The document summarizes tips on contract management from a technical seminar presented by Ms. Lily Heo. It discusses general contract concepts like the definition of a contract and elements of a valid contract. It also covers common contract strategies, cost control methods, pricing approaches, managing variations and claims, performance monitoring, and contract completion. Key points emphasized include understanding all contract terms, establishing clear processes for variations, maintaining open communication, and implementing performance monitoring systems.
There are several types of construction contracts. Price-based contracts include lump sum contracts, where the contractor is paid a fixed price for the entire project, and unit price contracts, where payment is made based on rates for individual work units. Cost-based contracts include cost plus contracts, where the contractor is reimbursed for costs plus a fee or percentage, and guaranteed maximum price contracts, where the owner's liability is capped but the contractor can retain savings if the project costs less than estimated. The appropriate contract type depends on factors like project scope definition and risk allocation between owner and contractor.
This document discusses various procurement strategies and contract types for construction projects. It begins by outlining the key stages of the procurement process. It then describes different contract types including fixed price, remeasurement, drawings and specifications, and cost reimbursement contracts. For each contract type, it discusses the advantages and disadvantages as well as scenarios where they may be suitable. It also covers risk allocation between the client and contractor for different contract strategies. Finally, it discusses design-build procurement and the variations of management fee procurement including management contracting and construction management.
The document provides an overview of key construction documentation topics including:
1) Obtaining work through various contract types such as competitive bid, design-build, and construction management.
2) The components of a project manual including drawings, specifications, contract documents and addenda.
3) Requirements for documentation of activities, circumstances, meetings and correspondence throughout the project.
Collaborative procurement methods like partnering encourage parties to construction contracts to work together cooperatively to achieve outstanding results, rather than taking confrontational approaches. Partnering specifically establishes a culture of collaboration through a multi-step process including an initial workshop where parties define shared goals and commit to them, establish evaluation and issue resolution processes, and appoint partnering champions. While voluntary and not altering legal responsibilities, partnering aims to build mutual trust and benefit between parties to facilitate better outcomes through cooperation rather than conflict. Regular evaluation and follow-up workshops are needed to ensure ongoing collaborative behavior as intended.
The design and build method of construction procurement has not been widely adopted in the Middle East due to low awareness and understanding of the approach among both clients and contractors in the region. There are also relatively few large contractors with the expertise to manage design and build projects. While design and build can deliver projects faster and at lower cost when implemented properly, many clients in the Middle East are hesitant due to less established relationships between clients and contractors and less robust building regulations compared to Western countries. However, as trust levels grow between clients and experienced design and build contractors, experts believe this procurement method will become more common in the Middle East in the next few years.
This document provides information about a group assignment for a professional practice course. The group members are listed. The project involves developing a 20-storey condominium in Kuala Lumpur to address the effects of the Malaysian economic downturn on property developers. Various construction procurement methods are discussed, including traditional procurement, management contracting, design-build, and cost reimbursement contracts. The advantages and disadvantages of each method are analyzed. Management contracting using a cost plus fixed fee contract is recommended to control costs while maintaining quality for the condominium project.
The document outlines various procurement strategies and contract forms for construction projects. It discusses traditional procurement, management contracting, and design-build procurement methods. For each method, it describes the process, advantages, and disadvantages. It also examines standard contract forms used in Malaysia, including the PAM 2006, JKR 203A, and FIDIC contracts. Based on the project details of developing a 20-storey condominium, the document recommends using a traditional procurement method with a PAM 2006 contract form due to its common use for private sector building projects in Malaysia.
This document discusses various aspects of contract management for construction projects including methods of work execution, types of contracts, and the tendering process. It describes executing work through amanat (directly by the owner) or through contracts. It outlines various types of contracts like lump sum, unit price, cost reimbursable, design-build, and BOOT/BOT. Finally, it explains the tendering process which involves preparation, tender notice, tender document, conditions of contract, prequalification, evaluation, and selection/award.
