Contract Management and Administration for Contract and Project Management Professionals
Introduction
Why this Book - My purpose in writing this Book is to present my definition of the Contracting Process which provides an orderly method of organizing the planning, preparing, performing, managing, and administering Contracts, their related Documents, and the Contracting Process. My goal was to develop an expandable and adaptable Contracting Process Template to provide a structured process Contract and Project Managers can follow as they plan a project; plan and develop RFP and contract documents; evaluate bidders ’proposals, and award contracts; and proceed to monitor and manage the contractor’s work and administer the contract.
As a Contract Manager and Project Manager for over fifty years and a contracts attorney for over twenty-five years, I have had a great deal of experience preparing RFP and contract documents, evaluating proposals and contractors, and monitoring, managing, and evaluating contracted work. I have had my share of successful and not so successful contracts. I developed this Book to be a practical and useful Text and Reference Book. It provides discussions of contracting law and theory, noton a purely legal basis, but on a practical level which will allow Contract Managers and Administrators and Project Managers to be able to apply the theory and practical experience as they plan, develop, and manage contracts and the Contracting Process. I also wanted to share some best practices, formats, forms, and examples of useful contract terms. This Book not only provides information, it provides guidance on the practical application of contract theory in planning, developing, managing, and administering contracts and managing contractors. I have also described some successful and not so successful contracts and projects and Change Order and Claims situations to provide learning experiences to the reader. As a Contracts Management Professional, you will never know all you need to know or what you will need to know. It is up to you to keep learning and continually aspire to maintain and increase your knowledge and experiences.
Smart people learn from their mistakes, A genius learns from the mistakes of others. (Albert Einstein)
I have provided some highlights from some of the topics covered in the Book. There is a Table of Contents for your review on this website. Some limited preview of the Book is available on the Amazon Books website.
Contracts as a Complete Process – The Ten Stages of the Contracting Process
One of the most important items introduced, described, and discussed in this Book is the author’s unique and breakthrough concept of The Ten Stages of the Contracting Process which is a practical breakdown of the Contracting Process into Ten Interdependent Stages from planning and structuring the Contract and Request for Proposal (RFP) to Contract Close Out. The Contracting Process also includes Post Contract Close Out Requirements such as Operational and Contractual Requirements which remain after Close Out, the Warranty Period, Evaluating the Contract, and Evaluating the Performance of Each Party.
The Ten Stages of the Contracting Process provides a path through the Contracting Process from the beginning of planning for the contract requirements and scope of work incorporated into the contract (including preparing the RFP and evaluating bidder proposals) to performing, completing, and accepting the work performed under the contract and closing out the completed contract. Each of the Ten Stages is selected because the Stage represents significant and distinct activities within the Contracting Process and there are distinct legal, technical, and administrative principles which apply to each Stage’s activities. The Book contains seven chapters of comprehensive discussions of the activities and interrelationships of each of the Ten Stages.
The Ten Stages of the Contracting Process provides Contract and Project Management personnel a system to more efficiently and effectively plan, prepare, negotiate, manage, and evaluate RFP’s and Contracts and manage and administer contracts and manage contractors resulting in well-prepared and well-managed RFPs, Contracts, and Contractors resulting in an Increased Number of Successful Contracts and Projects.
The benefit of defining the Contracting Process and each Stage allows a Contracts or Project Manager to understand how to incrementally plan and define the contract and RFP and to cover and coordinate the needed requirements of each Stage.
The Ten Stages of the Contracting Process provides a path through the Contracting Process from the beginning of planning for the contract requirements and scope of work incorporated into the contract (including preparing the RFP and evaluating bidder proposals) to performing, completing, and accepting the work performed under the contract and closing out the completed contract. Each of the Ten Stages is selected because the Stage represents significant and distinct activities within the Contracting Process and there are distinct legal, technical, and administrative principles which apply to each Stage’s activities. The Book contains seven chapters of comprehensive discussions of the activities and interrelationships of each of the Ten Stages.
The Ten Stages of the Contracting Process provides Contract and Project Management personnel a system to more efficiently and effectively plan, prepare, negotiate, manage, and evaluate RFP’s and Contracts and manage and administer contracts and manage contractors resulting in well-prepared and well-managed RFPs, Contracts, and Contractors resulting in an Increased Number of Successful Contracts and Projects.
The benefit of defining the Contracting Process and each Stage allows a Contracts or Project Manager to understand how to incrementally plan and define the contract and RFP and to cover and coordinate the needed requirements of each Stage.
