Built Environment Contract and Risk Management (Student Handout) PDF

CONSTRUCTION CONTRACT AND RISK MANAGEMENT CONTRACT CONTRACT AND RISK LIFE CYCLE MANAGEMENT Copyright Copyright ©©2024 2024 Project Management Institute, Inc. All r...

CONSTRUCTION CONTRACT AND RISK MANAGEMENT CONTRACT CONTRACT AND RISK LIFE CYCLE MANAGEMENT Copyright Copyright ©©2024 2024 Project Management Institute, Inc. All rights reserved. 1 This material is being provided as part of a PMI course. Obligations Are you, or have you been, party to a contract? Think about why a contract was necessary. What did/does the contract cover? What was/is the impact of breaching that contract? Copyright ©2024 Project Management Institute, Inc. All rights reserved. 2 This material is being provided as part of a PMI course. Objectives 5 4 1 3 2 Introduce the Explore five contract life contract cycles clauses Copyright ©2024 Project Management Institute, Inc. All rights reserved. 3 This material is being provided as part of a PMI course. What Is a Contact? A formal agreement between two or more parties Delivery of an agreed scope of work (SOW) A legally binding document Contains clauses governing management of the project Copyright ©2024 Project Management Institute, Inc. All rights reserved. 4 This material is being provided as part of a PMI course. Contract vs. Project Delivery Life Cycles COMMISSIONING AND START-UP Activities that occur before and Contractdevelopment after contract Life Cycle and signature. Commissioning and Startup Planning, design, and Project Delivery construction Life process Cycle to required execute and complete a project. Copyright ©2024 Project Management Institute, Inc. All rights reserved. 5 This material is being provided as part of a PMI course. Contract Life Cycle THE BASICS Copyright ©2024 Project Management Institute, Inc. All rights reserved. 6 This material is being provided as part of a PMI course. Activity: FRONT-END PLANNING Contract Life Cycle Begins during front-end planning Proposal Process 5 5 Consists of five stages X Contract Close-out 4 4 1 1 Length differs based on the project Discovery delivery method Contract Execution and Management Pre-award 3 23 2 Copyright ©2024 Project Management Institute, Inc. All rights reserved. Next Slide This material is being provided as part of a PMI course. 7  Contract Life Cycle: Discovery Short-Term Business Contract Development Options Discussions Project 6 Analysis 2 3 5 1 4 Walkaway Point Initial Market Business Assessment Case Copyright ©2024 Project Management Institute, Inc. All rights reserved. 8 This material is being provided as part of a PMI course. Discovery: Project Analysis Analyze the initial project idea Project Analysis Assess project feasibility Determine project value 1 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 9 This material is being provided as part of a PMI course. Consider Feasibility Can feasibility studies only occur during the discovery stage of the project? Yes No Incorrect. While most feasibility studies do Correct! New challenges and issues can occur during the project’s early stages, arise at any point during the project’s contract there are often situations where feasibility life cycle and beyond. In our scenario, what studies can happen at any contract stage. would happen during the contract execution stage if the construction site was hit by a major storm? Copyright ©2024 Project Management Institute, Inc. All rights reserved. Next Slide This material is being provided as part of a PMI course. 10 Discovery: Market Assessment Market Assessment Delivery method Scope and time lines 2 Final cost Copyright ©2024 Project Management Institute, Inc. All rights reserved. 11 This material is being provided as part of a PMI course. Discovery: Business Development Discussions Business Development Discussion Builds early alignment Offers project insight 3 Increases collaboration Copyright ©2024 Project Management Institute, Inc. All rights reserved. 12 This material is being provided as part of a PMI course.  Perform Influence Screen Acquiredue contracting industry thediligence project input entities specs for into the Sorting Develop Identify the proposed and note anyclient/coordinator contracting early and high-risk areas project, innovations assess entityincluding about their and Activity: that needrelationship viability project further investigation technologies feasibility for walk design/design &away structure of benefit point Owner-Partner Tasks Owner/Stakeholder Tasks Partner Tasks Click to begin Copyright ©2024 Project Management Institute, Inc. All rights reserved. 13 This material is being provided as part of a PMI course. Discovery: Initial Business Case Determines project feasibility and return on investment (ROI) Provides a project reference point Establishes stakeholder goals 4 Initial Business Case Copyright ©2024 Project Management Institute, Inc. All rights reserved. 14 This material is being provided as part of a PMI course. Consider Business Cases Can the business case for the Avocet Island project only be used as an internal document by the Becklesten Group’s management team to determine whether to move forward with or halt the project? Yes No Sorry, that’s incorrect. The business case Correct! Business case studies can provide documentation is more than just an internal all stakeholders, not just Becklesten Group document for the Becklesten Group executives, a way to consider the costs and executives. What other parties might want benefits of the Avocet Island project. to review and comment on the case study? Copyright ©2024 Project Management Institute, Inc. All rights reserved. 