Consensus Docs: Introduction to Integrated Project Delivery in ConstructionDBL Law
The document provides an introduction to integrated project delivery (IPD). It discusses some of the flaws and inefficiencies of traditional design-bid-build project delivery methods. IPD aims to improve collaboration and common understanding between project participants through techniques like lean project planning, co-locating project teams, and emphasizing relationships and shared risk/reward. The document outlines IPD principles and compares the traditional hierarchical approach to IPD's collaborative approach. It also provides examples of tools that can be used, such as workshops to establish team dynamics and lean processes like pull planning and weekly work planning.
This document discusses and compares different construction project procurement methods for a proposed 20-story condominium development. It analyzes traditional procurement, management contracting, lump sum contracting, and design-build approaches. The document recommends the traditional procurement method for this project, noting it provides price certainty, allows for client control over design quality, and secures the project budget and completion timeline. Traditional procurement is seen as most suitable given the project characteristics and client needs and risks. Design-build is not recommended due to reduced client control and potential cost-cutting affecting quality for a large-scale development like a 20-story condominium.
This was a presentation delivered by Dr Jon Broome, chair of the APM Contracts and Procurements specific interest group (SIG), on Tuesday 7th October. The event was organised and hosted by the APM North East branch and was entitled 'Project contracts and how they support collaborative working'. It was held at the Radisson Blu hotel in Durham.
Project Controls Expo, 18th Nov 2014 - "NEC3 Contracts – Managing Risk and Ch...Project Controls Expo
Traditionally many Contractors (and even Employers) see following the contract or being contractual as a very negative. The NEC3 suite of contracts command a different approach and this session will explore the benefits of being contractual, and how it will help both Parties to manage their project and understand exactly where they both are in terms of liability throughout their project. A key aspect of this is approach to the management of regular revised programmes, which compared to other forms of contract have a much higher contractual significance under NEC3.
The document discusses contract strategy, which involves selecting organizational and contractual policies to execute a project successfully. It outlines different project objectives, contracting methods, contract types, and factors to consider when selecting a contract type. Contract strategy aims to choose the most appropriate structure and agreements based on priorities like time, cost, performance and risk allocation between the owner and contractor.
There are several types of construction contracts:
1. Separated contracts involve separate entities for design and construction, resulting in delays. Lump-sum and measurement contracts fall under this category.
2. Integrated contracts assign design and construction responsibilities to a single entity to streamline the process. Design-build, turnkey, and build-operate-transfer contracts integrate the roles.
3. Management contracts appoint a single contractor to plan, manage, and coordinate subcontractors for design and construction. Construction management contracts focus on coordination. Design-build-manage contracts assign all three roles.
4. Discretionary contracts like partnering and joint ventures involve collaboration between client and contractor or between multiple contractors to share
Need help choosing your next project delivery method? View a comparison of methods to help make the right decision. Compare Design-Build, Design-Bid-Build, and CM at Risk to learn which is best for your project.
This document discusses contract dispute resolution techniques presented by Dr. Rafiq Muhammad Choudhry. It covers traditional techniques like contract negotiations, mediation, and arbitration as well as their advantages. Contract claims can occur for various reasons and if unresolved, may lead to litigation which is generally more costly and lengthy compared to alternative dispute resolution methods.
Ethics and Integated Design-Build services 062916George Wilkinson
This document discusses best practices for engaging mechanical, electrical, and plumbing (MEP) subcontractors early in integrated project delivery. It recommends a three-step process: 1) Subcontractor "auditions" where subcontractors present their qualifications without a contractual agreement; 2) A planning stage agreement (part 1 of 2) if the audition is satisfactory, defining work to be performed; 3) A construction subcontract (part 2 of 2) executed after design development when subcontractors have invested resources with an expectation to perform the work. The document emphasizes establishing clear expectations and commitments at each stage to ensure fair and ethical treatment of subcontractors while allowing the contractor to receive needed expertise and input to benefit the project
The document discusses project procurement management which involves acquiring goods and services from outside sources. It describes the four key processes: plan procurements, conduct procurements, administer procurements, and close procurements. Planning defines requirements and selects suppliers. Conducting involves soliciting and selecting bids. Administering manages contract performance and changes. Closing confirms the work meets requirements and completes the contract. The document provides details on procurement documents, contract types, negotiation tactics, and terms used in procurement.
