TOPIC 5 CONTRACT MANAGEMENT

TOPIC 5

CONTRACT MANAGEMENT

Types of contracts

Contract   pricing    methods:

Design and development of contracts usually set the stage for either the success or failure of the commercial relations between the client and the contractor. A wide selection of contract pricing methods is necessary to provide the flexibility needed for effective management projects and contracts.

 

The contract pricing method selected helps in determining:

  • The degree and timing of the cost responsibility assumed by the contractor
  • The amount of profit or fee available to the contractor
  • The motivational implications of the free portion of the pricing method

 

Most contractors are very risk averse in the sense that they may not be willing to accept large money amounts of uncertainty unless they are able to transfer this risk to the clients in the form of higher prices.

The project and contract managers have a range of contract pricing methods designed to meet the needs of a particular project or contract. There are a number of contract pricing methods depending on the costs involved, lead time involved, simplicity

Or complexity of the project, risk level associated with the project, pricing policies practiced by the parties to the contract, urgency at which the project is required, track records of the parties contracting together. Etc. these include;

 

A] Firm fixed price contract

This is an agreement to pay a specified price after the contract has been competently performed and accepted by the client.

Since there is no adjustment in contract price after the work is completed and actual costs are known in advance, the risk to the contractor tends to be high making most contractors reluctant to accept it.

It should be noted that a firm fixed price contract may not always stay fixed. A contractor who is losing money may request and get some relief if any of the following apply;

  • The client in one way or another has contributed to the loss but this must be justified by the contractor
  • The client badly needs works and other contractors in the market are not willing to undertake the same at the established costs
  • The contractor has multiple unique works and time is too short to do anything but to get the works at the increased costs from the initial costs
  • The client’s staff do not employ sound project and contract management practices

 

ADVANTAGES:

  • Client is not affected by market price variations and therefore does not bear additional costs unless otherwise
  • Client can plan the finances accurately as no changes in the cost are expected unless otherwise
  • Client has easy time of managing the contract due to limited responsibilities
  • Client stands higher chances of making bigger savings
  • Chances of conflicts arising are very minimal

 

DISADVANTAGES

  • Client will not attract the best contractors in the market
  • Quality may be compromised in the name of reducing losses following price changes in the market
  • May lead to poor commercial relations between the contracting parties incase of sharp price changes in the market
  • Client may earn a bad image in the market for not having fair contact terms and conditions

B]   Cost plus award fee method

In this method, the contract costs are only estimated with the client taking a commitment to cover all the contractor’s cost including profits. This method of pricing may only be appropriate to the client when it is impossible to use any other pricing methods.

 

ADVANTAGES

  • Client will attract the best contractors in the market
  • Better quality as contractor has free hand to spend
  • Better client- contractor relations as there is fair sharing of benefits
  • Clients earn good reputation in the market

 

DISADVANTAGES

  • Client is overburdened with managing the contract to ensure true contract costs
  • Possible disagreement over payments as there is no clear cut a way of measuring and justifying the contract costs
  • Difficulty in budgeting for the contract costs since accurate figures cannot be projected in advance
  • Difficulty in planning for future requirements due to lack of realistic cost data
  • May result into staff complacency giving the contractor a leeway to charge more than actual
  • Difficulty in setting performance measurement since standards cannot be reliable developed
  • Client may be tied-up to specific contractors hence compromising competitiveness

 

C]    Fixed price with economic price adjustment method

This method is particularly used to recognize economic contingencies such as unstable market and economic conditions which would prevent the establishment of a firm fixed price contract. without a larger contingency for possible cost increases or decreases for the purpose of protecting client against future market price changes

When setting indexes for price adjustments clauses in this method, the following rules must be followed:

  • Collect information on market economic forces from reliable sources only
  • Avoid broad indexes and use the lowest level classification for each contract activity
  • Develop a weighted index for each contract activity
  • Select market economic index by type and location
  • Define energy taken by type and location
  • Analyze the past history of each proposed index versus the actual price change of the contract activity in question

d]   Fixed price  redetermination method

In this method, contracts provide for a firm fixed price only for initial contract period with a redetermination either upward or downward at a stated time during contract performance or after contract completion.

It is usually applied in those circumstances calling for changes at earlier stages when fair and reasonable prices cannot be established and the amount involved is so small and performance period so short that use of any other contract pricing method would be impractical

E]   Cost sharing:

In some situations, the client and contractor may agree on what they can consider to be a fair basis to share the cost almost pro- rata for the purpose of sharing the benefits and losses fairly.