15 This material is being provided as part of a PMI course. Discovery: Walkaway Point Risk Margin 5 Scope Expertise Time scale Walkaway Point Copyright ©2024 Project Management Institute, Inc. All rights reserved. 16 This material is being provided as part of a PMI course. Discovery: Short-Term Contract Options Areas of weakness 6 Risks or omissions Overall constructability Optimal delivery method and contract structure Short-Term Contract Options Copyright ©2024 Project Management Institute, Inc. All rights reserved. 17 This material is being provided as part of a PMI course. Contract Life Cycle: Pre-Award Risk Management Process TENDERING Tendering Evaluation 8 Criteria 9 7 10 Delivery Method and Contract Strategy Copyright ©2024 Project Management Institute, Inc. All rights reserved. 18 This material is being provided as part of a PMI course. Pre-Award: Delivery Method and Contract Strategy 7 Informed by data gathered during the discovery phase Suboptimal choices impact the success of a project Delivery Method and Contract Strategy Copyright ©2024 Project Management Institute, Inc. All rights reserved. 19 This material is being provided as part of a PMI course. Pre-Award: Risk Management Process Risk Management Process Define strategic project risks 8 Develop a risk appetite Develop a risk plan and process Copyright ©2024 Project Management Institute, Inc. All rights reserved. 20 This material is being provided as part of a PMI course. Pre-Award: Tendering Proposal strategy selection Tendering Regulatory requirements may limit 9 strategy selection Copyright ©2024 Project Management Institute, Inc. All rights reserved. 21 This material is being provided as part of a PMI course. Tendering: RFT/ITT vs. RFP Project owner has a specific Request for direction in Tender (RFT) mind Direction supported by detailed Invitation to Tender (ITT) design documentation Project owner requests an entire proposal Request for Has an idea of what they want but Proposal does not have (RFP) detailed design documentation 017 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 22 This material is being provided as part of a PMI course. Pre-Award: Tendering Documentation Mature designs Tendering Project components broken into packages 9 Detail and clarity supports estimate accuracy 017 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 23 This material is being provided as part of a PMI course. Pre-Award: Evaluation Criteria Evaluation Rigorous internal standards Criteria Tailor criteria to each project 10 017 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 24 This material is being provided as part of a PMI course. Discussion: Evaluation Criteria Reflect on the Avocet Island initiative: Which evaluation criteria might be most relevant to the project? 3 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 25 This material is being provided as part of a PMI course. Contract Life Cycle: Proposal Process Project Analysis 11 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 26 This material is being provided as part of a PMI course. Proposal Process: Steps RFTs/ITTs or RFPs are issued Project Analysis Partners review and respond Partners are evaluated and selected 11 Contracts are formalized and signed Copyright ©2024 Project Management Institute, Inc. All rights reserved. 27 This material is being provided as part of a PMI course. Proposal Process: Specific Steps Bid solicitation Bid submission Subcontracting Bid selection Contract formulation 020 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 28 This material is being provided as part of a PMI course. Contract Life Cycle: Contract Execution and Management Contract Plan Management and Governance Performance Management 14 13 12 Contract Review Sessions Copyright ©2024 Project Management Institute, Inc. All rights reserved. 29 This material is being provided as part of a PMI course. Contract Execution and Management: Contract Review Sessions Deliverable scope Quality requirements Interfaces between packages/entities 12 Safety protocols Contract Review Change process Sessions Copyright ©2024 Project Management Institute, Inc. All rights reserved. 30 This material is being provided as part of a PMI course. Contract Execution and Management: Contract Plan Management Contract Plan Management and Governance The frequency of compliance reviews 13 Required attendees Documentation requirements Contract completion and final payment requirements Copyright ©2024 Project Management Institute, Inc. All rights reserved. 31 This material is being provided as part of a PMI course. Consider Contract Governance Should contract governance always incorporate good risk mitigation approaches for all contractors, suppliers, and consultants on the Avocet Island project? Yes No Correct! Risk reduction should be an Unfortunately, that’s incorrect. Without integral goal of any contract governance good contract governance, each contracting process. party may not fully understand, or may possibly shirk their roles and obligations to the other, which could lead to higher costs, increased risks, missed schedules, and possibly a failed project. Copyright ©2024 Project Management Institute, Inc. All rights reserved. 32 This material is being provided as part of a PMI course. Contract Execution and Management: Performance Management Performance Management Cost 14 Schedule Quality Safety Copyright ©2024 Project Management Institute, Inc. All rights reserved. 