Contract Management


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Contract Management

  1. 1. Contract Management Pankaj K Sinha
  2. 2. Why Contract Management ? <ul><li>Ensure Project Delivery as planned </li></ul><ul><li>Manage Scope, Cost and Schedule </li></ul><ul><li>Manage Risks and Opportunities </li></ul><ul><li>Close Contract </li></ul><ul><li>Create Value for all Stakeholders </li></ul>
  3. 3. Contracts in ESSAR <ul><li>Contract (In-house Projects) </li></ul><ul><ul><li>Process License </li></ul></ul><ul><ul><li>Software License </li></ul></ul><ul><ul><li>EPC </li></ul></ul><ul><ul><li>PMC </li></ul></ul><ul><ul><li>Engineering </li></ul></ul><ul><ul><li>Procurement </li></ul></ul><ul><ul><li>Construction </li></ul></ul><ul><ul><li>Transportation </li></ul></ul><ul><li>Contracts (External Projects) </li></ul><ul><ul><li>Strategic Relationship e.g. MOU/Consortium/JV/SPV </li></ul></ul><ul><ul><li>EPC </li></ul></ul><ul><ul><li>EPCI </li></ul></ul><ul><ul><li>BOT </li></ul></ul><ul><ul><li>Process/Software Licences </li></ul></ul><ul><ul><li>Subcontract (Construction, engineering, consultancy) </li></ul></ul><ul><li>Typical Contract Structure </li></ul><ul><li>Contract Agreement </li></ul><ul><li>SCC </li></ul><ul><li>GCC </li></ul><ul><li>Scope </li></ul><ul><li>Cost </li></ul><ul><li>Schedule </li></ul><ul><li>Acceptance Tests </li></ul><ul><li>LD and Liability </li></ul><ul><li>Others </li></ul>
  4. 4. Strategy- Keep It Smart and Simple Formulate Administer (Risk and Mitigation) Execute Formulate Administer
  5. 5. Murphy’s Law <ul><li>Everything that can go wrong will, therefore, plan for it beforehand. </li></ul><ul><li>Contract Administration process helps the Stakeholders through the project life cycle to manage Risks and Opportunities to create Value. </li></ul>
  6. 6. Typical Risks <ul><li>Team Formation </li></ul><ul><li>Communication (Voice and data) </li></ul><ul><li>Synergy of Engineering/Procurement/Construction </li></ul><ul><li>Delivery of Long Lead Items </li></ul><ul><li>LD and Liability </li></ul><ul><li>Subsurface conditions </li></ul><ul><li>Social Factors </li></ul><ul><li>HSE </li></ul><ul><li>Contract Terms and Conditions </li></ul><ul><li>Ineffective Change Management System </li></ul><ul><li>Fund Management </li></ul>
  7. 7. Contract Formulation (In-house Projects) <ul><ul><li>Create Team of Stakeholders Representatives (Owner, Entities from PBG and Functional Specialists) </li></ul></ul><ul><ul><li>Provide copies of Feasibility Study. </li></ul></ul><ul><ul><li>Conduct Risk Workshop for risk identification and equitable risk distribution within Group entities. </li></ul></ul><ul><ul><li>Finalize Execution Strategy for optimum tax structure and to map risk mitigation measures, scope & schedule from Feasibility Study. </li></ul></ul><ul><ul><li>Finalize Terms Sheet for attractive proposal to Financial Institution and optimum contracting structure </li></ul></ul><ul><ul><li>Use industry popular formats with customization e.g. World Bank, FIDIC with stand alone attachments for Scope, payment, schedule , acceptance tests etc. </li></ul></ul><ul><ul><li>Optimize exposure for default provisions and exist routes. </li></ul></ul><ul><ul><li>Continuous dialogue and finalize Contract. </li></ul></ul><ul><ul><li>Execute Contract and distribute scanned copies. </li></ul></ul>Week 1 Week 2 Week 3 Week 4 Week 0 Proposed saving of time- more than 100% without any additional resources Proposed Implementation time- Two weeks
  8. 8. Contract Formulation (External Projects) <ul><ul><li>Create Bidding Team (along with Functional Specialists) </li></ul></ul><ul><ul><li>Review Tender Document/Proposal/ Strategic interests (for JV/Consortium) </li></ul></ul><ul><ul><li>Conduct Risk Workshop, identify risks (Quantitative and qualitative) and mitigation measures to acceptable limits </li></ul></ul><ul><ul><li>Bid/no bid decision and finalize Execution Strategy </li></ul></ul><ul><ul><li>Optimum and equitable Risk distribution within Bidding entity, Client and Subcontractor </li></ul></ul><ul><ul><li>Raise Deviation and resolution with Client/Vendor/Service Provider </li></ul></ul><ul><ul><li>Submit proposal and finalize Contract </li></ul></ul><ul><ul><li>Execute Contract </li></ul></ul><ul><ul><li>File original Contract and distribute scanned copies. </li></ul></ul>Week 0 Week 2 Week 0 As per Client’s requirement Proposed Implementation time- Two weeks.
