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Essentials of project management for consulting engineers

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Presentation to the Cheltenham City Club on the 27th April 2011

Presentation to the Cheltenham City Club on the 27th April 2011

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  • A contract is an agreement between two or more people that is legally binding. It can be verbal or written. IntroductionA contract is an agreement between two or more people that is legally binding. A contract can be verbal or written.Essential ingredientsOfferThere must be an offer made, that is a proposal to enter into a contract.AcceptanceThe offer must be accepted and must always be communicated to the person who has made the offer.ConsiderationConsideration must have been given, for example there must be a price paid, or promise made in return or something else that proves that both parties give some value to each other. Gifts are not legally enforceable, since the recipient of a gift gives nothing in return.Legal relationshipThe parties must have intended to create a legal relationship.Offer and acceptanceThe offer must be in reasonable detailAn offer to buy a work will not be valid if no price is stated. If you accept an offer that is not valid, it will not be legally binding.An offer is not the same as an invitation to you to make offersWhen a client invites a consultant to tender they are not making an offer, but inviting the consultant to make an offer. If an offer is made by a consultant in the tender, the offer can still be accepted or rejected.An offer can always be withdrawn by the party who made it before it is accepted, but not afterwards.If a consultant offers to do a study and the client does not respond within a reasonable period (normaly quoted in the offer) , the consultant can always withdraw the offer.An offer is automatically cancelled by a counter-offerIf a client offers an consultant £25k to do a design study and the consultant asked for £30k, the original offer of £25k is automatically revoked. If the consultant later decides to take the lower price of £25k the client is entitled to say no as the earlier offer was automatically cancelled by the counter-offer.The battle of the formsThis happened when there is not clear acceptance of the offer occurs and the customer send purchase order with different terms and conditions to the original offer. Some believe that the last shot wins but in fact may be no contract at all the last shot may be on delivery. In practice the only safe recourse is to agree a signed contract before starting work.An acceptance of an offer must be clearly communicated to the person making the offerImplied termsSome contract terms are implied by statute usually where Parliament has intervened to protect the consumer. They are 'implied' into every contract unless otherwise agreed and can apply to consultancy workRight to sellThe seller must have the right to sell the article (IPR) being sold and it must not be owned by someone else.Conformity with descriptionThe goods must correspond to the description given by the seller.Reasonable careWhere a consultant is providing services, there is also an implied term that the services will be performed with 'reasonable care and skill'.Other implied termsWhere it is clear that both parties intended to enter into a contract but some important term was not discussed, a court can decide that an implied term of contract arises. The court will try to make commercial sense of the arrangements made by the parties.For example, a consultant is telephoned by a client to review a design. The consultant acted on this, wrote a report and sent it to the client, but no fee was ever discussed.Although technically a court could say that because there was no 'consideration' there was no contract, in practice the court would try to make commercial sense of the arrangements made by the parties by deciding the fee for them (or imply it into the contract), either on a 'quantum meruit‘ (as much as he has deserved) basis, based on what was reasonable in the circumstances, or else based on the consultant standard fee for a commission of this kind.
  • What types of risks will I have to manage?Customer Risk:You will need an assessment of the credit worthiness of your customer. This should include checking the following:the identity of your customer. Do they exist as a legally established business in the country of import? Are you dealing with someone who has the authority to bind your customer; the usual period of credit offered in your customer's country; the credit limit you are prepared to offer your customer; the trading history of your customer. Are they a prompt payer? Have there been any changes to their normal payment patterns? are your exports compatible with your customer's normal business profile? can your customer pay the bill? insolvency. Remember that a customer's insolvency can involve you in a pre credit risk, where losses can occur if your customer becomes insolvent during the manufacturing process or at any time before or after the despatch of the export consignment. You can obtain the information needed to carry out these checks either yourself or through a reputable credit agency or credit insurer.Country Risk:As well as your customer, their country can pose separate risks that you will need to manage. Country risks traditionally fall into five areas:Sovereign: The willingness or ability of the government to pay its debts. This is affected by the political climate within the country (the legislature, judiciary and government institutions); internal and external threats to the country; international trading performance including balance of payments record; the level of national debt and the amount of foreign exchange reserves. Other political decisions can also frustrate your export sales; these include the imposition of embargoes, tariff or other quotas, and import or export restrictions. Private: The ability of the private sector to pay for its imports. This situation is affected by the state of the domestic economy, the commercial institutions in the country, and the competence of banking and financial services sector.Natural: Some regions of the world suffer from regular climactic catastrophes (for example annual flooding, drought, earthquakes and other disasters). When these occur they can severely disrupt the operations of both the business sector and the government.Fashion and Finance: International trading patterns often create a fashionable region or country as an export market. In these circumstances trade finance is often readily available, allowing you to offer good credit terms to your export customers. However, fashions change and countries can quickly go out of favour for both exports and trade finance.Other: These include transfer risks such as the inconvertibility of the local currency; transaction risks such as late or non-payment, and transition risks for emerging markets where the threats are the effectiveness of the liberalisation programme, failure to complete economic structural reforms and any possible destabilising influences.Credit Risk:Perhaps the first question you should ask is 'Can I afford to give my customers credit?' To decide how much credit you are prepared to advance you must consider :the amount of credit outstanding in your trading accounts, both overseas and domestic; what do you know about your customer and what is the maximum amount of credit you should NOT exceed; can you carry any financial shortfall? What will be the impact on your business if your customer delays payment or does not pay at all? how will you finance the credit period you offer? This means do you have sufficient money to allow you to offer credit terms in export sales contracts as part of your business cycle. Foreign Exchange Risk:When you trade internationally you will most likely be dealing in more than one currency. This means you are exposed to fluctuations in the foreign exchange market. You can learn how to manage this risk by referring SITPRO's guide on The Foreign Exchange Market.Corruption Perception Index (Transparency International) has been measured since 1995, based on a wide range of measures. Some critisisum of the measure because by it’s nature corruption is hidden. Nevertheless it gives us and indication of how careful we need to be.
  • Transcript

