Chapter Three: contract management

1 Chapter Three: contract management

1.1 Importance of Contract Management

Contract management involves activities performed by a PE after a contract has been awarded to determine how well the PE and the contractor performed to meet the requirements of the contract. It encompasses all dealings between the PE and the contractor from the time the contract is awarded until the work has been completed and accepted or the contract terminated, payment has been made, and disputes have been resolved. As such, contract management constitutes that primary part of the procurement process that assures the PE gets what it paid for. The basis of Contract management is the contract signed between the Client and the Contractor.

As a rule PEs are required to use PPRA Conditions of Contract drawn from Standard Tender Documents for Small Works, Standard Documents for Medium and Large Works. In situations where PPRA documents are not suitable, the contract document could be drawn from various sources such FIDIC, World Bank, European Union subject to approval of PPRA. For donor funded projects and where there is stipulation to use procurement rules of the funding agency, the documents approved by the funding agency shall be used and such approval from PPRA shall not apply. There are three aspects to a contract that must be managed while the assignment is being carried out: time, cost and quality as shown in Figure 3.1.

Time and cost must be measured against the budget and projected time required to complete the contract to detect deviations from the plan. The performance of the contract must be checked to ensure that the targets are being met.

Good contract administration assures that the end users are satisfied with the product or service being obtained under the contract. It is absolutely essential that those entrusted with the duty to ensure that the PE gets all that it has bargained for must be competent in the practices of contract management and are aware of and faithful to the contents and limits of the delegation of authority from their Employers.

Figure 3.1 Time, Cost, Quality (TCQ) Interdependencies⁵

There are many post-contract issues that need to be dealt with, monitored and resolved before the contract reaches its conclusion and these include the following:

• Appointment of a PM and Supervising Engineer;
• Contract Effectiveness;
• Contract Delivery Follow-up;
• Progress Monitoring and Control;
• Preparation of Interim and Final Certificates and managing payments to the Contractor;
• Delays in Performance;
• Initial and Final Acceptance of the works;
• Contract Close Out
• Stakeholder’s Management;
• Communication Management;
• Issues Management;
• Relationship Management;
• Claims Management;
• Disputes Management;
• Managing Termination of Contract;
• Evaluating of Contractors Performance.

1.2 Appointment and Roles of Project Manager

1.2.1 Appointing a Project Manager (Supervisor)

Regulation 243 of the PPR 2013 emphasizes the need for each contract, a PE to monitor the performance of a contractor entrusted to implement a contract. It is usually advisable to appoint a person within the organisation to oversee the management of a contract.

Similarly Regulation 252 of PPR 2013 provides for Appointment of Works Supervisor – normally a public officer, a unit responsible for works in PE or a Consultant- Manages the work of the inspection committee. Also Condition of Contract including those contained in PPRA’s Standard Tender Documents for Works makes it mandatory to appoint a PM. According to the documents:

The PM is the person named in the Special Conditions of Contract (SCC) (or any other competent person appointed by the Employer and notified to the Contractor, to act in replacement of the PM) who is responsible for supervising the execution of the Works and administering the Contract.

Contract management for works is often complex and time-consuming, as it involves supervision of the progress of the works, ordering variations where unforeseen conditions are encountered and measuring the works completed for payment purposes. For major contracts, a PE will normally use a full-time supervising engineer or PM, who will exercise control and supervision of the contract on its behalf. Where a PM is used, the PE must:

1.2.2 Responsibilities of the PM

As discussed above once a PM is appointed, the PE must ensure that his roles are clearly defined. The following are some of the responsibilities of the PM:

(a)Monitoring the performance of the contractor, to ensure that all delivery or performance obligations are met or appropriate action taken by the PE in the event of obligations not being met;
(b)Ensuring that the contractor submits all required documentation as specified in the tendering documents, the contract and as required by law;
(c)Ensuring that the PE meets all its payment and other obligations in time and in accordance with the contract.
(d)Ensuring that there is adequate cost, quality and time control, as required;
(e)Preparing any required contract variations or change orders and obtaining all required approvals before their issue. Such variations or change orders must be clearly justified in writing backed by supporting evidence;
(f)Managing any handover or acceptance procedures;
(g)Making recommendations for contract termination, where appropriate, obtaining all required approvals and managing the termination process;
(h)Ensuring that the contract is complete, prior to closing the contract file including all handover procedures, transfers of title if need be and that the final retention payment has been made;
(i)Ensuring that all contract administration records are complete, up to date, filed and archived as required,
(j)Ensuring that the contractor and the PE act in accordance with the Provisions of the Contract, and
(k)Discharging of performance guarantee where required.

1.2.3 Requisite Skills Set of Project/Contract Manager

Good practice requires that a PM is appointed for every contract. For small, routine contracts, this may be one person, who has a portfolio of contracts to manage. For large, complex, high-value contracts this is normally an entity (Engineer, PM Etc.) The PM needs to have the appropriate range of qualifications, skills mix and experience. A project will have a good head start if it has a qualified and experienced PM. The PM, both acting on behalf of, and representing the Ministry, has the duty of ‘providing a cost-effective and independent service, selecting, correlating, integrating and managing different disciplines and expertise, to satisfy the objectives and provisions of the project brief from inception to completion. The service provided must be to the Ministry’s satisfaction, safeguarding its interests at all times. The key role of the PM is to motivate, manage, coordinate and maintain the morale of the whole project team. This leadership function is essentially about managing people and its importance cannot be overstated. A PM needs to multi-task, as for example, shown in Figure 3.2.