Post Contract Management

Contract and Payment
structures
The nature of the contract
depend on
- scope of the work
-Responsibility of the contractor
- The risk involved
- Required time for the
completion of the work.

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Things to considered during the
Selection of contractors
•Whether responsibility for the design,
procurement , construction,
commissioning is allocated to one
contractor or not
•Whether the main contractor will both
mange the project and undertake
construction or will be responsible
management only while the
construction is undertaken by other
contractor
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Procurement routes

1. Traditional system
- Characteristics of traditional
system
a. The client has
engineer/architect who is is
responsible for the design
b. Contractors are responsible
for construction
c. Client is responsible for the
management of the contract
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2. Turnkey contract

-The client is responsible for the
preparation of their work
specification/statement of requirement
-The client does not retain an engineer
during the construction
-The client’s role is limited to
inspection , payment and ensuring the
successful completion of the work.

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3. The design and build

•The contract is responsible for
both construction design and
construction
•The client should have an
engineer who protect the interest
of the client

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4. Construction management and managing contract

•The contractor is responsible only
for the management of the
contract whereas the construction
of the work will be undertaken by
other contractors appointed by the
client
• Construction Management
Contract is for use on construction
projects where the employer
appoints separate contractor to
carry out the works, and a
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5. Guaranteed maximum
price
•Is a cost-type contract (also known as an
open-book contract) where the contractor
is compensated for actual costs incurred
plus a fixed fee subject to a ceiling price.
• GMP Combines construction
management with the design and build
•The contractor is responsible for the
management of the design such as
programming, coordinating the work of
designers
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. Guaranteed maximum price
continued
The contractor is responsible for cost
overruns, unless the GMP has been
increased via formal change order
(only as a result of additional scope
from the client, not price overruns,
errors, or omissions).
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The contract pricing
There are three main ways in
which contract is calculated
•Lump sum
•Remeasurement/bill of quantity
and
•Cost reimbursement(cost plus)

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Lump sum
Advantages of lump sum
•It provides the maximum
incentives to the contractor to
complete the work on time
•It reduces to minimum the amount
of administration involved after
contract agreement

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Conditions related to lump sum
method
•The ground condition on the site
•Material quantity and specification
• number of labors and labor hours
•Descriptions and quantities of boughtout
items
•Types of constructional plant which will
be
required and for what periods
•Time required by the designers
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Conditions related to lump
sum method continued
The site organization and facilities and
which will be required and for how long.
• Factors which will affect the site
productivity
• Geographical and climatic factors as
they affect site work
• Access to site
•Local availability of material and labor
NB: The contractor should give similar
information to the subcontractors
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Bill of quantity
•It involve in estimation of quantity,
cost of the materials, labor, supervision
and plant which will be required to
execute the work.
•It is commonly used in building and
engineering contracts

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Cost reimbursement
In Cost reimbursement contract (cost
plus contract), the contractor is
reimbursed the actual cost they incur.
•It can be used where the scope of the
work to be carried out can not be
properly defined at the beginning and
the risk associated with the works are
high (repair/rehabilitation). This is a high
form of contracting for the client as the
final cost is not known when the
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Terms of payment
Advantage of terms of payment
•The employer avoids having to restrict
the tender list to large firms possessing
the resources to finance the contract.
• It ensures that the renderers do not
have to inflate their tender prices by
financing charges.
•It gives encouragement to and allow the
employer to take advantage of firms
possessing technical initiatives who
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Advantage of terms of
payment continued

The employer minimizes the risk of
being saddled with a contractor who
has insufficient cash with which to
carry out the contract and of having
therefore to either support the
contractor financially or terminate
the contract.

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Delay in payment
•After issue of completion certificate by
the architect or engineer, there is no
excuse for delay
• Late payment is breach of contract
• Many contract charge interest on
client of being delay of payment
•If payment is delayed after notice from
the contractor for more than a specified
period, the contract has right to
suspend the work or terminate the
contract
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Advance payment
It is recommended to avoid advance
payment

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Retention money
With contracts for building and civil
engineering works, it is usual for the
purchaser to retain a proportion of the
contract price until the work has been
completed.
This percentage varies but is usually
between 10 per cent and 20 per cent.

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