05[1][1][1].11.09 Contract Administration

7/29/2019 05[1][1][1].11.09 Contract Administration

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March 13

Contract Administration towards best

practice

Objective:

Maintain equilibrium of contract conditions

Safeguard companys interests

Advise on strategic moves and act on management

directions


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Steps for Effective Contract Administration

Clear understanding of Contract conditions

Identify potential sources of deviations

Identify high risk areas

Check and act to restore equilibrium


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Understanding of original set of conditions.

Tendering/Estimation Department to document and

report on

1. Basic considerations and assumptions for Bid.

2. Identify Risk areas, requiring special attention.

Contract Manager to prepare Appreciation of Contract

Documents based on:

1. Tender Department Report.

2. Contract Documents and

3. Applicable law and the Rules of Interpretation.


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Potential areas for possible deviations.

Potential areas for deviation

From within the organisation By breaches/actions of the client. Reasons beyond control.


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Reasons for deviation from within.

Lack of awareness of contract provisions.

Over enthusiasm and zeal for production.

Owning additional responsibilities.

Hesitation in applying Contract.

Preference to out of Contract resolutions.

Lack of coordination and flow of information.

Failure of subcontractors/suppliers.

Failure to meet committed efficiency levels.


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Deviation from the Client/Engineer.

Failure to provide deliverables.

Failure to issue timely approvals/instructions.

Failure to pay timely.

Deliberate misinterpretation.

Changes through drawings/site instructions.

Reluctance to recognise entitlements.

Offloading obligations on the Contractor.

Shift blames of own failure on Contractor.

Undue influence of client.


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Deviation from reasons beyond control.

Various force majeure conditions.


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Contract Administration Towards Best

Practices.1. Within the Organisation:

Awareness of Contract provisions and involvementof key officials/execution staff.

Record of Bid assumptions and considerations. Ifnot clearly indicated in Bid, then submit with theContract Program, after review.

Review the procedures and format of submittals tosuit contract requirements.

Establish system for interdepartmental flow ofinformation.

Strict compliance with drawings and instructions.


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Practices.

Restrict number of authorised persons.

Any detail/instruction to be requested only through

official communication (Request for information).

Issue timely notifications and submissions.

Resolution of the disputes as per the contract.

Close monitoring of the Subcontractors

performance.

2. Deviations by Client/Engineer.

Schedules of deliverables to be monitored.

Deviation to be recorded and duly notified.


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Practices.

Analyse reasons for rejection/delayed approval of

submissions.

Check instruction/new drawing for change/variation.

Centralised correspondence.

Claims to be notified and valued at the earliest.


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Claims Management

The basic principle, where a party sustains a loss by reasons ofa breach of contract, he is, in so far as money can do it, to beplaced in the same situation with respect to damages, as if thecontract had been performed.

Indian Contract Act

1. When a contract has been broken, the party who suffers by suchbreach is entitled to receive, from the party who has broken thecontract, compensation for any loss or damage caused to himthereby, which naturally arose in the usual course of things from

such breach, or which the parties knew, when they made thecontract, to be likely breach of it. Such compensation is not to begiven for any remote and indirect loss or damage sustained byreasons of the breach.

2. in estimating the loss or damage arising from a breach ofcontract, the means which existed of remedying the inconveniencecaused by the non performance must be taken into account.


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Basic steps involved in Claim Evaluation.

1. Define contractual entitlements.

2. Determine effect of breach on entitlements.

3. Proving losses.

4. Evaluate compensation.

5. Mitigation measures.


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General principles for pursuing claims.

Resolve issues as soon as they crop up.

Case well presented is already half won.

Try establishing actual efficiency bench mark.

All dealings based on contract.

Any deviation at final negotiation stage.

Use Dispute Resolution Mechanism without loosing

time.


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General principles for pursuing claims.

Attempt using ADR, if no DRB.

If no resolution, present all outstanding issues

together to highlight overall impact.

Demonstrate financial impossibility, if no resolution.

Build up pressure halfway thru the Work.

Further steps to be decided case by case.

Critical Examination of issues prior to initiating

formal litigation.


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Claim management - Actions to be taken.

Set up standard procedures for evaluation of EOT entitlement

and prolongation costs. Evaluation of EOT entitlement to be done every month and

request for EOT t to be updated at least every quarter.

Set up standard procedure for evaluation of loss of

productivity.

Set up standard procedure for evaluation of direct costs. Set up standard procedure for DRB/Arbitration submissions.

Appropriate cost control system for verification of costs for

each of the claim.

05[1][1][1].11.09 Contract Administration

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