ROLE OF CONTRACT MANAGEMENT IN CONSTRUCTION INDUSTRY

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The luck of all projects is closely relates to the right prepared contract. Contracting is an integral part of construction projects. Managing the contracts therefore is equally important for the success of any business process due to rapid increase in multiple contracts. Contract and partnerships are an essential part of today’s high speed, multilateral business culture both in the public and private sector. Contract management is becoming an integral part of project management, and business in general. Many commercial and project managers are more and more facing contract management issues. Contract management is the active management of the relationship between the client and the contractor over the term of the contract for the provision of goods and services to the agreed standards. Contract management should be proportionate to the value, risk and complexity of the contract. In this seminar report information about contract management is given. The constructions contract lifecycle model and each of the construction contract lifecycle phases is described. The guidance in this report provide us with the know-how to manage the contract "start up", manage the process relating to unresolved issues; administer the contract effectively; undertake performance management; and manage contract disputes.Successful contract management organisations can increase control, increase effectiveness and reduce cost and also provide strategic and competitive advantages. Good preparation, the right contract, single business focus and service delivery management and contract administration factors essential factors for good contract management. In Construction contract lifecycle model, each phase consists of different elements which are very important in the realization of the purpose related to exact phase. There are several reasons why organisations fail to manage contract successfully, the chief reason for project delays is poor contract management, therefore proper contract management is essential

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International Engineering Journal For Research & Development
E-ISSN No: 2349-0721
Volume 1 Issue 2
www.iejrd.in Page 1

ROLE OF CONTRACT MANAGEMENT IN CONSTRUCTION INDUSTRY
Mr.Swapnil Khandar
1
1
P.G.Student PRMCEAM, Badnera
1
[email protected]
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ABSTRACT :
The luck of all projects is closely relates to the right prepared contract. Contracting is an integral
part of construction projects. Managing the contracts therefore is equally important for the success of any
business process due to rapid increase in multiple contracts. Contract and partnerships are an essential part
of today’s high speed, multilateral business culture both in the public and private sector. Contract
management is becoming an integral part of project management, and business in general. Many
commercial and project managers are more and more facing contract management issues. Contract
management is the active management of the relationship between the client and the contractor over the term
of the contract for the provision of goods and services to the agreed standards. Contract management should
be proportionate to the value, risk and complexity of the contract. I n this seminar report information about
contract management is given. The constructions contract lifecycle model and each of the construction
contract lifecycle phases is described. The guidance in this report provide us with the know-how to manage
the contract "start up", manage the process relating to unresolved issues; administer the contract effectively;
undertake performance management; and manage contract disputes.
Successful contract management organisations can increase control, increase effectiveness and
reduce cost and also provide strategic and competitive advantages. Good preparation, the right contract,
single business focus and service delivery management and contract administration factors essential factors
for good contract management. I n Construction contract lifecycle model, each phase consists of different
elements which are very important in the realization of the purpose related to exact phase. There are several
reasons why organisations fail to manage contract successfully, the chief reason for project delays is poor
contract management, therefore proper contract management is essential
INTRODUCTION :
Contract management is the process that enables both parties to a contract to meet their obligations in
order to deliver the objectives required from the contract. It also involves building a good working relat ionship
between the customer and the service provider. It continues throughout the life of a contract and involves
managing proactively to anticipate future needs as well as reacting to situations that arise.One of the key aims of
contract management is to obtain the services as agreed in the Contract and achieve value for money. This
means optimizing the efficiency, effect iveness and economy of the service or relat ionship described by the
contract, balancing costs against risks and actively managing the customer and service provider relationship.
Contract management may also involve aiming for cont inuous improvement in performance over the life of the
contract. The terms and conditions of the contract should include specifications, bill of quantities, contractor
bonus, liquidated damages, time period, means to measure items executed, price adjustmen t procedures,
variation/change control procedures, foreclosure, termination, and all the other formal mechanisms that enable a
International Engineering Journal For Research & Development
E-ISSN No: 2349-0721
Volume 1 Issue 2
www.iejrd.in Page 2

