When a project is awarded, the pitfall many Contractor’s face after signing the contract, is that this is the last time that they look at it. Contract Management is seen as a specialised discipline and, in some instances, specialised resources are hired to manage the contracts, supporting the Project Managers.

Whilst it may not be necessary for all contractors to have such specialised resources in place, it is highly recommended that in an effort to reduce risk, the personnel charged with addressing all contractual matters as part of the job profile are at least adequately conversant with the contract in place and general principles of contract. In this regard, due consideration should be given to training.

The commonly used contracts in the construction industry are the JBCC, FIDIC, NEC3, MBSA and GCC agreements. In other instances, bespoke contracts are used. Each of these contracts have different risk profiles and different allocation of risks between the Employer and Contractor. Being familiar with these contracts and the management thereof is crucial to project success.

The implications of not adhering to the contract terms or not having regard to them can best be explained using the example of the processes contained in the notice and claims clauses of contracts for additional time or costs. These are critical instances where non-compliance to these terms often lead to time barring of claims and the Contractor enduring the losses.

Enclosed below are some of the considerations and steps a Contractor may take to manage their contracts effectively. These are based on an assessment of the best practice and past experience in managing contracts:

1. Take time to understand the basis of the contract and the nature of the risk allocation, including any special terms to ensure that you are able to comply with these. This also plays a role in the Contractor’s pricing of the works during the tender stage in ensuring that risks allocated to the Contractor are priced in. This should be done in the pre-award phase.
2. In allocating resources, it is prudent to ensure that people tasked with managing the contract are familiar with the type of contract used under the circumstances. This is important in the post award phase in particular.
3. The contract is also used as a basis of alignment between the Employer and Contractor by ensuring that there is an understanding of what is required from both parties including the obligations of both parties. Therefore, unambiguity is key.
4. Ensure frequent alignment with the Employer at progress meetings and discuss the matters of concern and follow up by ensuring these are dealt with in terms of the contract.
5. Regular internal risk reduction meetings at Contractor level to ensure that risks are identified early and addressed within the time requirements of the contract. The major risks are those affecting the schedule, costs or quality of the works. From these meetings, contractors may realise that there are certain notices that may be required to be given to the Employer or that they need to accelerate the works at their own costs to ensure timely practical completion in order to avoid delay penalties. Some broad examples of these are:
   a. Schedule slippage
   b. Access delays
   c. Additional works
   d. Variation Orders
   e. Delays
6. It is important for key resources to be aligned and for no resource to be working in a vacuum. This facilitates easier identification of risks and ensures that they are dealt with in a timely manner in terms of the contract and that schedules/programmes are updated where required.
7. Closing out the contract is equally as important to ensure that both parties are protected and that avoidable claims are managed. At this stage it is also advisable to address items such as liens over materials and works together with the final account.

There will be four more articles in this series as follows:

• Pre-award phase of a contract providing guidance. This includes all steps in the contract negotiation up until contract signature.
• Post award phase of the contract which includes the contract phase from contract signature up until practical completion. The requirements of bonds and guarantees will be highlighted.
• During this phase, proper management of the contract is vital.
• Issues faced during the defects liability phase.

Close out phase of the contract will be covered. This phase entails the final account and closing out the contract with only the latent defect liability and guarantee periods to run.

Bilaal Dawood 

Head: Membership Services