitoring it until
handing over to Employer.
 ✓ If any occupancy starts, then warranty
should start which is to be notified timely to
Employer.
Warranty ✓ Warranty Claims should be handled with
Obligations timely responses.
(cont’d) ✓ Any actions invalidating the warranty
obligations should be closely monitored.
“Document
Retention”
Document Retention

✓ Some contracts specify the document retention

requirements.
✓ Employer may request some documents to be turned
over.
✓ Unless written in the contract, documents produced by
Contractor are its own property.
✓ Applicable law may also impose certain requirements for
record keeping.
✓ It is always recommended to access all documentation
and not to dispose certain documents in case of a future
dispute resulting in arbitration or lawsuit.
Thank you