33 This material is being provided as part of a PMI course. Contract Life Cycle: Contract Closeout Contract Close-out Steps 15 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 34 This material is being provided as part of a PMI course. Contract Closeout: Steps Review contract documentation Contract Closeout Steps Review change orders Validate facility permitting 15 Validate completion of operation and maintenance manuals Review final accounting Copyright ©2024 Project Management Institute, Inc. All rights reserved. 35 This material is being provided as part of a PMI course. Matching Activity: Contract Life Cycle Stages Monitoring and managing the Discovery contracts Contract Execution Final accounting Click to begin Proposal Process Benchmarking Contract Closeout Bid Submission Pre-Award Contract formulations Copyright ©2024 Project Management Institute, Inc. All rights reserved. 36 This material is being provided as part of a PMI course. Key Contract Clauses Copyright ©2024 Project Management Institute, Inc. All rights reserved. 37 This material is being provided as part of a PMI course. Key Contract Clauses INDEMNITY SPIN START & STOP 021 DONE Copyright ©2024 Project Management Institute, Inc. All rights reserved. This material is being provided as part of a PMI course. Change Clause One of the most important provisions in the contract CHANGE A mechanism for managing project changes CLAUSE Can enable project owners to update the project design (via a change order) QUESTION BACK 021 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 39 This material is being provided as part of a PMI course. Dispute Resolution Clause Even well-planned projects with well- written contracts can be susceptible to conflict DISPUTE Project entities should turn to dispute RESOLUTION resolution clauses when issues arise A mechanism to resolve contract-related QUESTION issues faster and cheaper than litigation BACK 021 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 40 This material is being provided as part of a PMI course. Indemnity Clause Transfers risk from one entity to another for INDEMNITY a specific event A mechanism managing potential risk CLAUSE QUESTION BACK 021 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 41 This material is being provided as part of a PMI course. Liquidated Damages Both parties agree to liquidated damages, LIQUIDATED establishing an up-front amount in case of a breach DAMAGES Constitutes an agreed-upon substitute value for actual damages QUESTION BACK 021 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 42 This material is being provided as part of a PMI course. Payment Clause Includes an overview of the payment process adopted by the project PAYMENT Comprises time frames, conditions for payment, documentation requirements, approval process, and final payment QUESTION BACK 021 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 43 This material is being provided as part of a PMI course. Termination Clause Once activated, controls the cancellation of a built environment project TERMINATION Typically includes clause scenarios that warrant cancellation QUESTION BACK 021 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 44 This material is being provided as part of a PMI course. Time-Barred Clause States a deadline that the contractor must TIME- make a claim Includes a time frame BARRED QUESTION BACK 021 Copyright ©2024 Project Management Institute, Inc. All rights reserved. 45 This material is being provided as part of a PMI course. Project Planning Best Practices Copyright ©2024 Project Management Institute, Inc. All rights reserved. 46 This material is being provided as part of a PMI course. Best Practices: Planning and Managing Contracts Creating a good contract takes Make KPIs a central theme Contracts are legally binding. The time and input from many throughout your contract Clear,should language concise, be writtenandin an documentation to ensure Integrated stakeholders. team Therefore, Set contract KPIs the contractor delivers the project’s easilyunambiguous understood fashion, commitment from upper allowing those unfamiliar with the management is key. performance outcomes and help them achieve your business goals. language project to interpret it easily. All contract parties need to Change is inevitable, and the Disputes over the project’s scope identify and assess the risk Identify, assess, Clearly of work defined are one of the most Track and mechanism to dealmanage involved with taking on the project with projectchange changes needs to be and manage common pitfalls scope ofin work the built and understand their risk clearly outlined in the contract. environment industry. apportionment. It is important for those who For most built environment Disputes are common on built Contract drafted and negotiatedisthe contracts, proof of insurance is Resolve environment disputes projects and can contract to explain the key Insurance required coverage for all entities, and the happen at any time. understood contract clauses and and contract outlines all insurance They will efficiently vary but will always coverages required. impact budgets and timelines. followed deliverables to the project managers and other project staff. Copyright ©2024 Project Management Institute, Inc. All rights reserved. This material is being provided as part of a PMI course. Questions Copyright Copyright ©©2024 2024 Project Management Institute, Inc. All rights reserved. 48 This material is being provided as part of a PMI course. Thank You! Copyright Copyright ©©2024 2024 Project Management Institute, Inc. All rights reserved. 49 This material is being provided as part of a PMI course.