Module 11 Session 11.2 Visual 1

Module 11

Executing and Controlling the Work

Session 11. 2: Managing Contracts

Module 11 Session 11.2 Visual 2

Phases of the project life cycle Implementation is just one phase

Conception Development Approval Implementation Termination

Planning Procurement Execution

Subphases of Subphases of Implementation PhaseImplementation Phase

Subphases of Subphases of Implementation PhaseImplementation Phase

Project approved

Plan approved

Contract signed

Construction finished

= Accomplishments or milestones

Module 11 Session 11.2 Visual 3

Keeping on courseA key project management task

Externalinfluence

Res

et c

ours

e

Actual travelPosition surveyed

Start of journey

Destination

Course set in

itially

(

Plan)

Module 11 Session 11.2 Visual 4

Actors

Principal Actors

• The client

• Works contractor(s)

• Consultants

• Suppliers of goodsand equipment

• Others directly impacted

Other Actors

Hidden actors:Bidders & proposersnot successful in obtaining work underthe project

Future bids may be affected by the perceptions of hidden actors

Module 11 Session 11.2 Visual 5

Cash flow may affect schedule

$

Time

Acc

um

ula

ted

Exp

end

itu

re

Curve represents expected profile of contractor’s Expenditure

This area represents

contractor’s financing gap during the contract

Steps represent contractor’s expected

payments under contract

Failure to make payments in accordance with the contract may cause financial problems for the contractor that may affect the progress of the contract.

Module 11 Session 11.2 Visual 6

Client’s reputation for fairness: Influence on future bids

Level of bid

Level of perceived risk

Lev

el o

f R

isk

High

Low

Lev

el o

f B

id

Medium

High

Low

Medium

The worse the reputation of the client, the higher the risk for the contractor

The higher the perceived risk, the higher the bids, and vice versa

Module 11 Session 11.2 Visual 7

Review the assumptions made at earlier stages of project life cycle

Construction cost Construction period Key analyses

Economic Financial Social Environment

Changes in assumptionsmay affect the forecastEconomic Rate of Return(the Benefits to the economy)

Module 11 Session 11.2 Visual 8

Review the assumptions made at earlier stages of project life cycle

Project risks

Risk reduction proposals

Milestones

Module 11 Session 11.2 Visual 9

Review the assumptions made at earlier stages of project life cycle

If Hierarchy of Objectives approach wasused during analysis and design, the critical assumptions will be listed in the matrix!

Complementary actions What’s to be done? By whom? When? Potential “winners” and “losers”

Module 11 Session 11.2 Visual 10

Managing works contracts

Contractor selected and prepared Contract in place All parties “satisfied” with terms and conditions Performance security in place Work plan approved

Contract documentation in place Specific Unambiguous Complete

Module 11 Session 11.2 Visual 11

Managing works contracts

At the outset Give order to commence work Make site(s) available Obtain performance security Assure adequate insurance is in place Establish day-to-day procedures and reporting Communicate consultant’s role, responsibility

and powers to all involved Authorize mobilization payment

Module 11 Session 11.2 Visual 12

Managing works contractsKeeping on track during execution

Make timely payments Follow specified change procedures &

document changes Monitor progress using network analysis Handle claims and complaints promptly Hand over completed work for operation and

maintenance

Module 11 Session 11.2 Visual 13

Managing works contractsGetting back on course during execution

Be alert for signs of trouble Schedule slip Major claims and disputes with no resolution Complementary actions required Other entities not carrying through with

obligations

Act quickly to identify and address problems Make continuous use of network analysis

Module 11 Session 11.2 Visual 14

Managing services contracts (consultants)

Confirm contracts (terms and conditions) Objective of services clear and unambiguous Support obligations defined Payment terms Reporting relationships Expected output

Module 11 Session 11.2 Visual 15

Managing services contractsAt Startup

Consider consultant requests to replace key personnel only in the most serious of circumstances

Ensure staff aware of why consultants are being employed

Module 11 Session 11.2 Visual 16

Managing service contractsDuring implementation Manage consultants primarily through periodic

reports Pay particular attention to the inception report Transmit essential information in reports Proactively identify and solve problems Consider in good faith consultant’s suggestions to

modify the terms of reference Make payments on schedule Final report should have NO surprises

Module 11 Session 11.2 Visual 17

Managing goods contractsThe contract process

Production bysupplier

Transport from supplier site to client site

Client site

Client arranges for inspection prior to shipment from supplier site (if in contract)

Arrangements for freight and insurance

• Reception facilities• Commissioning• Inspection• Training

Module 11 Session 11.2 Visual 18

Managing goods contracts At the outset

Payment schedule

Delivery schedule

Reception facilities

Staff (to operate)

Module 11 Session 11.2 Visual 19

Managing goods contractsResponsibilities

Contractor responsibilities: Deliver the goods/equipment

When, where, how specified in contract Replace non-conforming

Hand over documentation Transfer title

Client responsibilities: Inspect within reasonable time Take delivery if meet requirements Pay promptly and resolve claims and disputes

Module 11 Session 11.2 Visual 20

SummaryManaging contracts during implementation means

keeping the contracts on track as planned

taking actions to bring implementation back on track in terms of:

– cost, – budget, and – scope (performance & quality)

so that the project may begin the operations phase, and yield its expected benefits to the economy.