  9. 9. Contract Administration <ul><ul><li>Charter Team and organize Kick Off Meeting </li></ul></ul><ul><ul><li>Conduct Risk Workshop , develop Risk Register and update monthly. </li></ul></ul><ul><ul><li>Develop Contract Compliance Matrix, Execution Plan and Change Management and Document Control System </li></ul></ul><ul><ul><li>Monitor and mange Contractual deliverables by Stakeholders. </li></ul></ul><ul><ul><li>Ensure compliance and synergy of deliverables by Stakeholders to meet Project objectives </li></ul></ul><ul><ul><li>Manage Subcontracts </li></ul></ul><ul><ul><li>Review and drafting of correspondence. </li></ul></ul><ul><ul><li>Dispute resolution with Subcontractors/Vendors/Client. </li></ul></ul><ul><ul><li>Seek Management endorsements and approvals. </li></ul></ul><ul><ul><li>Close out of Contract. </li></ul></ul>Proposed Implementation time- Two to four weeks No additional resources.
  10. 10. Dispute Resolution Proposed Implementation time without any additional resources Contract Repository- Two to four weeks. <ul><li>Proactive association of Legal for maximum realisation of value: </li></ul><ul><ul><li>Continued involvement of Legal Counsels as continued support to Project Team throughout the life cycle of the Project. </li></ul></ul><ul><ul><li>Contract Repository- Custodian of copies of all Contract documents. </li></ul></ul><ul><ul><li>Proactive support by review of contractual correspondence within demanding project environment. </li></ul></ul><ul><ul><li>Support Contract Administrator for Claim documentation. </li></ul></ul><ul><ul><li>Proactive support for Notices, ADR, Arbitration etc. </li></ul></ul><ul><ul><li>Leading activities for Arbitration, Litigation throughout the Project Lifecycle. </li></ul></ul>
  11. 11. Consider PMBOOK Framework
  12. 12. FIDIC Red Book Provisions <ul><li>General Provisions </li></ul><ul><li>The Employer </li></ul><ul><li>The Engineer </li></ul><ul><li>The Contractor </li></ul><ul><li>Nominated Subcontractors </li></ul><ul><li>Staff and Labour </li></ul><ul><li>Plant, Materials and Workmanship </li></ul><ul><li>Commencement Delays and Suspension </li></ul><ul><li>Tests on Completion </li></ul><ul><li>Employer's Taking Over </li></ul><ul><li>Defects Liability </li></ul><ul><li>Measurement and Evaluation </li></ul><ul><li>Variations and Adjustments </li></ul><ul><li>Contract Price and Payment </li></ul><ul><li>Termination by Employer </li></ul><ul><li>Suspension and Termination by Contractor </li></ul><ul><li>Risk and Responsibility </li></ul><ul><li>Insurance </li></ul><ul><li>Force Majeure </li></ul><ul><li>Claims, Disputes and Arbitration </li></ul>Typical Sequence of Dispute Events Envisaged in Clause 20                                                                          
  13. 13. Typical Contract Management System Primavera & SAP Primavera Expedition SAP SAP, Marian, Expedition, Primavera Icarus Knowledge & Decisions Information IT Infrastructure Servers & Network Data Documents Procurement Contract Management System
  14. 14. Thank You Q & A