Contract Management has always been practised by the most important actors of the project i.e. the Employer, the Engineer and the Contractor. However, various findings in recent decades have been instrumental in transforming this process.
The difficulties (cost overruns, delays, disruptions) of major construction projects launched in the 80s and-90s favoured the development of the Contract Manager’s function. For many other projects, either large or small, the unforeseen conditions lead to economic upheavals. The disputes arising from different interpretations of the contract terms have then frequently been settled only through a long and costly judicial process.
In recent years, the legal environment evolved in many ways. Let us recall that under international pressure, the management of risks was formalized by the ISO 31000 Risk Management standard. New types of contract (building, design-build, public-private partnership, public-private partnership, services associated with construction or operation …) as well as new contractual clauses appeared to govern changes, risk allocation and disputes processing. Meanwhile, many stakeholders (Checkers, Lenders’ Technical Advisers, third parties such as neighbours and community groups, other organizations …) have been added to the well-known Employer, Engineer and Contractor.
In this context, while seeking greater clarity in the sharing of risks and associated responsibilities, the tender documentation and contracts became more complex. Subsequently, more resources are required to deal with them.
The primary objective of contract management is the project net margin. At the crossroads of operational, technical, financial and legal considerations, this objective is achieved through an appropriate risk management. Its efficiency is based on the anticipation of potential difficulties during the life of the project, this approach requiring dialogue with the various stakeholders.
The tender phase occupies a primary position with the identification, analysis, evaluation and development of procedures to manage risks in the light of lessons learned. In this respect, qualifications can thus be included in the proposal, to avoid or at least mitigate disputes.
After signing the contract, its execution represents the most usual and best known part of contract management. The essential task is the permanent analysis of the situation. It must involve all the notable events, project changes, occurrence of unforeseen conditions, and their consequences in terms of additional costs, extension of time … Reviews of claims and agreements on compensation are facilitated by establishing a dispute resolution board (DRB) or a dispute adjudication board (DAB). This committee is often required in the contracts to facilitate the treatment of disputes in the course of execution of the works.
However, some disputes may subsist at Taking-Over and Final Payment or may occur during the Defect Liability Period. Here again, the DRD or DAB may avoid lengthy and expensive judicial processes.
In all these phases, the contract management team shall have significant experience in the construction industry as well as good knowledge of the environment, in particular in international projects, where practices vary according to the country. Multidisciplinary vision and, at the same time, some distance from the daily stresses of the project are required and may be reinforced by audits. These are recommended in the various project phases, including at the project substantial completion to capitalize the lessons learned.
Such resources are not always available in-house at the requested time, third-party contractual assistance is therefore recommended. The AECI contract experts are these competent and experienced men and women you are looking for. They are used to work with your in-house team (construction managers, quantity surveyors, finance managers, legal advisors) and your third-party advisors (lawyers).