contract to be implemented. It is vital to build a contract that identifies clearly the obligations of the contractor
and the employer. The contract must be built on a firm formal and legal foundation, it should be flexible, to
accommodate changes, variations etc. Good contract management goes much further than ensuring that the
agreed terms of the contract are being met. There will always be some friction between the different
perspectives and approach of employer and contractor. Contract management is about resolving or reducing
such friction and achieving the completion of the project as envisaged. Increasingly, many organizations are
departing from tradit ional methods of contract management and moving towards building constructive
relationships with contractors. Contract management consists of the full and proper fulfillment of roles and
responsibilit ies.
Importance of Contract Management
Organizations in both the public and private sectors are facing increasing pressure to reduce costs and improve
financial and operational performance. New regulatory requirements, globalization, increases in contract and
complexity have resulted in an increasing recognition of the importance and benefits of effective contract
management. The growing recognition of the need to automate and improve contractual processes and satisfy
increasing compliance and analytical needs has also led to an increase in the adoption of more formal and
structured contract management procedures and an increase in the availability of software applications designed
to address these needs.
It is worthwhile noting that contract management is successful if:
The arrangements for service delivery continue to be satisfactory to both parties, and the expected
business benefits and value for money are being realized.
The expected business benefits and value for money are being achieved.
The supplier is co-operative and responsive.
The organization understands its obligations under the contract.
There are no disputes.
There are no surprises.
Efficiencies are being realized.
.
Contracting And Contract Li fe Cycle
Contracting is a high- risk and an increasingly complex business. It involves construction management,
workable organizational structure, and requires capabilities needed for success. Contracting success needs round
– the –clock problem solving acumen .Contract is basically a commit ment between t wo consenting parties,
which, if breaches, remedial protection can be sought under the law by the affected party, since the law
recognizes its performance as the rightful duty. Contract management is essential for good contract in
construction industry, its involved management of contract lifecycle, management of contract start up, contract
administration, control the disputes and proper record keeping.
The basis of developed model is made on construction contract life cycle model which is presented in
Fig. 1.
International Engineering Journal For Research & Development
E-ISSN No: 2349-0721
Volume 1 Issue 2
www.iejrd.in Page 3



Fig. 1. Construction contract lifecycle model
Each of the construction contract lifecycle phases have its input and output informat ion. Each phase has its own
purpose:
Contract request phase – different parties of the construction process can us such system and there
are different type of the contracts. In this phase user can is at starting point and have to decide which
type of the contract he needs.
Authoring phase – there are a lot of different contracts, but in most cases it is impossible to use
exactly the same contract few times. At this point user can edit existing contracts so it passes to
existing needs.
Negoti ati on phase – this phase is related to the presentation of drafts and versions of authorized
contracts for review by other employees, or even vendors/customers/clients, etc.
Approvals phase – in most cases construction contracts are complex and have to be checked by
different stakeholders, even in the same organizat ion. Such reviewers can be authorized staff, different
subject matter experts, legal and appropriate.
Contract execution phase – at this phase have to be prepared and signed final contract.
Obligations phase – the life of a contract and its relationships continue doesn’t stop after signing the
contract. At this moment starts very important post -execution stage with alerts, workflow processes,
risk assessment, spend management, compliance monitoring, and advanced reporting metrics.
Compliance phase – report ing capabilities provide organizations with visibility into all contractual
relationships including fully audit for contract.
Contract renewal phase – this phase is related to organizat ions possibility to capitalize on each and
every renewal opportunity by identifying candidates for renewal, alerting employees to these contracts
in time to make business decisions, and creating new contracts or drafts based on existing ones.
Each phase consists of different elements which are very important in the realization of the purpose related to
exact phase. There are different structures for each phase, and those have to be analyzed separately.

Analyze the Contract and Agree the Service Provi der's Understanding of the Contract
Identify deliverables and how their achievement will be measured.
Ascertain timeframes, part icularly any critical deadlines.
Understand payment arrangements, including links between payments and performance.
International Engineering Journal For Research & Development
E-ISSN No: 2349-0721
Volume 1 Issue 2
www.iejrd.in Page 4

Identify the roles and responsibilities of both parties and allocate responsibilities within the customer
organization.
Confirm agreement with the service provider, especially in relation to any sensitive matters. We
expect that many customers may have certain procedures that must be followed before and during
contract negotiation and prior to execution of contracts. The procedures may vary depending on the
contract terms, the service provider and project type

MANAGEMENT OF CONTRACT START UP
After a contract has been signed there are a number of matters that should be addressed to provide the
foundation for successful contract management. An early step is to ensure that sufficient resources and senior
management support are available to manage the contract. It is equally important to understand both the contract
provisions and contractual relationships at the outset. The following checklist should assist the contract
management team with providing a better understanding of the contract and can be used as a basis for
developing an effective working relat ionship with the service provider.

