May 31, 2020
If you are reading this article I’m sure you are somewhat interested in project Contract management and your own career growth as well! This is the right page for you. Anybody associated with construction projects must have at least some basic knowledge of contract management to become effective.
As a Site Engineer, your primary responsibilities include regularly studying the drawings, directing your battalion of workforce towards productivity, doing the paper-works and making schedules, debating with your client over technical or progress issues. You may wonder where contract management comes here in the first place. You are standing at the site to ensure the structures are erected as per the drawing, isn’t it all? Why is contract management required for you?
There is something more. Having the basic information about the project contract is essential, and a little in-depth knowledge could be an add-on to your technical and site management skills, for sure. Let’s see how.
Why it’s there?
The things which you do daily are part of your primary responsibilities, and those are the subset of the project itself. Any project, small or big, has some specific objectives to achieve. Also, completion of a project fulfilling all the end requirements is bound to have some risk. Monitoring of the Contract ensures the objectives are met on time, helps the parties to detect possible deficiencies, and suggests the way-out.
What is a Contract and why do you need to know it?
A number of definitions of contract exist on earth. It is defined as a “legally binding agreement between two parties” or “An agreement enforceable by law”. Basically, a contract is the set of promises made and accepted by the parties who are parts of the same. These promises collectively form the agreement, which, when enforced by law becomes a contract between those parties.
1. Basis of the Contract Price
Still wondering why it’s important for you, the Site Engineer to know about the basics of the project Contract? The reason is, the promises mutually made by the parties (here, your company and the client) form the basis of the price of the project.
Basis of price, How?
Let us consider the case when somebody asks you to make a pen for them and you decide to take up the job. How much you will charge for it? You cannot tell that really unless you know a little more about the proposed pen, isn’t it? Like, would it be a ball-pen or a fountain pen? Which material to use? When the pen is to be delivered and where? When you will get the money? Some more, maybe.
Now when you get the answers to the above questions from the person who ordered for it and accept to make a pen for them, you are making promises. Promises about the specification of the pen, delivery place, time to make it, etc. All these will be factors to enable you to decide the price of the pen, right? So is the project you are in.
Unless you know the promises made by your employer to the client like the work specifications, timeline, intermediate milestone dates, etc. you cannot have an overall vision of the project. Only a Contract decides an action whether it is right or wrong, so knowing it only will lead you towards doing things right.
2. What are the contract documents?
The documents which were agreed upon by both of the parties form the set of contract documents. This includes (but is not limited to) the Notice Inviting Tender (NIT), the Bill of Quantity (BOQ), Technical Specifications (TS), General Conditions (GCC), Special Conditions of Contract (SCC), and the tender drawings. The list of documents along with their priorities over the others is mentioned in a contract.
When the companies are in the process of bidding the tender, any question asked in the pre-bid meetings along with their answers also become part of a contract agreement.
As a Site Engineer, you should know the contract documents of your project. Go through them at least once so that you have the ideas about what is where.
To have the overall idea be aware of the following points about the contract of your project.
3. Technical Specifications (TS):
The most important thing is the TS! Unless you know what it is for the executable items, a strong chance is there to land upon a faulty product and get deprived of payment. Have a close look at the TS book of your contract at the first chance. Go to the PMG or Contract team of your project and ask for it and go through in detail.
4. Time available:
You are executing the works at the site, so you definitely need to know what is the time limit within which you have to complete a structure or specific parts of it so that no penalty can be imposed by the client on your company. Look if there are intermediate milestones in your contract so that your drive goes that way and you don’t lose on it.
5. Price of various items:
Once you know the money your organization will be paid by the client for the execution of individual items you can calculate easily what amount of work you are supervising. Also by knowing the prices of comparable items you can put an effort to convince the client for executing profitable items at the site.
6. Terms of payment:
This is of utmost importance if your project’s payment is milestone-based. If you know the milestones then your attention will be on the completion of relevant works so that your organization can get more money quickly. You will be able to prioritize the works accordingly.
Also, in the case of a cost-plus contract if you know what are the approved costs by your client you can avoid excess expenditure and save loss.
7. Safety Standards:
Maintaining the safety standards at the site is crucial at project sites. Even if your company has its own safety norms it is always advisable to know the requisites of the client as per the contract so that you never default on those.
8. Priorities of documents:
In case there is any conflict between two contract documents (e.g. BOQ and drawings), the relevant clause of your contract document will be able to tell you which one to abide by. Look for the priority of documents in your contract.
9. Reports to be prepared:
Go through the list and you will be able to prepare those on time. Also by knowing what exactly is required by the client you can avoid any additional thing you are doing now.
10. General (GCC) and Special Conditions of Contract (SCC):
Generally, there are a lot of conditions listed in the GCC and SCC. Just go through them and you will be aware of what are promised by your organization to the client, and vice versa. You can ask on time to your client for their deliverable to cut on the delay due to the same.
It will help you to communicate the right things at the right time.
Knowing the basics of a contract will help you to communicate with the client on behalf of your company. As you are working at the ground level you have the first-hand experience for all the happenings. If you know the contract clauses properly you will be able to understand what’s going wrong. This cognizance will help you to inform your Project Manager or the PMG team to communicate to the relevant people about the things, which will form the basis of delay analysis, which is the most important tool for a contractor to get time extension or raise and substantiate a claim for loss in future.
There are a lot of contract-related questions asked in the job-interviews. Being able to answer them along with the technology will definitely upvote your candidature.