Planning for Contracts
Contract Planning is vital to the success of a contract and its related Project. The planning and preparation for a large, complex contract is a project in itself which the Contract Manager must carefully manage. This Book has a complete chapter devoted to planning the contract, developing the contract Scope of Work, and preparing the Request for Proposal (RFP).
The Contract and Project Managers must coordinate the project and contract requirements and identify and evaluate contract and project risks; critical factors; available qualified contractors; available qualified personnel; current and future market and economic conditions; and scarce, limited, critical, long-lead-time; and limited availability required materials, components, and equipment.
The Book contains comprehensive tables and lists of information on scope development requirements, project and contract risks, RFP planning and requirements, types of contracts, project delivery systems, and when specific types of contracts and delivery systems would be applicable to a specific project based on project engineering completed and other project parameters.
Contract Management v. Contract Administration
Although many people view Contract Management and Contract Administration as synonymous and interchangeable terms, they are not. Contract Administration is one of the functions of Contract Management.
Contract Management encompasses all of the functions related to Contracting and Contracts including planning, drafting, evaluating, awarding, implementing, and managing and dealing with all circumstances and problems related to Contracts, Contracting, and the Contractor. Contract Administration is focused on the “technical and art” aspects of effectively managing Contract Implementation from Contract Award to Contract Close Out, and any Post Contract Close Out Activities and Warranty Issues. The Contract Administrator is focused on Implementing both the Contract and Project. The Contract Documents give the Contract Administrator the authority to oversee, monitor, surveil, inspect, and audit contractor activities as the contractor and its subcontractors and suppliers plan and implement their work. The Contract Administrator must understand the Contract, the Contracting Process, Project Management, and the Project.
The Contract Administrator has daily and periodic requirements including recording daily and other relevant events and transactions, recordkeeping, document storage, coordinating with key project and contractor personnel, monitoring the project schedule, monitoring and evaluating contractor’s work, monitoring contractor productivity and personnel strength, reviewing contractor invoices and payments and payment cycle, reviewing contractor correspondence, preparing or reviewing correspondence to the contractor, reviewing contractor claims, preparing changes documents to the contract, and ensuring both the owner and contractor properly fulfill their contractual obligations in a timely and reasonable manner. Other Contract Administration requirements include monitoring and auditing contractor’s programs required by the Contract such as Quality Control and Assurance, Security, and Environmental Management. The Contract Administrator must look ahead at contractual obligations, the project schedule, monitor delivery of critical components, materials, and equipment, and be alert to potential problems and take or recommend actions to avoid, resolve, or mitigate the problems. Effective Contract Administration Programs increase productivity and value to the owner and contractor.
Types of Contracts or Contract Forms/Formats
There are four basic types or forms for contracts. They are named by how payments will be made to the contractor. The four forms are 1) Fixed Price; 2) Cost Reimbursable; 3) Unit Cost; and 4)Time and Material. The forms can be used by themselves or may be combined in a contract depending on the Scope of Work and scope and state of the engineering. Knowing when to use a particular format or combination of formats is critical to the success of the Contract and Project. The Book has in depth discussions on each of the contract forms and some of their variances such as the Target Cost Contract. The Book provides detailed examples charts, tables, and lists about when they should be used and how the contract should be structured. Utilizing the wrong contract format is a significant factor for potential contract problems and failure.
Project Success and Contract Management
A project does not have to stop during construction or implementation and be cancelled to be classified as a Failed Project. Many Failed Projects are completed and become operational. There are differing parameters which determine if a project is successful. Three of the main parameters used to classify a Failed Project include 1) the total cost to complete the project is substantially greater than the established cost or budget, 2) substantial schedule delays in completing the project (which will also contribute to the cost overrun), and 3) facility or system does not operate as designed, i.e., capacity, output, productivity, and increased cost to operate the facility or system. In most cases, the overall reason for a Contract or Project Failure is the Scope of Work is not completely and specifically defined. It is up to the Contract Manager to work with project management and engineering teams to ensure the Scope of Work and all Specifications and other requirements applicable to the work are complete. If the Scope of Work is not complete or cannot be completed, the contract must address how work will proceed on an incremental basis. Knowing the project Scope and Risk Parameters and proper planning are essential to drafting a successful Contract and completing a successful Project.