F]    Time and materials pricing method:

Where the actual contract cannot be predetermined in advance, the contracting parties may agree on a fixed rate per cost hour that includes overhead and profits, with materials supplied at cost.

 

 

Issues in contract management

 MANAGING   CONTRACTUAL    RISKS:

In order to ensure competent performance of the contract, the client must make sure that specifications are as much clear and accurate as possible, select the most competent contractor in the market, pay the contract promptly, hatch good working relations, motivate the contractor, include punitive clauses in the contract document and interface with the contractor regularly and consistently. Incase of any defects or incompetent contract performance, the injured party or plaintiff has contractual rights to be compensated for the damages suffered. The form of compensation for damages applied shall depend on magnitude of the financial injury suffered and contract terms and conditions under liability clause. However, the plaintiff shall be strictly required at law to provide proof to justify for compensation that:

  • Plaintiff was owed duty of care by defendant.
  • There was breach of contract.
  • Plaintiff actually suffered a loss.
  • There was nothing the plaintiff could do to prevent the loss or damage.

 

Any contract incompetently performed shall automatically nullify works certification. The parties to the contract therefore shall be squarely and solely held liable for any breach of contract. Where defects have been suspected, diagnosed and qualified, the following options are available:

  • The contractor to rework out such defects at own cost if defects in question are within tolerance
  • Client to suspend and contract out rightly and terminate any further payments if magnitude is beyond tolerance
  • Contractor to demolish the entire works so far performed defectively and start afresh at own cost
  • Client to reduce the equivalent price if defect is minimal but contractor must consent to this
  • Client to sue the contractor for damages or specific performance as the case may be

 

SOURCES OF CONFLICTS.

All stages or phases of a project appear to be typified by conflicts. Most conflicts mainly center on such matters as:

  • Decisions on schedules among different functional specialists.
  • Decisions on priorities among different functional specialists.
  • Misinterpretation of project deliverables among different stakeholders.
  • Disagreement on administrative procedures between client and contractor.
  • Having different goals and expectations among different stakeholders.
  • Uncertainty about who has the authority to make binding decisions.
  • Interpersonal conflicts between people who were parties-at-interest in the project due to conflicts of interest.

 

Methods of conflict resolution.

Commonly there are five major methods used in resolving conflicts namely:

  • Withdrawing, where the conflicting parties find it better to refrain than to retreat from the conflicting issues. Such parties believe that silence is golden and resort to seeing no evil, hearing no evil and speaking no evil.
  • Smoothing, by playing down the differences and emphasizing common interest. Issues that might cause divisions or hurt feelings are not discussed.
  • Compromising, by splitting the difference, negotiating non-agreeing issues and searching for an immediate position. Such parties believe that better a half loaf than none at all. In this method no one loses but no one wins.
  • Forcing, where the parties become antagonists, competitors and non-collaborators. At the end of it all, one party wins while the other loses. Fived and rigid positions and polarization are taken thus creating a victor and a vanquished.
  • Confrontational or problem solving, where there is open exchange of information about the cause conflict or problem with each seeing it and party working through of differences to reach a common solution so that both parties win.

Confrontational or problem solving conflict or dispute resolution method is characterized with features including but not limited to:

  • The parties in conflicts or dispute have vested interest in the outcome.
  • The parties in conflicts or dispute believe that they have the potential to resolve the conflict or dispute and to achieve better solution through collaboration.
  • There is a recognition that the conflict or dispute or problem is mainly in the relationship between the individuals and not in each person separately.
  • The goal is to resolve the conflict or dispute or problem but not to accommodate different points of view.
  • The parties involved are problem-minded instead of solution-minded and parties jointly search out the issues that separate them. Through joint effort, the problems that demand solutions are identified and later solved.
  • There is a realization that both aspects of a controversy have potential strengths and potential weaknesses. Rarely is one position completely right and the other completely wrong.
  • There is an effort to understand the conflict or dispute or problem from the other party’s point of view. Full acceptance of the other is essential.
  • The importance of looking at the conflict objectively rather than a personalized sort of way is recognized.
  • An examination of one’s own attitudes is needed before interpersonal contact on less effective basis has a chance to occur.
  • An understanding of the less effective methods of conflict resolution.
  • One needs to present face-saving situations. Allow parties to give so that a change in one’s viewpoint does not suggest weakness or capitulation.
  • There ie need to minimize effects of status differences, defensiveness and other barriers which prevent parties from working together effectively.
  • Parties must always be aware of the limitations of arguing or presenting evidence in favour of own position while downgrading the opponent’s position.

 

Dispute  resolution involving third parties.