This document summarizes a research paper on design and build (D&B) as a procurement strategy. It begins with an abstract that states building procurement strategies are important for project success if the appropriate strategy is chosen. It then outlines the research objectives of investigating various procurement strategies, determining the relationship between time, cost and quality, and showcasing D&B's advantages. A literature review and case study of a public project were conducted. Survey results from construction professionals found D&B is preferred for projects under £50 million as it allows projects to meet time and cost goals while meeting client requirements. In conclusion, the research found D&B is a preferred strategy for both small and large private and public projects when certain factors are
Persons involved in tenders and contractshiva prakash
This document discusses the key representatives involved in tenders and contracts for construction projects. It defines a tender as inviting bids from contractors to carry out work, and a contract as a legally enforceable agreement. The main roles discussed include the client/owner, project manager, lead consultant, cost consultant, consultant, main contractor, senior estimator, commercial manager, building manager, cost planner, subcontractor, and suppliers. The client is responsible for the project, while the project manager oversees its planning and execution. Consultants help with documentation and the main contractor manages subcontractors and evaluates risks.
The document discusses strategies for business cost control and monitoring. It identifies major cost centers, types of costs, and opportunities to reduce costs through systematic analysis. Specific opportunities covered include reducing payroll, improving purchasing, increasing production efficiency, reviewing finances, and maximizing use of premises. The document cautions that some cost cuts can negatively impact employees or the business's ability to meet objectives if not implemented carefully.
Stone masonry involves shaping stone into geometric shapes and arranging them, often with mortar. There are different types of stonemasons who specialize in tasks like quarrying, sawing, carving, fixing, and memorial carving. Stonemasons use various tools like chisels and mallets to shape igneous, metamorphic and sedimentary stones. They undergo comprehensive training and the trade has existed for thousands of years, playing an important role in building cathedrals, castles, and other stone structures throughout history. Modern tools have made aspects of the work easier but many traditional techniques remain.
The document discusses tendering processes for construction projects. It defines tendering as sending drawings and bills of quantities to contractors to receive price estimates. The purpose of tendering is to select a main contractor. Different procurement methods are described such as traditional where the client separately selects a designer and contractor, or design-build where one company handles both. Factors like project size and economic climate affect the tendering method choice. Students are tasked to discuss tendering purposes and objectives, and select a method for a given project by considering build type.
This presentation discusses traditional and modern control techniques that managers can use to effectively monitor organizational activities. Some traditional techniques mentioned include personal observation, budgeting, break-even analysis, financial statements, and standard costing. Modern techniques discussed are return on investment, management audits, management information systems, and PERT/CPM. The presentation provides details on how each technique works and its benefits for control purposes.
Presentation deck (with speaker's notes in downloadable PPTX) used by Kenny Ingram, Global Industry Director at IFS, in his presentation at the 19th annual Future of Utilities conference in London on March 26, 2014.
This document discusses cost control and cost reduction in managerial economics. It defines cost control as monitoring and regulating expenditure, and involves setting targets, measuring actual performance, analyzing variances, and taking corrective action. Cost reduction aims to eliminate unnecessary costs to improve profitability. Key aspects of cost control include planning, communication, motivation, appraisal, and decision-making. Common cost control techniques are budgetary control, standard costing, inventory control, ratio analysis, and variance analysis.
This document discusses concepts related to food and beverage cost control. It begins by explaining that successful restaurant managers understand the importance of carefully monitoring costs like food, beverage, and labor costs, which typically represent 60-70% of total costs. The document then outlines learning objectives and defines various cost concepts like fixed, variable, and controllable costs. It also discusses sales concepts such as monetary terms like total sales and average check, and non-monetary terms like covers and seat turnover. Finally, the document introduces the cost control process and techniques like establishing standards and procedures.
Cost control involves minimizing costs without sacrificing quality for customers. A budget forecasts revenue, expenses, and profit over periods like 28 days. If actual results vary significantly from the budget, management must define problems, determine causes, and take corrective action. Precise sales forecasts allow for accurate expense and staffing estimates, increasing operational efficiency and profitability.
