Module 11 Session 11.2 Visual 1 Module 11 Executing and Controlling the Work Session 11. 2: Managing Contracts

Module 11 Session 11.2 Visual 2 Phases of the project life cycle Implementation is just one phase ConceptionDevelopmentApprovalImplementationTermination PlanningProcurementExecution Subphases of Implementation Phase Project approved Plan approved Contract signed Construction finished = Accomplishments or milestones

Module 11 Session 11.2 Visual 3 Keeping on course A key project management task External influence Reset course Actual travel Position surveyed Start of journey Destination Course set initially (Plan)

Module 11 Session 11.2 Visual 4 Actors Principal Actors The client Works contractor(s) Consultants Suppliers of goods and equipment Others directly impacted Other Actors Hidden actors: Bidders & proposers not successful in obtaining work under the project Future bids may be affected by the perceptions of hidden actors

Module 11 Session 11.2 Visual 5 Cash flow may affect schedule $ Time Accumulated Expenditure Curve represents expected profile of contractor’s Expenditure This area represents contractor’s financing gap during the contract Steps represent contractor’s expected payments under contract Failure to make payments in accordance with the contract may cause financial problems for the contractor that may affect the progress of the contract.

Module 11 Session 11.2 Visual 6 Client’s reputation for fairness: Influence on future bids Level of bid Level of perceived risk Level of Risk High Low Level of Bid Medium High Low Medium The worse the reputation of the client, the higher the risk for the contractor The higher the perceived risk, the higher the bids, and vice versa

Module 11 Session 11.2 Visual 7 Review the assumptions made at earlier stages of project life cycle  Construction cost  Construction period  Key analyses  Economic  Financial  Social  Environment Changes in assumptions may affect the forecast Economic Rate of Return (the Benefits to the economy)

Module 11 Session 11.2 Visual 8 Review the assumptions made at earlier stages of project life cycle  Project risks  Risk reduction proposals  Milestones

Module 11 Session 11.2 Visual 9 Review the assumptions made at earlier stages of project life cycle If Hierarchy of Objectives approach was used during analysis and design, the critical assumptions will be listed in the matrix!  Complementary actions  What’s to be done?  By whom?  When?  Potential “winners” and “losers”

Module 11 Session 11.2 Visual 10 Managing works contracts  Contractor selected and prepared  Contract in place  All parties “satisfied” with terms and conditions  Performance security in place  Work plan approved  Contract documentation in place  Specific  Unambiguous  Complete

Module 11 Session 11.2 Visual 11 Managing works contracts At the outset  Give order to commence work  Make site(s) available  Obtain performance security  Assure adequate insurance is in place  Establish day-to-day procedures and reporting  Communicate consultant’s role, responsibility and powers to all involved  Authorize mobilization payment

Module 11 Session 11.2 Visual 12 Managing works contracts Keeping on track during execution  Make timely payments  Follow specified change procedures & document changes  Monitor progress using network analysis  Handle claims and complaints promptly  Hand over completed work for operation and maintenance

Module 11 Session 11.2 Visual 13 Managing works contracts Getting back on course during execution  Be alert for signs of trouble  Schedule slip  Major claims and disputes with no resolution  Complementary actions required  Other entities not carrying through with obligations  Act quickly to identify and address problems  Make continuous use of network analysis

Module 11 Session 11.2 Visual 14 Managing services contracts (consultants)  Confirm contracts (terms and conditions)  Objective of services clear and unambiguous  Support obligations defined  Payment terms  Reporting relationships  Expected output

Module 11 Session 11.2 Visual 15 Managing services contracts At Startup  Consider consultant requests to replace key personnel only in the most serious of circumstances  Ensure staff aware of why consultants are being employed

Module 11 Session 11.2 Visual 16 Managing service contracts During implementation  Manage consultants primarily through periodic reports  Pay particular attention to the inception report  Transmit essential information in reports  Proactively identify and solve problems  Consider in good faith consultant’s suggestions to modify the terms of reference  Make payments on schedule  Final report should have NO surprises

Module 11 Session 11.2 Visual 17 Managing goods contracts The contract process Production by supplier Transport from supplier site to client site Client site Client arranges for inspection prior to shipment from supplier site (if in contract) Arrangements for freight and insurance Reception facilities Commissioning Inspection Training

Module 11 Session 11.2 Visual 18 Managing goods contracts At the outset  Payment schedule  Delivery schedule  Reception facilities  Staff (to operate)

Module 11 Session 11.2 Visual 19 Managing goods contracts Responsibilities  Contractor responsibilities:  Deliver the goods/equipment  When, where, how specified in contract  Replace non-conforming  Hand over documentation  Transfer title  Client responsibilities:  Inspect within reasonable time  Take delivery if meet requirements  Pay promptly and resolve claims and disputes

Module 11 Session 11.2 Visual 20 Summary Managing contracts during implementation means  keeping the contracts on track as planned  taking actions to bring implementation back on track in terms of: – cost, – budget, and – scope (performance & quality) so that the project may begin the operations phase, and yield its expected benefits to the economy.