When the parties to a contract happen to have disputes that they cannot resolve themselves, they may involve third party specialists by using dispute resolution methods such as:

 

Of all the above dispute resolution methods involving third parties, arbitration has proved to be the most effective and efficient.

  1. Arbitration

It is a method of settling disputes out of the courts.

Arbitration may arise by inserting arbitration clause in the contract where the lords in the house of the lords deem it befitting to refer a dispute to an arbitrator and by regulation by state where it is mandatory for certain disputes to be settled through arbitration e.g. marine insurance cases

Legally, arbitration verdicts cannot be reviewed under the act except under the following circumstances:

  1. If it is an appeal on the question of law and both parties must agree on this
  2. When it is necessary for the arbitrator to give his reasons in greater details. Leave for this must be obtained from the court of law
  3. If it is necessary and reasonable to determine a preliminary point of law. All parties to agree or leave of the court to be obtained

ADVANTAGES

  • Formal and straight forward. Private hence no publicity.
  • Quicker hence no time wasting.
  • Easier revision of works certificate.
  • Flexible as there no court restrictions or rigidities.
  • Greater specialist knowledge. Cheaper i.e. no legal representation, simple procedures, reduced arbitration fee.
  • Freedom of choice of the arbitrator. However, courts may determine arbitrator where there is deadlock.
  • Reduced misunderstandings as it is regulated by statute.
  • Better commercial relations between the parties as there is no winner or loser in arbitration.
  • Freedom of choice of venue

 

DISADVANTAGES

  • Some arbitrators are not skilled enough.
  • No formal rules resulting in unpredictable decisions.
  • Parties may end up in court incase of deadlock.
  • Appeal is only possible on point of law and not point of fact.
  • Arbitrator has less powers and authority compared to the courts.
  • Arbitrators only concentrate in urban areas giving rural areas raw deal.

 

Qualities of a good arbitrator:

  • Must possess expertise skills in his area of specialization.
  • Must be impartial i.e. patient and  tolerant.
  •  Must be independent in decision making.
  •  Must be honest and ethical.
  • Must be very current in his area of specialization. Must change reasonable rates.

 

2.Litigation

Where arbitration fails to resolve a commercial dispute, the parties can resort to the courts of law.

Parties only resort to litigation as the last alternative. This method has proved very unpopular in settling commercial disputes for the following reasons :

  • It is very expensive i.e. court fee, lawyer’s fee, witnesses expenses etc it takes longer before decisions are made leading to delays.
  •  No secrecy as cases are heard in the public.
  •  May result to poor client- contractor relationship as one emerges a winner while the other the looser.
  • Parties have no freedom of who should preside over their disputes. Parties have no freedom of choice of venue.
  • Very inflexible and rigid due to strict court restrictions and rigidity

ADVANTAGES

  • Law courts are handled with highly skilled learned friends.
  •  Petitions against any unsatisfactory verdicts are possible so long as there are adequate and sufficient grounds.
  • Law courts have supreme powers and more authority than the arbitrators.
  • Law courts offering litigation services are spread all over the country.
  • Law courts have formal rules for easier prediction of verdicts.
  • Law courts have supreme powers as verdicts made by them are more respected compared to methods of dispute resolution.

3.Adjudication is the legal process by which an arbiter or judge reviews evidence and argumentation, including legal reasoning set forth by opposing parties or litigants to come to a decision which determines rights and obligations between the parties involved.

  1. Mediation: Definition: Mediation is a voluntary process in which an impartial person (the mediator) helps with communication and promotes reconciliation between the parties which will allow them to reach a mutually acceptable agreement. Mediation often is the next step if negotiation proves unsuccessful.

The Process: The mediator manages the process and helps facilitate negotiation between the parties. A mediator does not make a decision nor force an agreement. The parties directly participate and are responsible for negotiating their own settlement or agreement.

At the beginning of the mediation session, the mediator will describe the process and the ground rules. The parties or their attorneys have an opportunity to explain their view of the dispute. Mediation helps each side better understand the other’s point of view. Sometimes the mediator will meet separately with each side. Separate “caucusing” can help address emotional and factual issues as well as allow time for receiving legal advice from your attorney. Mediations are generally held in the office of the mediator or other agreed location.

Agreements can be creative. You could reach a solution that might not be available from a court of law. For example, if you owe someone money but don’t have the cash, rather than be sued and get a judgment against you, settlement options could include trading something you have for something the other wants. If an agreement is reached, it will generally be reduced to writing. Most people uphold a mediated agreement because they were a part of making it. It can become a contract and be enforceable. If there is no agreement, you have not lost any of your rights and you can pursue other options such as arbitration or going to trial.

