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Contract Management Smile and make eye contact

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Presentation on theme: "Contract Management Smile and make eye contact"— Presentation transcript:

1 Contract Management Smile and make eye contact
Thank IMS AWWA for the opportunity Contract Management

2 What is a Contract? Agreement between two parties (both sides think they will benefit) Legally enforceable Start w/ basics Define contract 1st rule GET IT IN WRITING otherwise agreement becomes argument

3 Contract defines important parameters of the agreement
Scope of what is being exchanged Schedule Price Risk sharing Scope often includes a detailed task list or work breakdown structure Schedule may include progress or milestone dates Risk often comes from unknown conditions or circumstances 2nd rule THINK "WHAT IF" planning ahead saves alot of "management" work

4 Why enter into a contract?
To use the resources or expertise of others To complete a project or achieve a result To acquire rights or property Since we have defined what a contract is let's cover more basics by asking why we make contracts Deviate a little from the technical into the philosophical Next we will use an example

5 Pipeline Owner Contractor Owner Idea Many offers to implement the idea
Owner makes an agreement with a contractor Contract is a link between owner and contractor So with the contract established lets look at the results

6 Owner is probably thinking
Owner is probably thinking ... I didn't mean a leaky pipeline running above ground Contractor may be thinking... Why are you saying you won't pay went I built a pipeline like you asked It looks like we need to expand the 1st rule GET IT IN WRITING to include get the details in writing It is likely in this case the 2nd rule THINK WHAT IF was not followed This hypothetical example shows a few problems so lets discuss what other major errors can happen and how to avoid them

7 Contract Blunders Selecting the wrong contract partner
Not defining contract parameters (or not matching them to the situation) Unenforceable provisions (illegal, unreasonable or erroneous) Not following the contract Problem such as using a contract designed for a supplier to a situation where the "product" is an engineering study. Next lets replay our contract scenario with a few changes

8 Pipeline Engineer Owner Contractor Sub-Consultant Owner Idea Expert
Sub for soils or corrosion Drawings to define the details of the project Agreement now includes project specifics Lets look as the result Sub-Consultant

9 This time the owner might be thinking
This time the owner might be thinking... This is a great project that will meet my needs The contractor might be thinking... This is a great project. How can I make even more money doing this? I say that somewhat jokingly but in some cases owners and engineers need to do a better job of bringing attention to the value of what they are doing. This brings up more recommendations on contract management

10 Contract management recommendations
Quality based selection Appropriate risk sharing Partnering agreements Standard contract documents Why use QBS could be a seperate presentation so I won't get into the specifics on that topic other than to bring up the 3rd rule of contract management THINK WIN-WIN I credit Steven Covey for the buzzword but it applies to contract management In contract both sides are looking for value low price focus can miss long term value this is also true for project risks -- unbalanced risk in a contract may lead to default Partnering is one way to establish a win-win relationship Lets look at standard contract forms in more detail

11 Standard Contract Forms
AGC AIA EJCDC Agency standard form Consultants standard form associated general contractors american institute of architects engineers joint contract documents committee These groups all develop standard contract documents for good reason... next slide

12 Template/Standard Is familiar to parties involved Has legal precedent
Uses established terminology Lowers risk and costs Good reasons Don't reinvent the wheel Lower risk does not try to place all risk on one party Because they have been field tested standard contract documents are typically balanced (they meet the 3rd rule criteria THINK Win - Win for successful contracts) How do they meet the 2nd rule (THINK WHAT IF)

13 Modifying the Contract
Adapt to project needs (supplemental or special conditions) Deal with the unexpected Mutual agreement In order to manage a contract successfully we need to plan for change Next Contract document structure can also help manage the contract

14 Construction Contract Documents
Bidding documents Agreement Standard conditions Supplemental conditions Technical specifications Addenda Change orders As a contract gets more detailed it is useful to break it up into sections that have specific functions Now that we have learned 3 rules for making contracts, some problems that can occur and some specifics regarding contract documents lets look at some of the other management tools we have

15 Management Tools Progress meetings Progress reports
Payment applications Progress incentives / delay damages Retain a construction manager If things get really complicated it is likely a good value to bring in expert help to manage a contract Summary Contract Management is all about keeping agreements from turning into arguments and making them legally enforceable. Hopefully this brief overview highlighted a few tools that are helpful in contract managment Next Here is my contact information Are there any questions?

16 Bowen Collins and Associates
Jared Oldroyd, P.E. Bowen Collins and Associates UtCivilEng (twitter)

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