    • 1. Essentials of Project Management for Engineers
      How to deliver customer satisfaction and make a profit
      www.ParallelProjectTraining.com
      Copyright © All rights reserved.
    • 2. Clearly describe the importance of project managers’ role to the profitability and satisfaction of client needs
      Explain why and how to manage consulting project throughout the life cycle. Selling, Starting, Delivering and Closing. Specifically this will include effective implementation of the following project control processes
      Scope management and planning.
      Project management planning and scheduling.
      Risk management.
      Cost management including planning and forecasting using earned value.
      Control of changes.
      Issue management and communications.
      Manage a contract
      Demonstrate strategies for managing the client relationship and expectations within the constraints of a contract.
      Objectives
    • 3. A Project Management Framework
    • 4. Sell the Work

      Customer Needs
      Review T&C
      Liabilities Risk and Scope
      Profit



    • 5. 5
      Capture all the costs
    • 6. What is a Contract?
      In law, a contract is a binding legal agreement that is enforceable in a court of law
      A contract can be verbal or written.
      Essential elements
      Offer
      Acceptance
      Consideration
      Must have intention to create a legal relationship
      Offer must be reasonable and legal
      An offer can be withdrawn before accepted but not after.
      An offer is automatically cancelled by a counter-offer
      An acceptance of an offer must be clearly communicated to the person making the offer
      Implied Terms as common in this type of trade
      Rights to sell
      Conformity with description
      Reasonable care
      Other implied terms
      Best way of ensuring compliance is a fully signed agreement
      6
    • 7. Overseas Working
      Benefits
      Less saturated market
      Wider range of opportunities
      Supports growth
      Buffers local economic factors
      Develops new skills and capabilities it’s global market
      Risks
      Customer Risk
      Credit worthiness
      Payment terms
      Trading history
      Country Risk
      Sovereign
      Private
      Natural
      Fashion and Finance
      Foreign Exchange Risk
      H&S
      Corruption Perception Index
      (Transparency International)
      7
    • 8. Plan the Work

      Don’t start without contract cover
      Define the scope (deliverables)
      Agree the timeline
      Agree and manage the risk



    • 9. Don’t start without contract cover!
    • 10. Review the objectives post contract
    • 11. Agree a Plan of Work
      Scope
      Planning
      Project
      Plan
      Activity Sequencing
      Activity
      Definition
      ScheduleDevelopment
      Risk Analysis
      Duration Estimating
      Work Breakdown Structure
      ResourcePlanning
      CostBudgeting
      £ + £ + £ = ££
      Cost Estimating
    • 12. 12
      Risk Assessment: P- I Grid
      Set thresholds
      VHI
      HIGH
      RISK
      HI
      urgent
      attention
      PROBABILITY
      MED
      MEDIUM
      RISK
      LO
      regular
      review
      VLO
      Low
      Risk
      VLO
      LO
      MED
      HI
      VHI
      monitor
      IMPACT
    • 13. Do the Work

      Follow the plan
      Highlight change from the outset
      Control Quality and Acceptance
      Watch the Cash



    • 14. Control the Project
    • 15. Control Changes from the Start
    • 16. Capture acceptance criteria early
      Check quality of products against criteria
      Ensure client reviews are addressed
      Limit the number of client reviews in scope
      Control Quality and Rework
    • 17. Control Cash
      17
    • 18. Learn for the Future

      • Capture the “true” cost
      • 19. Close out the contract
      • 20. Get a client reference
      • 21. Look out for future opportunities



    • 22. Parallel Project Training
      on-line APM
      e-learning
      Public & in-house
      training
      Slides at
      http://blog.parallelprojecttraining.com/