CONTRACTS & CLAIM

MANAGEMENT
PROJECT PLANNING & CONTRACT
MANAGEMENT
Presentation by
R. Srinivasan

24th Oct’08

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What is Contracts Management

Time Management is directly

proportional to the Contract
Management

Time is the essence of a

Contract

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 What is a Contract..

 An agreement between the parties for a

defined Service, Price, with defined
entitlements and Responsibilities.
What is a Contract..

 For success of any project, it is crucial

that the conditions of the contract are
understood by all parties involved.

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 Types of Contract

 Lumpsum Turnkey Projects

 Engineering , Procurement and Construction
projects (EPC)
Types of Projects
 Supply Contracts
 Unit Rate contracts
 Cost plus contracts

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 Contract Document
 Defines
– Scope
– Stakeholders
– Rights and obligations
Contract
– Payment terms Document
and other financial conditions
– Statutory compliance / Clearances
– HSE requirements / Social/ Environmental Obligations
– External agency coordination
- Mechanism for redressal of Disputes / Arbitration
- The terms should be precise , definite and should be
no room for ambiguity

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 Contract - Phases

 From commencement to completion of

the Project.
 Tendering ( Pre tender , post tender)
 Project execution Phase
Contract Management - Phases
– Engineering
– Procurement (Equipment and subcontracts )
– Installation ,Testing and commissioning
– Handing Over

• Contract Closure . ( Claims realization ,obtaining the

guarantees)
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 Vital Conditions to be focused

 Completion period
 Milestone Events
 Obligations of both clients and
contractors
 Price Variation Clause – Firm/Variable

 Excise Duty – Reimbursable/Excluded

 Liquidated Damage/Bonus clause

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Contd…
 Vital Conditions to be focused
 Payment Terms and Conditions
--- Advance with/without interest
 Bank Guarantee-PBG/ABG

 Insurance Obligations/FOB/CIF

 Form C

 PAC/FAC

 Cost sheet based Estimation

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 Impacts
Impacts of
of Delayed
Delayed Completion
Completion

 Liquidated Damages
 Erosion of Margin

 Increase in overheads

 Extension of Bank Guarantees

/Insurance

 Lengthy process of Amendments

 Price variation beyond the volatility li

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 Contract Management

Contract management or Contract administration

is the management of contracts made with customers, vendors,

partners, or employees. Contract management includes negotiating the
Contract Management
terms and conditions in contracts and ensuring compliance with the
terms and conditions, as well as documenting and agreeing any changes
that may arise during its implementation or execution.

It can be summarized as the process of systematically and efficiently

managing contract creating, execution, and analysis for the purpose of
maximizing financial and operational performance and minimizing risk
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Triangle

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 Contract Management

Prime motto of Contract Management

 Balancing costs against risks
Contractthe
 Actively managing Management
customer contractor
relationship ( Contact Management )
 Continuous operational improvement.

Key objectives of Managing any contract is to ensure

that it continues to achieve value for money over a time
period
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 Project Planning

 Project Kickoff
 Internal & Customer.
Scope and schedules
Project Planning
Site Structure & Mobilisation.
Procurement , Taxation and
statutory compliances .
Commercial obligations .
Key Roles and
responsibilities/Action Plan .
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 Project Planning

 Project Scheduling
 Project Costing (ACE)
 Planning
Project Project Quality Plan
 HSE Plan
 Work Method
Preparation
JCR Preparation & Review
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 Engineering Deliverables

 Design Phylosophy
 Master Drawing Control Sheet
 Classification of DCI into

Engineering Civil and Structural drawings
Deliverables
 Electrical layouts and design calculations
 Schematic drawings
 Mechanical & Plumbing drawings
 Detailed schedule indicating the plan , actual ,
recording the variances shall be prepared and
continuously monitored.

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 Materials Management
 Selection of qualified vendors
 Compliance to specifications and Quality systems
 Supply record with L&T and Customer
Materials
Clear Management
terms and conditions of the Purchase order
 Checks in the system to ensure the following:
 Individual qty ordering does not vary from the
contractual limits
 The sales price with revised qty does not
exceed the ceiling on CV (+/- %)

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 Materials Management Contd….