This was a presentation delivered by Robert Langley, partner and head of the construction and engineering team at Muckle LLP, on Tuesday 7th October. The event was organised and hosted by the APM North East branch and was entitled 'Project contracts and how they support collaborative working'. It was held at the Radisson Blu hotel in Durham.
ECI in Sweden - A. Kadefors, KTH Royal Institute of Technology, Stockholm (SE)OECD Governance
This document discusses different construction project delivery and payment models. It begins by outlining common delivery models like design-bid-build and design-build. It then explains different payment methods that can be used like fixed price, unit prices, and cost-reimbursable. The document also discusses pricing strategies and how they relate to risk transfer between parties. It provides details on collaborative models like early contractor involvement and discusses selecting the optimal contract based on a client's project risks, desired influence, and market conditions.
This document provides an overview of project procurement management. It discusses the key processes involved, which include planning procurements, conducting procurements, controlling procurements, and closing procurements. Different types of contracts are also outlined, including fixed-price, cost-reimbursable, and time and material contracts, along with their risks for buyers and sellers. Make-or-buy analysis and expert judgement are two techniques used in planning procurements. The outputs of the planning process include the procurement management plan, procurement statement of work, and procurement documents.
This document discusses different types of contract strategies for managing construction projects. It describes traditional, integrated, and management strategies.
The traditional strategy involves separate roles for clients, consultants, and main contractors. The integrated strategies discussed are turnkey, design-build, and concession approaches. Management strategy places additional emphasis on project management expertise.
Emerging strategies include collaborative approaches like joint ventures, partnering between clients and contractors, and public-private partnerships, which involve both public and private funding. Different contract strategies aim to balance objectives, risks, and complexity for construction projects.
Exploration of risks and risk management in construction project deliveryMECandPMV
Risks are pervasive throughout construction projects and need to be properly managed. This document discusses:
1) Various types of risks that occur during different phases of the project life cycle from planning to construction.
2) How the selection of a project delivery system, such as design-bid-build or design-build, can impact risks related to costs, schedule and control.
3) Qualitative and quantitative risk analysis methods that can be used to identify, prioritize and evaluate risks, such as cause-and-effect diagrams and decision analysis.
The document discusses various types of construction contracts including: lump sum contracts where the owner pays a specified amount upon completion; cost plus contracts where the owner pays the contractor's documented costs plus an additional fee; and integrated contracts where a single contractor is responsible for design and construction like design-build or turnkey contracts. Management contracts involve appointing a contractor to coordinate other subcontractors. Measurable and item rate contracts establish payment based on physical measurements or rates for units of work.
NCHICA - Contracts with Healthcare Cloud Computing VendorsWhitmeyerTuffin
The document discusses contracting with healthcare cloud service providers. It covers topics like selecting a vendor, negotiating key contract terms, and dealing with vendor non-performance. When selecting a vendor, organizations should perform due diligence, document requirements, and check references. Key contract terms to negotiate include security, pricing, support, intellectual property, and termination. If a project fails, the buyer should document problems and potentially withhold payment while allowing the vendor to cure issues. Due diligence is critical to choosing a secure and transparent cloud vendor.
HOW TO SURVIVE CONSTRUCTION PROJECTS DURING TIMES OF ECONOMIC INSANITYBurns White LLC
Following is a slide deck from a presentation given by Burns White Members Chad A. Wissinger and T.H. Lyda to attendees at the National Railroad Construction and Maintenance Association (NRC) annual conference in January about how to survive construction projects during times of economic insanity.
This document discusses tendering and estimating for construction projects. It describes the documentation required for the tender process, including invitation letters, forms of tender, bills of quantities, specifications, and drawings. It also discusses open tendering, which allows any qualified bidder to submit proposals, and selective tendering, which limits bidding to pre-selected contractors. Finally, it outlines different forms of construction contracts based on the procurement method (traditional, design-build, management) and payment type (cost-plus, fixed fee, target cost).
The document discusses various types of contract structures and payment methods for construction projects. It describes conventional/traditional contracts, turnkey contracts, design-build contracts, construction management contracts, and guaranteed maximum price contracts. It also covers lump sum, measurement, and cost reimbursement pricing approaches. Factors that influence contract selection include project complexity, schedule, client experience, regulations, risk allocation, and the nature of the project. The document emphasizes that properly structuring the contract and payment terms is important to allocate risk appropriately between the client and contractor.