ANALYSE THE CONTRACT AND AGREE THE SERVICE PROVIDER'S UNDERSTANDING OF
THE CONTRACT
i. Identify deliverables and how their achievement will be measured.
ii. Ascertain timeframes, part icularly any critical deadlines.
iii. Understand payment arrangements, including links between payments and performance.
iv. Identify the roles and responsibilities of both parties and allocate responsibilities within the customer
organisation.
v. Confirm agreement with the service provider, especially in relation to any sensitive matters. We
expect that many customers may have certain procedures that must be followed before and during
contract negotiation and prior to execution of contracts. The procedures may vary depending on the
contract terms, the service provider and project type
GAIN AN UNDERSTANDING OF THE BACKGROUND TO THE CONTRACT AND THE
RELATIONSHIP THAT HAS BEEN DEVELOPED WITH THE SERVICE PROVIDER
i. Discuss the relationship that has developed with the service provider over the preceding phases of the
contracting cycle.
ii. Meet with the service provider as necessary to further develop the relationship and address issues that
may impinge on effective contract management.
ESTABLISH ANY REQUIRED SYSTEMS FOR MONITORING AND REPORTING, PROTOCOLS
FOR COMMUNICATION AND RECORDKEEPING ARRANGEMENTS.
i. Establish contract management or data collection systems or processes.
ii. Draw up a monitoring plan or checklist covering key timelines, critical deliverables and performance
reporting priorities.
iii. Develop any procedures or protocols.
iv. Establish recordkeeping arrangements.

International Engineering Journal For Research & Development
E-ISSN No: 2349-0721
Volume 1 Issue 2
www.iejrd.in Page 5

OBTAIN OR CONFIRM LICENCES IN RELATION TO INTELLECTUAL PROPERTY THAT HAVE
NOT ALREADY BEEN OBTAINED
i. Ensure that relevant confirmat ion has been obtained.
ii. Confirm all documentation is up-to-date.
iii. Store evidence of these matters appropriately
BRIEF ANY TEAM MEMBERS OR STAKEHOLDERS :
i. Set out meeting arrangements for the life of the contract.
ii. Confirm stakeholder involvement and their requirements for information.
iii. Set up and/or brief any committees or working groups.
iv. Brief any members of the contract management team regarding their roles and responsibilit ies.

MANAGEMENT OF UNRESOLVED ISSUES :
In many instances, not all issues are resolved at the time of contract signature. These need to be
addressed in a timely way during contract start up. These issues can create problems when managing a contract
if not properly dealt with at the correct time.
In situations where there are issues that have not been fully resolved at contract signature, the contract manager
should:
i. Identify and record any agreements or arrangements made by the part ies relating to this when the
contract was negotiated;
ii. Identify and record aspects of the contract which have been potentially left for future development; and
iii. Identify and record aspects of the contract which will be subject to some other process, for example,
third party approvals.
The detailed review of the contract at contract start up may also identify issues that require clarification or
elaboration in the contract. It is important to address any such issues promptly. This may require a contract
variation or exchange of correspondence.

ADMINISTRATION OF THE CONTRACT :
Good project preparat ion and the right contract are essential foundations for effective contract
management. The arrangement must also be flexible enough to accommodate change. In long term contracts,
where interdependency between employer and contractor is inevitable, it is in both their interests to make the
relationship work. Contract administration handles the formal governance of the contract and changes to the
contract documentation. All these areas must be managed successfully if the arrangement is t o be a success.
Contract administration, the formal governance of the contract, includes such tasks as contract maintenance and
change control, charges and cost monitoring, variation order process and payment procedures, management
reporting, and so on. The importance of contract administration to the success of the contract, and to the
relationship between employer and contractor, cannot be underestimated. Contract administration is an integral
and important element of contract management and overlaps with monitoring and performance assessment. It
encompasses various activities that need to be completed on a day-to-day basis, including:
i. Developing and maintaining contact details of key people involved in the contract;
ii. Understanding the notice provisions;
International Engineering Journal For Research & Development
E-ISSN No: 2349-0721
Volume 1 Issue 2
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iii. Scheduling meetings and other actions required by the contract delivery and acceptance of the goods or
services;
iv. Making payments;
v. Maintaining complete records for the contract itself; and
vi. Establishing and maintaining contract documentation.
CONTACT DETAILS :
To assist the overall management of long term contracts, there can be benefits in
maintaining up-to-date records of key personnel, stakeholders, end-users and/or experts and their contact details.
This can assist in facilitating communications between the parties particularly where there are changes in
personnel or where personnel are geographically dispersed.

