SLQS-Journal Vol. 1 - Slqs-uae.org

SLQS JOURNALJanuary 2009Need for an Effective Contracts Managementin Execution Phase of ProjectsBy Hilary Fernando MBA (Aus)26 Years experience in the Middle East, engaged in many different roles such as an Estimator, Quantity Surveyor,Project Coordinator, Project Manager, and Contracts Manager. He is presently working in Special Projectssection of Contract Department of Qatar Petroleum.The construction industry in the Middle East is becomingcompetitive and is suffering from low margins and the Contractorsare having difficulties in making projects profitabledue to various reasons. Therefore, the need for an effectiveContracts Management setup is very important from the initiationto the closeout process of a construction project andthis discipline is observed from a different perspective dependingupon the requirement of various role players in the industrysuch as Clients, Consultants, Project managers, Contractors,etc. In most occasions, due to the Clients urgency foran early start of a Project, the decision of project executionfalls under different calcifications based on the available ContractManagement standards. Purpose of writing this letter isto highlight the need of an effective Contracts Managementfunction, specifically during execution phase of the Project.Regardless of the type of contract being executed, it is thegeneral tendency that the Engineer and Contractor do alwaysargue about the compensations in variations for additionalwork that occur during a project. In construction projects today,the project management has to deal with a large amountof variations and additional work due to several causes, probablythe major cause resulting from parallel design changes.Consequence of early starts is the concentration of projecttime. The lack of time might result in poor revision of contractualdocuments e.g. if the drawings are not updated, willcause a problem in the construction phase, since a fundamentalassumption of contracts is that drawings are valid.Since the amendments or variations are so frequent in contractualdocuments, there is a significant risk that this fundamentalrule is neglected because there is no time or routinesto update drawings and responsibility is spread among differentfunctions. In most occasions, it is difficult to make adetailed planning in the initial phase of the project, since theconditions for the construction keeps changing everyday. Inthis busy environment important contractual issues may beignored. A better Contracts Management practice could bea way of handling the changing conditions in a constructiveway.Repeated revisions to contractual documents due to neverending changes have become a fact of life. The Contractor hasto be aware of how to handle all these changes in an effectiveand timely manner and the project management also needsto be aware of all obligations and opportunities the contractstates. One of the key solutions is to work more efficientlyand effectively with the governing contract by appointing aContracts Manager. The responsibilities of a Contract Manageris to follow up all contractual circumstances betweenthe parties such as Client and the Contractor, to establishcontract administration systems, identify critical contractualissues, to manage variations and additional work and to releasenotifications to concerned parties. A Contract Managershould establish understanding for and raise awareness ofcontractual issues within the project organization. In general,a Contract Manager will ensure that all variations and additionalwork are taken care with due diligence.Regardless of the type of contract beingexecuted, it is the general tendency thatthe Engineer and Contractor do alwaysargue about the compensations invariations for additional work that occurduring a project.Contracts Manager should effectively support the role of Engineer,strengthen the relation between different role playersand prevent conflicts and misunderstanding through bettercontract awareness. In the event of unforeseen circumstanceson site, there is always a tendency to find urgent solutions inorder to allow rest of the work to continue. A delay in workmeans loss of time and money. Most occasions, the course ofthe delays are mainly due to changes, which result in manyvariations and additional work even to the extent of remobilizationof labor and machinery from on-going work. Out comeof this would be the time extensions and re-programming ofwork. The use of contracts to make proper valuations of additionalwork, so that adequate compensation is paid out, couldhelp management to handle the situation effectively. When37