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Contractors need to know contract management fundamentals

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by Peter Caulfield last update:Nov 8, 2016

Contract management planning and implementation will be the subject of a three-hour education session by professional development trainer Court Stevens at Buildex Calgary 2016.
Contractors need to know contract management fundamentals

"Contract management planning is not a new business concept," Stevens said. "We've been doing this for hundreds of years under different names.  It sets out a framework for planning all of a project's contractual requirements."

Although contract management planning may sound like nothing more than the formalized application of common business sense, many small- and medium-sized contractors don't always practice it, even though they all need to.

"The more complex a project, and the more serious the consequences of a failure, the greater the need for contract management and planning," said Stevens. "The respective contractual obligations and requirements of project owners and vendors aren't always clearly spelled out, so both parties need to protect themselves."

Contract management covers, in a systematic way, the different stages of buying and selling goods and services that are used on a project: planning and solicitation; pre-award and award; managing and monitoring; post-contract evaluation; and vendor relationship management.

"Most contracts, especially contracts dealing with services like construction, information technology and specialized equipment purchasing have both expected and unexpected issues that come up while they are being carried out," said Stevens.

There are a number of areas where problems for small- and medium-sized contractors can arise.

One of the most common sources is not understanding the difference between tenders and requests for proposals (RFPs) at the solicitation stage, Stevens explains.

"Projects can be delivered following the issuance of a tender, in which the contractor with the lowest qualified price is awarded the project," he said. "Or they can follow RFPs, in which the contractor who has proposed the best solution of which price is only one of several variables, gets the job."

Stevens says vendors and owners need to carefully differentiate between the different solicitation processes.

"Unfortunately, however, we're still living in a world of the-lowest-qualified-price-gets-the-job," he said.

Another source of confusion comes from not understanding the difference between the concept of Contract A and Contract B, which were defined in Canadian law in a 1981 construction dispute. Contract A is the solicitation or bid contract that is established between a buyer and each of the vendors who submit a bid or proposal.

"The procurement document — tender or RFP — is a legal offer from the owner to the vendor," said Stevens. "The bid or proposal the vendor submits signifies his acceptance of the owner's offer."

Contract B, on the other hand, is the actual performance contract.

"Once a buyer has evaluated all of the different vendors' submissions, he accepts one, which leads to a Contract B," he said. "Contract B specifies the actual work the contractor will perform and the buyer's obligations to pay for them."

If, however, a project owner and the winning vendor cannot agree on a final price or on some other conditions of the contract, the Contract A arrangement can be canceled – although there could be costs associated with the cancellation – and the owner can proceed to the second-place vendor. Or he can decide to re-do the solicitation.

Stevens says computers have made contract management planning both easier and more difficult.

"Information technology has vastly changed the process of how we do contract management," he said. "The ability to find instantly a wide range of products, services and vendors has greatly improved how buyers and sellers work together."

At the same time, however, information technology has put more stress on the contract management process.

"People expect instant responses and faster ways to find and implement the best solution to a problem," he said.  "That has led to a multitude of planning documents and templates that need to be filled out online."

Stevens says computer-based templates are, unfortunately, not what they used to be.

"They've gone from providing planners with valuable project management checklists that facilitated group thought, to just filling in the blanks without giving your answers much thought, because none is asked for," Stevens said. "Templates need to be adjustable. Construction practices change often, and contract templates need to change with them."

The session T03 – Contract Management Planning and Implementation takes place Nov. 10 at Buildex Calgary.

last update:Nov 8, 2016

One comment

  • # 1

    ARUN

    This generally includes oversight of the contract management process, as well as development of specific standards for bidding and submission, contract negotiations, drafting contracts and document management.
    Contractual agreements, a vital and often overlooked corner of operations, can provide management with the business intelligence to help reduce risks, uncover waste, and improve performance. Contract management is an integral component of the firm’s strategy and business operations. A lack of control around the contractual relationships creates risks.
    here's i found related to contract management check out below link:-
    [[ https://goo.gl/0dKNxS ]]

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