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12.5 Contract Administration

Introduction

Contract Administration is the process of ensuring that the seller's performance meets contractual requirements. The legal nature of the contractual relationship makes it imperative that the project team are acutely aware of the legal implications of actions taken when administering the contract.

Contract administration includes the application of the appropriate project management processes to the contractual relationship and integration of outputs from these processes into the overall management of the project. The key processes are:

  • Project plan execution - to authorize contractor work at the right time
  • Performance reporting - to monitor contractor, cost, schedule and technical performance
  • Quality control - to inspect and verify the adequacy of the contractor's product.
  • Change control - to ensure that change are properly approved and all those with a need to know are aware of the changes

12.5.1 Inputs

  1. Contract
  2. Work results
  3. Change requests
  4. Seller invoices

12.5.2 Tools & Techniques

  1. Contract change control system
  2. Performance reporting
  3. Payment system

12.5.3 Outputs

  1. Correspondence
  2. Contract changes
  3. Payment requests

 

 

 

 

 


12.5.1 Contract Administration - Inputs

12.5.1.1 Contract

Refer to contract.

 

12.5.1.2 Work results

The seller's work results:

 

12.5.1.3 Change requests

Change requests may include modifications to the terms of the contract or to the description of the product or services to be provided. This includes:

 

12.5.1.4 Seller invoices

The seller must submit invoices from time to time (as defined in the contract) and request payment.

 

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12.5.2 Contract Administration - Tools and techniques

12.5.2.1 Contract change control system

A contract change control system defines the process by which the contract may be modified. It defines the paperwork, tracking systems, dispute resolution procedures, and approval levels necessary for authorizing changes. The contract change control systems should be integrated into the overall change control system.

A change is a modification of the contract done to alter the specifications, delivery time, price, quality or any other provisions of the contract. Except in a sale of goods contract or the "changes" clause in a government contract, there must be mutual agreement to modify a contract and that agreement must be supported by consideration. Modification of a contract is different from:

 

Areas with contractual implications

Monitoring specifications

The SOW is usually based on product specifications and the project manager must be aware of the following propensities of designers when closing the contract:

This area must be closely monitored by the project manager since it is a significant cause of cost growth.

Quality control

Changes should be approved only after their impact on quality is ascertained. Correction of deficiencies should be thorough and timely. There are two types of warranties - implied and express.

Implied warranties are measured by "merchantability" or "fitness for a particular purpose". Express warranty clauses in a contract should be carefully drafted so as not to limit the project manager's options by any other remedy. It may allow the project additional time following acceptance and even payment within which to assert claims.

Subcontract management

Generally it is better to subcontract when:

A subcontract should include a work statement, specifications, changes, quality, payment terms and other clauses. Administering the contract involves:

Waiver

Under the doctrine of waiver it is possible for a party to relinquish rightshe or she otherwise has under the contract. If for example, a selling party tenders incomplete, defective or late performance and the project manager knowingly accepts without objection or does not demand that the defects be remedied, the project manager has waived his or her right to strict performance. The party can still be held for breach of contract (but not material beach).

Bonds

There are two types:

 

12.5.2.2 Performance reporting

Performance reporting provides management with information about how effectively the seller is achieving contractual objectives.

 

12.5.2.3 Payment system

The project may need to develop its own payment system which should include appropriate reviews and approvals by the project management team.

 

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12.5.3 Contract Administration - Outputs

12.5.3.1 Correspondence

Contract terms and conditions often require written documentation of certain aspects of buyer/seller communications, such as warnings of unsatisfactory performance and contract changes or clarifications.

 

12.5.3.2 Contract changes

Changes (approved and unapproved) are fed back through the appropriate project planning and procruement processes, and the project plan or other documentation is updated as appropriate.

 

12.5.3.2 Payment requests

This assumes that the project is using an external payment system. If the project has its own internal system this will be called "payments".

 

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