This interesting article about the role of the contract manager has kindly been made available by Ahmed Mohamed to the readers of this blog. You can also find it on his blog at the following location: https://engamohd.blogspot.com/2019/08/5-steps-quickly-effective-contract-administration.html
Definition of the Contract Manager’s role
A contract is like a marriage, a long undertaking that requires a lot of understanding and effort to reap its rewards. Contract management is the process of monitoring and managing a contract, and other legally enforced agreements, during its execution phase. This includes monitoring of contractors, construction works, suppliers and other service/goods providers during the execution of the project. Proper contract administration is crucial to a smooth execution of a contract, as it is the contract manager that ensures that all processes are carried out in accordance with the provisions of the contract. He/She endeavors to solve problems and issues before they grow and escalate into multi-million claims and disputes.
When should a contract manager be involved?
For the contract administration process be truly effective, it is should start during the very early phases of the project.
During the tendering phase, contract managers can highlight risk and opportunities in the proposed contracts, negotiate acceptable clauses and decrease the likelihood of unknown risks. This will result in more accurate bids. However, most contractors view the contract administration as an expensive luxury. And, as a result, they place more emphasis on the ‘real work’ at site on usually ambitious contracts that place a lot of risk on the contractor.
This strategy usually gives rise to many small and minor issues, deviations and non-compliance with contractual provisions and requirements. The contractor is then forced to pay more attention to proper contract administration process. But it may be too late.
5 things an effective contract manager should do
Obviously, the role of the contract manager is of critical, yet underrated, importance to the project. Over the period of my professional experience, I have come to a conclusion that – to quickly achieve proficiency as a contract manager for contractors in construction projects – there are five things to do:
1. Study FIDIC Contracts
Most international construction projects are built on a FIDIC contract template. FIDIC stands for Fédération Internationale Des Ingénieurs-Conseils (International Federation of Consulting Engineers in English), and publishes the renowned FIDIC family of contract templates. The most common contract of the FIDIC family is the contract for “building and engineering works designed by the employer” published in 1999. It is commonly referred to as the “Red Book”. In depth knowledge of the procedures, terminologies and the workings of a FIDIC contract is very important and is usually a prerequisite for a contract administration job. Among the most important FIDIC Redbook 99 clauses are
- Clause 4, which describes the duties and responsibilities of the contractor,
- Clause 8, which describes the commencement, times for completion, delays, programme and extension of times,
- Clause 11, which describes the defects liability period and the responsibilities of all parties,
- Clause 13, the powerful clause that entitles the engineer to issue changes or variations to the scope of work,
- Clause 14, describes the process of payments and changes to rates,
- Clause 15, entitles the employer to terminate the contract in specific circumstances, and
- Clause 20, the controversial claim clause, which includes a time-bar.
2. Contract Manager to review the Contract Before Signing
If you are involved in the pre-award phase, reviewing and negotiating contract clauses can greatly benefit the project to your advantage. Employer’s usually sneak extra responsibility to the contractor. Meticulous revision of the conditions of contract can greatly help avoid such unexpected risks. A well drafted contract should include:
- Well defined scope – study the priority of contract documents and check for ambiguities,
- clear and unambiguous wording,
- clear commencement dates and time for completion,
- well balanced variation clauses,
- risks and responsibilities during events of force majeure (exceptional events),
- balanced obligations and responsibilities of the other party,
- delay damages and provisions regarding sub-contractors,
- clear obligations on the employer/engineer regarding payments and other required input, and
- clear, and realistic, claim requirements.
In such cases, the contract manager will greatly benefit from the knowledge of a well known – tried and tested – balanced contract conditions such as FIDIC or JCT.
3. Knowledge of the Governing Law
Contract managers in the construction industry are usually of Engineering or Business Administration academical background. As such, they are usually lacking law knowledge of the law. However, it is very important to individuals in the contract administration field to seek sufficient education in law and gain knowledge of the principles of law. This greatly aids contract managers during contract drafting, claims and disputes. Yet, for major disputes, the services of a lawyer are usually called upon to work with the contract manager during the arbitration or litigation proceedings.
4. Contract Managers should make Logs, Checklists and Contract Files
A key tool for successful contract managers are logs:
- Variation logs,
- claim logs,
- payment logs,
- notice logs,
- issue logs, etc.
All sorts of logs help the contract manager to track the different issues, mandatory notices and deadlines required by the contract. Timely providing notices, anticipation of probable future issues and building a strong substantiated document history are always extremely useful at the later stages of the project. They provide a priceless asset in the event of any claim. Microsoft Excel is a very handy tool to achieve this.
Staying organized and developing checklists and flow charts greatly improves your performance as a contract manager. It also helps the project team in remembering and familiarizing with the contract mechanisms. Examples of such flow charts/checklists could be:
- time frames of mandatory notices,
- procedures for interim payment application,
- claim submittals checklist, and
- filing of project records and contract documents.
5. Continuous Improvement for the Contract Manager
It goes without saying that continuous studying and learning is critical to any one developing a career. The notion of ‘know it all’ is very toxic, and will end up stagnating your career. By working with more experienced professionals, with a passion to learn, you will earn a different perspective. Sharing knowledge with less experienced individuals is very important too. This will help building yourself a brand name in the industry. And, you end up learning a lot while reading and passing on knowledge to less experienced individuals.
Hope you find this article useful. Please share your ideas of any other tools for improvement. This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
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