Contract Management - Contracts Types and Payment StructureHASMANIRA
The document discusses various types of contract structures and payment methods for construction projects. It describes conventional/traditional contracts, turnkey contracts, design-build contracts, construction management contracts, and guaranteed maximum price contracts. It also covers factors that determine the appropriate contract structure for a project, such as complexity, schedule, client experience, regulations and risk allocation. Finally, it discusses various methods for determining payment, including lump sum, remeasurement/bill of quantities, and cost reimbursement approaches.
The document discusses contract administration processes and common issues that can lead to disputes such as deviations, claims, and breaches. It emphasizes the importance of clear documentation, communication, and dispute avoidance strategies. The document then outlines various alternative dispute resolution methods like negotiation, mediation, conciliation, and arbitration that can be used to resolve disputes without litigation. It provides details on the procedures, roles
The document discusses strategies for negotiating outsourcing contracts, including defining objectives, risks, costs, and terms. It recommends listing priorities, knowing constraints, and assessing liabilities before negotiations. The document also describes types of contracts like fixed price, time and materials, and gain/pain share agreements and potential advantages and disadvantages of each.
Management consulting involves identifying problems, developing solutions, creating strategic and tactical plans, pricing consultancy services, and acquiring talent. Subcontracting is commonly used when projects require diverse capabilities. General contractors hire subcontractors to undertake specialized work while maintaining overall responsibility. Subcontracting can help control costs and mitigate risks by allowing contractors to focus on their core competencies.
The document discusses different procurement routes for construction projects, including traditional design-bid-build, design and build, and management contracting. Under the traditional approach, the developer hires a professional team including an architect, quantity surveyor, and engineer. The architect designs the building, the quantity surveyor prepares cost estimates and payment valuations, and engineers provide structural and mechanical support. Contractors then bid to build the design. Design and build contracts assign design and construction responsibility to a single contractor for a fixed price. Management contracts engage a contractor to manage the project in exchange for a fee, while the developer directly pays all construction costs.
QUESTION :
Taylor’s University is intending to build a branch campus in Kota Kinabalu, Sabah. Based on Taylor’s University plan they require the branch campus to be operational in mid-2019. Your quantity surveying firm, Innovative Cost Consultant Sdn. Bhd., of which you are a director, has been appointed to provide advice on the procurement system and the tendering methods that are to be adopted in carrying out the project.
The management of the University has informed you that the following requirements are of priority:
i) Cost to completion to be within the budget fixed.
ii) Timely delivery of the facility in order to commence operation in mid- 2019.
You are required to prepare a report to Taylor’s University recommending the procurement system and the tendering method to be adopted.
In your report you shall consider the procurement systems commonly used. You shall list out and explain the advantages and disadvantages of each system before making your recommendation.
As for the tendering methods, you shall consider all the three methods; i.e. open, selective and direct negotiation methods. Similarly you are to describe the advantages and disadvantages of each method before arriving at your recommendation.
Your report shall clearly explain your reasons for your recommendations.
Based on the above recommendations you are also required to prepare a simple programme or schedule in a form of bar chart showing the various activities commencing from the confirmation of the procurement system until completion of the project.
This document defines different types of construction contracts and summarizes their key aspects. It discusses lump sum, unit price, cost plus, and other contract types. For each type it provides an overview of how payment is determined, as well as advantages and disadvantages from the perspective of owners and contractors. The goal of different contract types is to appropriately allocate risk between owners and contractors for a given project scope, schedule and budget.
Similar to 20050314 tips on contract management (20)
2. Contents
• General understanding of contract
• Common Types of Contract Strategies
• Cost Control
• Management of Variation and Claim
• Performance Monitoring
• Contract Completion and Closure
2
3. What is a Contract?
• Established where there are commitments and
agreements to buy and sell.
• Represents the total legal obligations originated
from agreement between parties.