Another reason for Project Failure is owners and contractors make critical decisions based on inaccurate cost and schedule estimates. The accuracy of cost and schedule estimates is directly related to the amount of Detailed Design Engineering completed and utilized in preparing the estimates. The degree of inaccuracy greatly increases when only a small amount of engineering is complete, especially for a large project with a project scope containing high-risk parameters. Estimates based on only Conceptual or Front-End Design Engineering are extremely inaccurate and cannot be relied on when making long-term decisions especially for large, complex, long-term projects. As the Detailed Design Engineering is completed, original designs will change and the amounts of originally estimated materials and labor will come into focus and most likely increase. The increased material and labor quantities will substantially increase the project cost and completion date. The size of scopes between small (> $1 million) and large (<$10 million) projects relate to more inaccuracies for larger projects. Therefore, the average failure rate for large projects (38%) is greater than the failure rate for smaller projects (18%).
Claims and Claims Management
A Claim is a notice from the contractor stating it believes it has discovered or incurred a condition not covered under the scope or terms and conditions of the contract or has encountered a condition which interferes with, impedes, or inhibits its work processes and flow.
Claims Management is a widely misinterpreted and misunderstood function of Contract Management and Administration. Most Project and Contracts Managers share the popular misconception Claims Management is the process of dealing with a contractor claim upon its receipt from the contractor. Project and Contract Managers who have planned, developed, and are managing contracts and projects under this misconception have already lost their ability to successfully prevent, control, and evaluate most claims and are managing a potential troubled or failed contract and project. To successfully Manage Claims, the Claims Management Process must begin with project planning and the initial planning of each contract to support the project. Claims Management begins with the contract having a complete and detailed scope of work and the Project and Contract Manager’s understanding of the project scope and engineering, much the same as understanding Contracting Strategy and Contract Format Selection. When a Contract Manager develops the terms and conditions for a contract, he/she must ensure the contract contains terms and conditions which provides specific requirements for the form, substance, and process for preparing and submitting Change Requests and Claims Notices from the contractor to the owner. The Book contains comprehensive discussions of Changes and Claims Management to include methods for Claims Avoidance and Mitigation.
The Book contains specific contract terms and conditions for contractor’s requests for Change Requests and Claims Notices to the owner, a list and discussion of potential claims conditions, and specific contract terms for Dispute Resolution should the owner and contractor not be able to mutually agree on a course of action. The discussion of Claims also includes a special Flow Chart Diagram of the Claims Analysis Process developed by the author as well as tables and lists for information and formats and analyses of Change Requests and Claims.
Definition of a Best Practice
A Best Practice is a technique which improves a process or detects and avoids problems in performing a process such as the management and administration of contracts. In most cases, Best Practices are practical techniques learned through experience and documented and evaluated through a well-organized, effective Lessons Learned or other Organization Improvement Program. If after review and evaluation the Lesson Learned or Improvement is found to improve a process, it should be incorporated into the process as a Best Practice.
The Difference Between a Best Practice and Lesson Learned
Best Practices and Lessons Learned are both extremely useful results of effective Performance Improvement Programs. The difference between a Best Practice and Lesson Learned is the Scope of its Application. A Lesson Learned can always be documented and applied to improve future performance in the area or scope in which it was discovered. Should a Lesson Learned be found to have a wider application and be applicable to other scopes and processes, the Lesson Learned is designated as a Best Practice and incorporated in the other applicable scopes and processes including department or corporate level process, procedures, and programs.
About the Author - Joseph J. Corey, Jr.
Joe has spent more than fifty years managing projects and contracts in the U.S. Army and the commercial nuclear and fossil power industry. He has managed contracts for the construction of nuclear power plants as well as the construction of complex buildings, facilities, environmental projects, and complex plant upgrades. Joe’s experience includes preparing and managing contracts and projects for the operation, upgrade/uprate, maintenance, and engineering of operational nuclear powerplants and contracts for the design and fabrication of major replacement components and the engineering and construction contracts for replacement of the components. Joe has prepared and managed many contracts for projects in the high nine figure range and a project exceeding a billion dollars. Joe prepared this Book from his extensive experience as a contract and project manager preparing contracts for high-dollar, complex contracts; managing projects, managing and administering contracts, and managing contractors; providing consulting services on contract management, contract administration, contractor management, and claims preparation and claims evaluation; preparing and presenting training classes and related materials; and performing research and preparing publications related to contract and project management.
Joe is a West Point graduate and served as an Officer in the U.S. Army Corps of Engineers for14 years. He served in the U.S., Europe, Vietnam, and Thailand commanding Army Engineer Units where he planned and managed construction projects performed by army engineer units. Joe is a Vietnam veteran. He was an airborne combat engineer company commander with the 101st Airborne Division in Vietnam. He was awarded Bronze Stars for Heroism and Service and the Air Medal.
