A contract is like a marriage, a long undertaking that requires a lot of understanding and effort to reap its rewards. Contract administration is the process of monitoring and managing a contract, and other legally enforced agreements, during its execution phase. This includes monitoring of contractors, construction, suppliers and other service and goods providers during the execution of the project.
Proper contract administration is crucial to a smooth execution of a contract, as it is the contract administrator that ensures that all process are carried out in accordance with the provisions of the contract, and endeavors to solve problems and issues before they grow and escalate into multi-million claims and disputes
For the contract administration process be truly effective, it is should start during the very early phases of the project. During the tendering phase of the project, contract administrators can highlight risk and opportunities in the proposed contracts, negotiate unacceptable clauses and decrease the likelihood of unknown risks, resulting in more accurate bids.
However, most contractors view the contract administration as an expensive luxury, and as a result place more emphasis on the 'real work' at site on usually ambitious contracts that place a lot of risk on the contractor.
This strategy usually gives rise to many small and minor issues, deviations and non-compliance with contractual provisions and requirements, which then forces the contractor to pay more attention to proper contract administration process, which may be too late.
Obviously, the role of the contract administrator is of critical, yet underrated, importance to the project. Over the period of my professional experience, I have come to a conclusion that to quickly achieve proficiency as a contract administrator as a contractor in construction projects, there are five (5) things to do:
Study FIDIC Contracts
Most international construction projects are built on a FIDIC contract template. FIDIC stands for Fédération Internationale Des Ingénieurs-Conseils (International Federation of Consulting Engineers in English), and publishes the renowned FIDIC family of contract templates.
The most common contract of the FIDIC family is the contract for "building and engineering works designed by the employer" published in 99 commonly referred to as the "Red Book".
In depth knowledge of the procedures, terminologies and the workings of a FIDIC contract is very important and is usually a prerequisite for a contract administration job.
Among the most important FIDIC Redbook 99 clauses are
- Clause 4, which describes the duties and responsibilities of the contractor,
- Clause 8, which describes the commencement, times for completion, delays, programme and extension of times,
- Clause 11, which describes the defects liability period and the responsibilities of all parties,
- Clause 13, the powerful clause that entitles the engineer to issue changes or variations to the scope of work,
- Clause 14, describes the process of payments and changes to rates,
- Clause 15, entitles the employer to terminate the contract in specific circumstances, and
- Clause 20, the controversial claim clause, which includes a time-bar.
Review the Contract Before Signing
If you are involved in the pre-award phase, reviewing and negotiating contract clauses can greatly benefit the project to your advantage.
Employer's usually sneak extra responsibility to the contractor and meticulous revision of the conditions of contract can greatly help avoid such unexpected risks. A well drafted contract should include:
- Well defined scope, study the priority of contract documents and check for ambiguities,
- clear and unambiguous wording,
- clear commencement dates and time for completion,
- well balanced variation clauses,
- risks and responsibilities during events of force majeure (exceptional events),
- balanced obligations and responsibilities of the other party,
- delay damages and provisions regarding sub-contractors,
- clear obligations on the employer/engineer regarding payments and other required input, and
- clear, and realistic, claim requirements.
In such cases, the knowledge of a well known, tried and test and balanced contract conditions such as FIDIC or JCT shall be a valuable asset to the contract administrator.
Knowledge of the Governing Law
Contract administrators in the construction industry are usually of Engineering or Business Administration academical background. As such, they are usually lack the proper law knowledge.
However, it is very important to individuals in the contract administration field to seek sufficient education in law and gain knowledge of the principles of law. This greatly aids contract administration individuals during contract drafting, claims and disputes.
However, during a major dispute, the services of a lawyer or a professional arbitrator is usually called upon to work with the contract administrator during the arbitration or litigation proceedings.
A Contract Administrator should make Logs, Checklists and Contract Files
A key tool for successful contract administrators are logs. Variation logs, claim logs, payment logs, notice logs, issue logs, all sorts of logs help the contract administrator to track the different issues, required notices and deadlines required by the contract.
Timely notices, anticipation of probable future issues and building a strong substantiated document history are always extremely useful at the late stages of the project, and provide a priceless asset in the event of any claim. Microsoft Excel is a very handy tool to achieve this.
Staying organized and developing checklists and flow charts greatly improves your performance as a contract administration, while aiding the project team in remembering and familiarizing with the contract mechanisms. Examples of such checklists could be:
- time frames of notices required,
- procedures of interim payment application,
- claim submittals checklist, and
- filing of project records and contract documents.
It goes without saying that continuous studying and learning is critical to any one in career development. The notion of 'know it all' is very toxic, and will end up stagnating your career.
Working with more experienced professionals with a passion to learn will earn you a different perspective.
Sharing knowledge with less experienced individuals is very important too, which will build yourself a brand name in the industry, and you end up learning a lot while reading and passing on knowledge to less experienced individuals.
Hope you find this article useful. Please share your ideas of any other tools you use to improve your role as a Contract Administrator.