NOTICE PROVISIONS :
Although notice provisions are not the most glamorous or excit ing of clauses, it is often important to determine
at what time notification is considered to have been given or received. Therefore, the following essentials of a
notice provision should be well understood:
i. The place at which notice is to (or may) be served;
ii. The method by which it is to (or may) be served;
iii. Where and when service is deemed to take place.

SCHEDULING MEETINGS :
For most contracts, meet ings and particular actions will need to occur at specific times
throughout the life of the contract. It is an important element of contract administration that a schedule of
meet ings for parties to the contract, end-users and stakeholders is established in advance, giving the time, place
and purpose of the meeting. The schedule should also list any planned reviews or other key actions.

PAYMENTS :
Contract payments should only be made in accordance with the provisions of the contract. Before
payments are made evidence is required that the appropriate representative of the customer has certified that
goods and services have been received and have met the required standard of performance. It is also important
that payments for satisfactory performance are made in line with the t imeframes set out in the contract.
Payments for satisfactory performance should not be delayed because this can undermine the relat ionship with
the service provider. Payments should be made following receipt of a correctly rendered invoice or other
statement of expenditure. All necessary authorisations and approvals should have been obtained prior to making
payment.

CONTRACT DOCUMENTATION :
It is important that the most up-to-date version of the contract incorporating any variations is formally
evidenced in writ ing and appropriately stored. This provides the basis for making payments and the ongoing
management of the contract. It is likely by the contract management phase that a system for maintaining
International Engineering Journal For Research & Development
E-ISSN No: 2349-0721
Volume 1 Issue 2
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documents for the particular contract will already have been established. If this is not the case, a recordkeeping
system containing all appropriate documentation should be established in accordance with the customer's
recordkeeping policy and pract ices. If a system already exists it should be reviewed to ensure that it is
appropriate to the contractual arrangement. Any additional recordkeeping requirements should be identified and
any gaps in documentation addressed.

CONCLUSIONS :
From above study regarding various aspects of contract management following conclusions is drawn
Successful contract management organizations can increase control, increase effectiveness and reduce
cost and also provide strategic and competitive advantages.
Good preparat ion, the right contract, single business focus and service delivery management an d
contract administration factors essential factors for good contract management.
In Construction contract lifecycle model, each phase consists of different elements which are very
important in the realization of the purpose related to exact phase.
Contract administration is an integral and important element of contract management and overlaps with
monitoring and performance assessment.
There are several reasons why organizations fail to manage contract successfully, the chief reason for
project delays is poor contract management, therefore proper contract management is essential.
References
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analysis’’,Contemporary Issues in Business, Management and Education 2013, Procedia - Social and
Behavioral Sciences 110 ( 2014 ), pp. 1226 – 1234.
J. T. Nashikkar, “Contract Management”, Peer Experience And Reflect ive Learning,
www.indiaurbanportal.in
Tauqir Haider, “Financial Management of Construction Contracts”, International Research Journal of
Finance and Economics ISSN 1450-2887 Issue 28 (2009) © Euro Journals Publishing, Inc. 2009
http://www.eurojournals.com/finance.htm.
Edwin H. W. Chan, Raymond Y. C. Tse, “Cultural Considerations in InternationalConstruction
Contracts”, Contracts; Dispute resolution; Hong Kong; International factors; Construction industry,
10.1061/ (ASCE)0733-9364~(2003)129:4(375).
Dr. Rene G. Rendon, “Best Practices in Contract Management”, 92nd Annual International Supply
Management Conference, May 2007, (831) 656-3464.
Manju Pillai , Pramila Adavi , “Intelligent Contract Management” , International Journal of Scientific
and Research Publications, Volume 3, Issue 1, January 2013 ,ISSN 2250-3153.
Straub, A., & Mossel. H. J. (2007), “Contractor Selection for Performance-Based Maintenance
Partnerships”, International Journal of St rategic, Property Management, (11), 65–76.
Adriaanse, J. (2007), “Construction contract law”, New York: Palgrave Machmillan.

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