The Contract and Project Managers must coordinate the project and contract requirements and identify and evaluate contract and project risks; critical factors; available qualified contractors; available qualified personnel; current and future market and economic conditions; and scarce, limited, critical, long-lead-time; and limited availability required materials, components, and equipment.
The Book contains comprehensive tables and lists of information on scope development requirements, project and contract risks, RFP planning and requirements, types of contracts, project delivery systems, and when specific types of contracts and delivery systems would be applicable to a specific project based on project engineering completed and other project parameters.
Contract Management v. Contract Administration
Although many people view Contract Management and Contract Administration as synonymous and interchangeable terms, they are not. Contract Administration is one of the functions of Contract Management.
Contract Management encompasses all of the functions related to Contracting and Contracts including planning, drafting, evaluating, awarding, implementing, and managing and dealing with all circumstances and problems related to Contracts, Contracting, and the Contractor. Contract Administration is focused on the “technical and art” aspects of effectively managing Contract Implementation from Contract Award to Contract Close Out, and any Post Contract Close Out Activities and Warranty Issues. The Contract Administrator is focused on Implementing both the Contract and Project. The Contract Documents give the Contract Administrator the authority to oversee, monitor, surveil, inspect, and audit contractor activities as the contractor and its subcontractors and suppliers plan and implement their work. The Contract Administrator must understand the Contract, the Contracting Process, Project Management, and the Project.
The Contract Administrator has daily and periodic requirements including recording daily and other relevant events and transactions, recordkeeping, document storage, coordinating with key project and contractor personnel, monitoring the project schedule, monitoring and evaluating contractor’s work, monitoring contractor productivity and personnel strength, reviewing contractor invoices and payments and payment cycle, reviewing contractor correspondence, preparing or reviewing correspondence to the contractor, reviewing contractor claims, preparing changes documents to the contract, and ensuring both the owner and contractor properly fulfill their contractual obligations in a timely and reasonable manner. Other Contract Administration requirements include monitoring and auditing contractor’s programs required by the Contract such as Quality Control and Assurance, Security, and Environmental Management. The Contract Administrator must look ahead at contractual obligations, the project schedule, monitor delivery of critical components, materials, and equipment, and be alert to potential problems and take or recommend actions to avoid, resolve, or mitigate the problems. Effective Contract Administration Programs increase productivity and value to the owner and contractor.
Types of Contracts or Contract Forms/Formats
There are four basic types or forms for contracts. They are named by how payments will be made to the contractor. The four forms are 1) Fixed Price; 2) Cost Reimbursable; 3) Unit Cost; and 4)Time and Material. The forms can be used by themselves or may be combined in a contract depending on the Scope of Work and scope and state of the engineering. Knowing when to use a particular format or combination of formats is critical to the success of the Contract and Project. The Book has in depth discussions on each of the contract forms and some of their variances such as the Target Cost Contract. The Book provides detailed examples charts, tables, and lists about when they should be used and how the contract should be structured. Utilizing the wrong contract format is a significant factor for potential contract problems and failure.
Project Success and Contract Management
A project does not have to stop during construction or implementation and be cancelled to be classified as a Failed Project. Many Failed Projects are completed and become operational. There are differing parameters which determine if a project is successful. Three of the main parameters used to classify a Failed Project include 1) the total cost to complete the project is substantially greater than the established cost or budget, 2) substantial schedule delays in completing the project (which will also contribute to the cost overrun), and 3) facility or system does not operate as designed, i.e., capacity, output, productivity, and increased cost to operate the facility or system. In most cases, the overall reason for a Contract or Project Failure is the Scope of Work is not completely and specifically defined. It is up to the Contract Manager to work with project management and engineering teams to ensure the Scope of Work and all Specifications and other requirements applicable to the work are complete. If the Scope of Work is not complete or cannot be completed, the contract must address how work will proceed on an incremental basis. Knowing the project Scope and Risk Parameters and proper planning are essential to drafting a successful Contract and completing a successful Project.