When and How Mediation Is Used: When you and the other person are unable to negotiate a resolution to your dispute by yourselves, you may seek the assistance of a mediator who will help you and the other party explore ways of resolving your differences. You may choose to go to mediation with or without a lawyer depending upon the type of problem you have. You may always consult with an attorney prior to finalizing an agreement to be sure that you have made fully informed decisions and that all your rights are protected. Sometimes mediators will suggest that you do this. Mediation can also be used at any stage of the conflict such as facilitating settlements of a pending lawsuit.

Characteristics of Mediation:

  • Promotes communication and cooperation
  • Provides a basis for you to resolve disputes on your own
  • Voluntary, informal and flexible
  • Private and confidential, avoiding public disclosure of personal or business problems
  • Can reduce hostility and preserve ongoing relationships
  • Allows you to avoid the uncertainty, time, cost and stress of going to trial
  • Allows you to make mutually acceptable agreements tailored to meet your needs
  • Can result in a win-win solution

5.Negotiation {parties themselves try to solve the problem}

  • Negotiation is by far the most common form of dispute resolution. The objective of sensible dispute management should be to negotiate a settlement as soon as possible. Negotiation can be, and usually is, the most efficient form of dispute resolution in terms of management time, costs and preservation of relationships. It should be seen as the preferred route in most disputes.
  • Its advantages are:

Speed/ cost saving/confidentiality/preservation of relationships/range of possible solutions/control of process and outcome

If you are unable to achieve a settlement through negotiation, you will need to consider what other method or methods of dispute resolution would be suitable.

NB; it will still be possible or may be necessary to continue negotiating as part of or alongside other forms of dispute resolution.

6.Conciliation – as per mediation, but a conciliator can propose a solution.

 

MAIN  CONTRACT   CLAUSES

Clauses in a contract document are inserted to safeguard against generous payments or safeguard against cost structure. They ensure that a party to the contract does not suffer a financial loss.

Clauses in a contract may be expressed or implied. The commonest clauses inserted in a contract document may include:

  1. Force majeure clause:

The clause safeguards parties to the contract against liabilities caused by vents beyond help and control. The clause states that no payment shall be effected if any event beyond help and control of ether party or both parties takes place. No party to the contract shall victimize the other in liability should such an event arise.

Major risks covered under this clause may include:

  • Lightning
  • Bad weather effects
  • Acts of God e.g. earthquake, tsunami, floods
  • Death of principal party to the contract
  • Instabilities e.g. wars, rebellions, uprisings
  • Legal effects g. court orders, new legal restrictions
  • Enemies to the contract e.g. strikes by staff
  • Destruction of contract matter

 

Further take note that “force  majeure” shall not apply in events where there is an alternative of performing the contract despite harsh prevailing events

 

  2      Retention fee clause

This clause entitles the contractee {client} to hold certain percentage of contractor’s payment for a specified period after contract performance to take care of any thereafter liabilities. Retention fee clause therefore performs the following purposes:

  • Ensuring quality contract performance.
  • Taking care of post contract liabilities.
  • Compelling contractor to cost the contract accurately and honestly.
  • Motivating contractor to strictly honor up contract terms and conditions.
  • Giving client ample time to qualify contract performance before final clearance.

 

  • Dispute resolution or arbitration clause:

This clause helps to identify in advance the method of resolving contract disputes should they arise in future. The arbitrator to preside over the disputes may be nominated in advance or named on the floor. It helps to speed up disputes hence saving time and improving client- contractor relationship

  • Payment schedule  clause:

This clause specifies modalities of client paying the contractor. The client to effect payments in accordance with schedules provided by the contractor subject to strict adherence to contract progress

  • As per  clause:

The client to pay if contract is performed as per the statement of works or specification agreed upon in the contract document otherwise client to be compensated

  • Price variation{escalator} clause:

The clause requires parties to the contract to agree in advance on the circumstances that may justify future price changes and modalities of addressing same

  • Liability clause:

The clause requires the payment to be effected subject to clearance of liability considerations. Modalities applied in compensating the injured party by the party breaching the contract are clearly spelt out under this clause to avoid disagreements in future incase of contract breach

  • Time essence clause:

The clause requires the contractor to complete contract performance within the agreed upon lead time. Violation against this clause shall render the contractor liable in damages including profits lost by client if any

  • Title{ramalpa} clause:

The clause states that the client shall only be entitled to property or works ownership upon paying certain amounts of money to the contractor as per the contract documents otherwise property rights shall not pass

