Contract Administration and Management

• Contract administration manages contracts throughout their lifecycle
• Contract administration ensures compliance with terms
• Contract administration addresses any issues that arise

Overall Contract Management Phases

• Contract Planning
• Tendering/RFP/RFQ
• Contract Administration

Contract Planning Phase

• Determine needs and select a team by conducting systematic needs assessments to identify requirements
• Develop a business case justifying the project and outlining benefits for business case analysis and funding
• Compile documentation that includes the statement of work and work breakdown structure for requirements documentation
• Conduct market analysis to identify qualified suppliers, and issue requests for proposals or bids for supplier competition and selection

Tendering/RFQ/RFP Phase

• Issue RFP or invitation to bid (ITB) to potential suppliers for solicitation of proposal
• Create a comprehensive tender document with project requirements and evaluation criteria for tender/RFQ/RFP preparation
• Establish a secure process for receiving bids for the receiving bids process
• Evaluate proposals against predetermined criteria fairly for offers evaluation
• Develop a negotiation plan before engaging with the selected supplier
• Develop a formal contract incorporating all negotiated terms

Contract Administration Phase

• Define roles, responsibilities, and resources for effective contract management in project initiation and planning
• Analyze contract terms and specifications for smooth project commencement in start work
• Provide contractors with clear project expectations and contract terms in post award orientation
• Verify invoices and track progress in payment approval process
• Maintain records and monitor payment milestones in tracking progress payments
• Monitor market conditions and adjust payments accordingly in economic price adjustments
• Monitor expenditures and implement cost-minimizing measures when administering cost controls
• Establish procedures for compliance with regulations in quality, safety, environment planning
• Track project progress and identify potential issues in performance reporting
• Identify non-compliance issues and implement corrective actions as a corrective action process
• Analyze project activities and establish contingency plans in schedule control planning
• Develop a communication plan for project updates in communication planning
• Ensure all parties are informed of project developments during information distribution
• Foster team collaboration and development in team development

Contract Administration Knowledge Base

• Contract Fundamentals: understanding of contract terms, types, and work breakdown structures
• Execution & Quality Control: Ensure compliance with specifications and testing requirements
• Process Management: Manage tendering, evaluation, and award activities
• Legal & Compliance: Understanding of relevant laws and dispute resolution procedures

Key Players in Contract Administration

• Contract Administrator: the central figure responsible for day-to-day contract management
• Contracts, Tender Management, or Purchasing Departments: Provide support throughout the process
• Legal Counsel: Offers legal guidance for resolving issues
• Contractor/Supplier: Responsible for fulfilling contract obligations

Starting the Contract File

• Initial Document Storage is important to store original signed contracts securely
• A Contract Administrator's Role is to maintain contract files and oversee communications
• Essential File Contents include tender documents, proposals, contracts, correspondence, and reports
• Ongoing Documentation entails maintaining detailed records of all communications

Post Award Conference

• Establish Mutual Understanding: Ensure clarity on contract requirements
• Address Potential Challenges: Identify and discuss potential issues
• Review Key Operational Details: Discuss property control, warranties, delivery schedules, and more

Contract Risks

• Understanding contract risks is critical for effective management which includes risk response strategies and different contract types

Risk Response Strategies

• Transfer: Shift risk to others through insurance
• Tolerate: Accept risk when mitigation costs outweigh benefits
• Treat: Implement controls to manage risk

Contract Types & Risks

• Fixed-Price: Low risk for contractor with a well-defined scope
• Cost-Reimbursement: High risk for contractor with uncertain scope

Contract Changes

• Contract changes can arise from various factors, including scope modifications and timeline adjustments
• Its essential to manage these changes effectively

Common Changes

• Scope Modifications: Adding or removing tasks
• Timeline Adjustments: Changes in project deadlines
• Price Variations: Adjustments to contract price due to cost changes

Overall Change Control

• Document all approved changes for clarity
• Coordinate across schedule, cost, risk, quality, and staffing

Evaluation of Price Changes

• When evaluating price changes, consider the breakdown of cost elements, including direct labor, indirect costs, and other expenses

Cost Elements Breakdown

• Direct Labor: Wages and benefits for project personnel
• Indirect Costs: Overhead and administrative expenses
• Other Costs: Special tooling, travel, and consultant services
• Royalties: Licensing agreements for royalties over $1,500
• Facilities Capital Cost of Money: Cost of capital invested in facilities

Buyer's Rights Before Performance is Due

• Buyers have specific rights in a contract, including the right to seek remedies for anticipatory repudiation or to reject non-conforming goods

Inspection and Acceptance

• Define what will be inspected and accepted
• Specify where and when inspections will take place
• Outline the inspection process, including testing criteria

Breach of Contract

• Understanding the obligations of both parties is essential in case of a breach as remedies for breach include cover, direct damages, and specific performance

Remedies for Breach of Contract

• Cover: Purchasing substitute goods and recovering damages
• Direct Damages: Recovering the difference in value of goods
• Incidental Damages: Recovering expenses incurred due to breach
• Consequential Damages: Recovering lost profits if the seller knew of specific requirements
• Specific Performance: Seeking court enforcement for unique goods

Bank and Insurance Bonds

• Bonds provide financial resources to cover various risks, including failure to complete work or pay subcontractors

Types of Bonds

• Bid Bond: Guarantees contractor will enter into a contract
• Advance Payment/Performance Bond: Guarantees completion of work
• Payment Bond: Guarantees payment to subcontractors and suppliers
• Retention Bond: Guarantees fulfillment of obligations

Warranties

• Warranties can be expressed or implied, ensuring goods are merchantable and fit for a particular purpose

Implied Warranties

• Merchantability: Goods must be of fair average quality
• Fitness for a Particular Purpose: Seller must know the intended use of goods

Payments

• Payments must be authorized and made according to the terms of the contract
• Various payment terms exist, including open account and consignment

Payment Terms

• Open Account: Goods delivered before payment is required
• Consignment: Seller receives payment only after goods are sold
• Documentary Collection: Goods delivered to a third party until payment is received

Disputes

• Disputes can arise from various issues, and effective resolution mechanisms are crucial
• Common methods include negotiation, mediation, arbitration, and litigation

Contract Closure

• Contract closure ensures a smooth transition and protects both parties' interests
• It involves verifying deliverables, resolving outstanding issues, and documenting completion

Essential Contract Closure Steps

• Verify all products and services delivered as per the agreement
• Ensure all property and information are returned to the owner
• Finalize all financial obligations and settle outstanding payments
• Maintain comprehensive documentation throughout the closure process

Essential Contract Closure Checklist

• Verify all products and services delivered
• Document formal acceptance of deliverables
• Ensure return of all property and equipment
• Address any outstanding obligations
• Confirm final payment has been made
• Collect necessary certifications and warranties
• Communicate warranty provisions to end users
• Follow procedures for maintaining records