Another reason for Project Failure is owners and contractors make critical decisions based on inaccurate cost and schedule estimates. The accuracy of cost and schedule estimates is directly related to the amount of Detailed Design Engineering completed and utilized in preparing the estimates. The degree of inaccuracy greatly increases when only a small amount of engineering is complete, especially for a large project with a project scope containing high-risk parameters. Estimates based on only Conceptual or Front-End Design Engineering are extremely inaccurate and cannot be relied on when making long-term decisions especially for large, complex, long-term projects. As the Detailed Design Engineering is completed, original designs will change and the amounts of originally estimated materials and labor will come into focus and most likely increase. The increased material and labor quantities will substantially increase the project cost and completion date. The size of scopes between small (> $1 million) and large (<$10 million) projects relate to more inaccuracies for larger projects. Therefore, the average failure rate for large projects (38%) is greater than the failure rate for smaller projects (18%).
Claims and Claims Management
A Claim is a notice from the contractor stating it believes it has discovered or incurred a condition not covered under the scope or terms and conditions of the contract or has encountered a condition which interferes with, impedes, or inhibits its work processes and flow.
Claims Management is a widely misinterpreted and misunderstood function of Contract Management and Administration. Most Project and Contracts Managers share the popular misconception Claims Management is the process of dealing with a contractor claim upon its receipt from the contractor. Project and Contract Managers who have planned, developed, and are managing contracts and projects under this misconception have already lost their ability to successfully prevent, control, and evaluate most claims and are managing a potential troubled or failed contract and project. To successfully Manage Claims, the Claims Management Process must begin with project planning and the initial planning of each contract to support the project. Claims Management begins with the contract having a complete and detailed scope of work and the Project and Contract Manager’s understanding of the project scope and engineering, much the same as understanding Contracting Strategy and Contract Format Selection. When a Contract Manager develops the terms and conditions for a contract, he/she must ensure the contract contains terms and conditions which provides specific requirements for the form, substance, and process for preparing and submitting Change Requests and Claims Notices from the contractor to the owner. The Book contains comprehensive discussions of Changes and Claims Management to include methods for Claims Avoidance and Mitigation.
The Book contains specific contract terms and conditions for contractor’s requests for Change Requests and Claims Notices to the owner, a list and discussion of potential claims conditions, and specific contract terms for Dispute Resolution should the owner and contractor not be able to mutually agree on a course of action. The discussion of Claims also includes a special Flow Chart Diagram of the Claims Analysis Process developed by the author as well as tables and lists for information and formats and analyses of Change Requests and Claims.
Definition of a Best Practice
A Best Practice is a technique which improves a process or detects and avoids problems in performing a process such as the management and administration of contracts. In most cases, Best Practices are practical techniques learned through experience and documented and evaluated through a well-organized, effective Lessons Learned or other Organization Improvement Program. If after review and evaluation the Lesson Learned or Improvement is found to improve a process, it should be incorporated into the process as a Best Practice.
The Difference Between a Best Practice and Lesson Learned
Best Practices and Lessons Learned are both extremely useful results of effective Performance Improvement Programs. The difference between a Best Practice and Lesson Learned is the Scope of its Application. A Lesson Learned can always be documented and applied to improve future performance in the area or scope in which it was discovered. Should a Lesson Learned be found to have a wider application and be applicable to other scopes and processes, the Lesson Learned is designated as a Best Practice and incorporated in the other applicable scopes and processes including department or corporate level process, procedures, and programs.
About the Author - Joseph J. Corey, Jr.
Joe has spent more than fifty years managing projects and contracts in the U.S. Army and the commercial nuclear and fossil power industry. He has managed contracts for the construction of nuclear power plants as well as the construction of complex buildings, facilities, environmental projects, and complex plant upgrades. Joe’s experience includes preparing and managing contracts and projects for the operation, upgrade/uprate, maintenance, and engineering of operational nuclear powerplants and contracts for the design and fabrication of major replacement components and the engineering and construction contracts for replacement of the components. Joe has prepared and managed many contracts for projects in the high nine figure range and a project exceeding a billion dollars. Joe prepared this Book from his extensive experience as a contract and project manager preparing contracts for high-dollar, complex contracts; managing projects, managing and administering contracts, and managing contractors; providing consulting services on contract management, contract administration, contractor management, and claims preparation and claims evaluation; preparing and presenting training classes and related materials; and performing research and preparing publications related to contract and project management.
Joe is a West Point graduate and served as an Officer in the U.S. Army Corps of Engineers for14 years. He served in the U.S., Europe, Vietnam, and Thailand commanding Army Engineer Units where he planned and managed construction projects performed by army engineer units. Joe is a Vietnam veteran. He was an airborne combat engineer company commander with the 101st Airborne Division in Vietnam. He was awarded Bronze Stars for Heroism and Service and the Air Medal.