3
4. Elements of Contract
• Mutual assent evidenced by offer and acceptance
• Consideration and form - supported by something of
value in exchange
• Competent parties – must be capable of contracting
but not a minor, mentally ill, intoxicated person
• Legality of purpose
4
5. Why Contract is Important
• Failure to comply with agreed terms will be a
breach of contract
• Either party may claim for damages
• Parties will rely on the contract provisions in the
event that dispute is put to court proceedings
5
6. Contract Documents
• Tender Documents:
• Instructions to Tenderers
• Specification, General / Specific Requirements
• Conditions of Contract
• Contractor’ Proposal
s
• Form of Tender & Appendix
• Bill of Quantities
• Drawings
• Letter of Acceptance / Purchase Order
6
7. Key Terms in a Contract
• Definitions • Contract Prices
• Parties, roles and • Payment Term
responsibilities • Indemnities, warrants
• Specifications / Statement and insurance
of Work • Liquidated Damages
• Confidentiality
• Defect Liability Period
• Intellectual Property Rights
(IPR) • Termination
• Regularity issues eg. • Disputes and Arbitration
safety, environmental, • Force Majeure
statutory requirements
7
8. Factors on Contract Strategy
• Project Timeline
• Price Certainty
• Quality Level
• Design involvement
• Apportionment of Risk
• Project Complexity
• User of Contractor’ Expertise
s
• Involvement of Client
8
9. Contract Strategy
• Turnkey Arrangement (Design & Build)
• One single contractor is appointed to undertake the entire
project including design and provision of equipment and
subsequent implementation
• Advantage :
• Maximum responsibility on one contractor
• Should achieve a timely completion due to total ownership
• Disadvantage :
• No wayout when the work is underway
• Limited choice of supplier base may increase the project cost
9
10. Contract Strategy (cont’
d)
• Traditional Client-coodinated Arrangement
• Client takes responsibility for appointing different specialist
consultants / contractors for individual work packages (eg.
architect, E&M contractor, building contractor etc.)
• Advantage :
• Better value of money
• Maintain high degree of discretion on selecting contractors
• Disadvantage :
• Require a lot of resources to develop specifications and
selection of consultants / contractors
• Require resources for co-ordinating various consultants /
contractors
10
11. Contract Strategy (cont’
d)
• Partial Turnkey
• A hybrid or halfway between full turnkey and client-
coordinatd arrangement
• Client undertakes the responsibility for the organising of a
number of work packages eg. design package, independent
to implementation packages
• Advantage :
• Client owns greater responsibility for particular parts
• Disadvantage :
• With greater responsibility on particular area, client will share
risk of delays and cost overrun
• More effort on managing contractors
11
12. Contract Strategy (cont’
d)
• Management Contracting
• Developed in construction industry
• Client appoints an independent design team called
“Professional Team” led of architect or Project Manager and
the main contractor, “management contractor” for the
organisation and supervision of work for the project
• Advantage :
• Achieve cost economies and save time by integrating design
team and management contractor
• Disadvantage :
• Risk of cost underestimation by the design team
12
13. Cost Control
• Cost control program provides a systematic forum for
reducing the total project cost, without affecting
quality.
• Three aspects of cost control program :
• Cost reduction – effort to trim the costs eg. select
alternative material / method / process
• Cost avoidance – effort to prevent any cost increase via
value analysis, negotiation etc.
• Cost containment – hold costs within certain target limit via
value analysis, negotiation etc.
13
14. Selection of Pricing Method
• Fixed Price Contract :
• Firm fixed price
• Fixed price with adjustment / escalation
• Fixed price with incentive
• Cost Reimbursable Contract :
• Cost plus incentive fee
• Cost sharing
• Time and material contract
• Cost plus fixed fee
14
15. Selection of Pricing Method
(cont’d)
Buyer Risk Contractor Risk
• Fixed Price Contract :
• Firm fixed price
• Fixed price with adjustment / escalation
• Fixed price with incentive
• Cost Reimbursable Contract :
• Cost plus incentive fee
• Cost sharing
• Time and material contract
• Cost plus fixed fee
15
16. Value Analysis / Engineering
• Value Analysis and Value Engineering are used
interchangeably
• Value Analysis focuses on existing products and
systems and co-ordinates all functions in an
operation to reduce overall cost of the production
• Value Engineering analyses the functional
requirements of a new design / product / procedures
used in production in order to achieve the lowest cost
without loss of performance, quality and reliability
16
17. Definition of Variations
• It is an “alteration or modification of the design,
quality or quantity of the Works” specified in the
contract
• A variation has only limited scope and can’ be used
t
to change the essence of the contract
17
18. Cause of Variations
• Inadequate design work
• Changes of mind or requirement after the contract
has been signed
• Change in the method of performing work
• Unforeseen circumstances eg. Change in technology
18
19. Impact of Variation
• Increased cost
• Increased time necessary to complete which will
affect :
• Insurance
• Preliminary
• Additional consultancy cost
• Other expenditure or financial loss eg. Loss of potential
rent.