Purchase order terms :

–Shall be in line with main contract .
– Commercial conditions shall be clear and workable
( Tax/duty Documentation , variation clauses ,
Drawings submission , delivery schedules)
Materials Management Continued….
–Statutory compliances shall be checked
Freight and Insurance – Service tax implications
Billing break up where required to be approved by
Customer for C form Transaction.
 Where price variation is permitted in the contract ,
orders to the extent shall be on variable basis except
in cases where delivery requirement is immediate.

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 Subcontract Management
– Clarity on scope / conditions
– Division of responsibility / Matrix
– Orientation to Company Quality and safety requirements
– Performance Guarantee
Subcontract Management
– Statutory compliances /deductions
– Work items should be clearly measurable and engaging
subcontractors on item rate basis .
– Anomalies in items rates of different contractors working
at same site
– Control on scope changes / Amendments to the work
orders
– Control on the manpower of subcontractor
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 PROJECT CLOSURE

 Close
Add YourOut
Title here
Demobilization
Demobilization
Planningis a Design
ThemeGallery of Resources
of Resources
Digital Content & Contents
mall developed by Guild
 Handing over
Design Inc.
Project
Project Learning
Learning

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 Contracts Management - Summary

Contracts Management

Schedule Variance Scope variance Cost Variance

• Registration and • Quantity variation in • Price escalation

notification of delays BOQ items
• Idling of resources
• Revision of schedule • Extra works
• Overstay
and obtaining
extension of time • Geological, technical,
commercial variations
• Environmental / force
majuere conditions
• Rework due to design
or Spec. changes

Management of Contractual Commitments Of All Parties – Client,

Contractor & Sub-contractor. Proper & Timely Supporting Documentation

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 THE NEED OF THE HOUR

 It is our responsibility to make all the

key players of the project aware of the
contractTHE NEED OF .THE HOUR
conditions
 We need to evolve and establish
contract management system.
 It should be understood that it is a
team work not just in spirit and paper
but in all our actions .
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 MONITORING SYSTEM
 Record and photograph obstructions and
hindrances and their clearances
 Record of Land released for construction
 Schedule of Price Indices
SYSTEM ….Continued
 Schedule of delays in the issue of drawings
 Schedule of delays in the issue of
information/approvals
 Record of Change Orders
 Record of Payment Applications
 Record of Sub-contractor payments
23 System Compliance Reports
 Important actions

 Contractual correspondence will be

issued or replied to within contract
timings
 Claims will be identified
Certain ‘early’ and not
Key issues
‘lost’ through neglect
 Payment applications will be made fully
and on time – and followed up
 Extension (s) of Time will be claimed to
avoid the liability of Liquidated Damages
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CLAIMS MANAGEMENT

1 What are Claims?

2 Where do they Originate ?

3 How to address a Claim ?

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 A Claim

 A claim is a request for payment for work

which is not in the original contract scope.
 Claim if acceptedA Claim
will result in a change
order / Variation Order . Change
Order/Variation Orders are established
based on BoQ rates or new rates to be
mutually agreed upon .

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 GENESIS
 Claims can arise in any part or time in the contract
 Design
 Tender conditions
 Programme of Works
 Payment , Variations Loss and Expense
GENESIS
 Practical Completion and Defects
 Liquidated Damages
Most Contract Conditions contain provisions whereby varied
work, and/or contract work affected by variations, qualifies for
a revised rate if it can be demonstrated that the work has
changed in character and/or conditions from that reasonably
apparent from the original contract documents Look for
conditions in the contract which facilitate recognition of
change in content/scope .

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 Desired
Occurrences that can affect actions
the contract conditions
Once a change in scope is identified , the impact
of on following shall be ascertained clearly .
–Design
–Procurement
–Construction
–Manpower
–Schedules
COST IMPLICATIONS SHALL BE ESTABLISHED
. CONTRACTUAL REFERENCES SHALL BE
QUOTED AND TENABILITY OF CLAIM SHALL
BE CHECKED .

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 Contracts Management

Key objectives of Managing any contract

is to ensure that it continues to achieve
value for money over a time period,
Contracts Management
strives for better relationship and
customer satisfaction
and
Ensures business continuity

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