19
20. Cost of Variation
The cost of the variation may be calculated by :
• An agreed price
• Measurement and valuation by a Quantity Surveyor (QS) in
accordance with Bill of Quantities or Daywork Schedule etc.
20
21. Variation = Claim
Variation is an alteration of the works whether by way
of addition, modification or omission
Claim refers to additional monies sought by the
contractor. It can be made for the payment of
damages due to the buyer’ breach of contract, that
s
constitutes delay completion of work.
21
22. How to Minimise Variation & Claim
• To include a clause covering variations to minimise
the risks associated with cost and time within the
contract
• To ensure a good contract management / project
management system embedded with contract
• To maintain open and clear communication
22
23. How to Deal with Them
• All reasonable efforts should be made to avoid
variations
• Variations should be subject to a clearly defined
procedures within the contract
• When unavoidable, variations and claims should be
negotiated
23
24. Assessment during Negotiation
• What will be the possible outcome ?
• Will the result affect the relationship ?
• Is there sufficient time for the negotiation ?
• Are we clear of what to be achieved ?
24
25. Some Negotiation Techniques
• Opening – avoid making the opening bid
• Testing – get information on counterpart’ position
s
• Active listening
• Use silence to encourage more information flow
• Keep concession for trading / exchanging
• Try avoiding excessive conflict
• Prepare persuasive and logical arguments
• Focus on interests, not positions
• Invest in options for mutual gain
25
26. Negotiator Style
• Logical Negotiator – provides factual arguments
• Relationship Negotiator – focus on relationship
• Intuitive Negotiator – led by intuitions
• Tough Negotiator – result oriented and unconcerned
26
27. Common Dispute Settlement Methods
• Arbitration – both parties present their cases to
arbitrator(s) who will then decide how the case
should be settled. The decision is binding and is
enforceable through the courts. Unlike litigation, the
arbitration cases are private. They can be less costly
and be handled quickly.
27
28. Common Dispute Settlement Methods
(cont’
d)
• Mediation – With the aid of a mediator who will listen
to and question each side to lead a settlement. A
mediator does not make a binding decision.
• Re-negotiation – Both parties place all difference on
the table for re-negotiate the contract
• Litigation – If unable to resolve, a party may sue for
damages suffered as a result of contract breach. It
will then be decided in the courts according to the
law. It will take a lot of time and cost.
28
29. Performance Monitoring
• Establish performance monitoring system in contract
• Define stakeholders
• Agree evaluation criteria and measurement method / key
performance indicator (KPI)
• Determine whether KPI will be associated with incentive
payment
• Agree impact of the measurement result
29
30. Contract Closure
• Contract is considered completed when the required
certificates have been issued by the client :
• Completion Certificate – when the work is substantially
completed
• Taking Over Certificate – when the plant has passed test
• Acceptance Certificate – when the performance test has
been passed
• Final or Maintenance Certificate - at the end of defects
liability period
30
31. Tips to Those who Manage
Contracts
• Clear understanding of contract itself including
specification, performance measures and all
contractual terms
• Access to management information that details how
the contractor is performing
• Establish contract management framework eg.
meeting and reporting interval
• Effective teamwork and relationship management
31
32. Reference
• Study Guide – Project Management and Contract Management
for Purchasing and Supply, The Chartered Institute of
Purchasing & Supply
• The C.P.M. Study Guide, National Association of Purchasing
Management (currently called Institute for Supply Management)
• Building Services Procurement, Christopher Marsh
32