  • Exclusion/limitations clause:

This clause specifies responsibility limits of each party in the contract. However, at law no party to the contract shall exclude or limit its compensatory responsibilities unless such exclusions or limitations are reasonable at law and in public interest

  • Pay when paid  clause:

This clause commonly to contracts involving third parties or sub-contractors. This clause empowers the main contractor to pay his subcontractors only when he {main contractor} has been paid by the client. However, the main contractor shall be under legal pressure  to pay his sub-contractors{creditors} even without receiving payments from client if:

  • Nonpayment by client is caused by contractor’s own defaults
  • Nonpayment by client is caused by forces beyond help and control of client
  • Nonpayment is subject to legal considerations
  • Nonpayment is through agreement between main contractor and client
  • Without commitment  clause:

This clause clears one party from the responsibility of paying another if the party to pay another did not commit itself to do so in the contract. This clause is usually used in correspondence such as “revocable letters of credit” letters of comfort etc. under this clause, there is no guarantee of payment leaving the party expecting such payment to perform the contract at own risk

  • Subject to contract clause:

This clause cautions that there is no contract until the details of the contract are settled, approved and exchanged. Any party incurring any expenses while this clause is still alive shall not be entitled to any compensation payment unless if the contract was sourced through tender, auction and letter of intent.

 

CAUSES OF PRICE VARIATIONS DURING THE COURSE OF CONTRACTS:

  • When there is no suitable rate on price in the contract.
  • When original cost lacks breakdown on specific deliverables such as labour, materials, overheads etc.
  • Increase in work often causes disruption forcing for variations.
  • Using wrong information while negotiating the cost.
  • Using poorly skilled staff.
  • Devaluation of the currency.
  • Unstable market supply.
  • Lack of adequate research.
  • Sabotage by staff who may have poor relations with employer.
  • Abrupt change in legal system affecting contracts.

                      

SAFEGUARDS OF PRICE  VARIATIONS;

  • Contractor must breakdown his cost into labor, materials and overheads.
  • Contractor to provide detailed build- up of price for variation.
  • Only reputable contractors to be engaged.
  • Price to be settled before variation to be executed.
  • Variation clause to be included in the contract with its contingencies well defined.
  • All non- core works to be avoided.
  • Thorough market scanning to ensure market price stability.
  • Employment of competent staff.
  • Motivating the staff.
  • Minimize contract specifications adjustments

PROCEDURE FOR PRICE ADJUSTMENTS:

  • Adjustments should be strictly authorized by a senior responsible officer.
  • Adjustments should be notified to all the interested parties before any action is taken.
  • Adjustments should be confirmed in writing.
  • A standard approach approved by top management should be followed in making adjustments.
  • The base date of both original contract and circumstances giving rise to an adjustment should be clearly identified.
  • Contractors should justify price increases.
  • Adjustments should be considered only if there is a clause in the contract providing so

 

Alternatives to price adjustments

Where request for price adjustment fails, the following strategies may offer solutions:

  • Look for alternative contractors.
  • Look for alternative materials.
  • Considering undertaking in- house.
  • Value analyzing i.e. researching for better practices.
  • Where the contractor is a monopolist, take the matter to the Restrictive Practices Court

 

ANALYSING  PROJECT RISKS;

Before an option to undertake a project or contract is settled for, the client must analyze the risks involved in advance using any of the following techniques:

  1. Financial ration  projections:

Key financial ratios which give measures of the future risks are thoroughly analyzed e.g. effect of the contract expenditure on the capital structure of the organization. Important to analyze further are the long term loans effects on the financial position of the organization, organization’s business volumes and consistency, debtor’s credibility etc.

The resultant risks level will be compared and contrasted to guide in decision making

 

 

  1.  Sensitivity analysis:

Computer spreadsheet packages are used for incorporating the risk assessment. Each assumption underlying a particular option is critically analyzed to give a projected picture in terms of output. E.g. profits, market demand, better labor relations etc. this analysis helps to develop a clearer picture of the risks of choosing a particular option and its corresponding degree of confidence and reliability. Sensitivity analysis is therefore a useful technique for assessing the extent to which the success of a preferred option is dependent on the key assumptions which underline that particular option.

  1.  Decision  matrices

Many possible options are proposed and after thorough analysis reduced to fewer and most profitable ones. Total costs and expected profitable gains are analyzed for each option and weighted against each other. This will help in ranking options from the best to the poorest. There are usually four rules applied namely:

  • Optimistic decision rule- best of the best outcomes for each option is determined i.e. options with the lowest possible cost
  • Pessimistic decision rule- worst of the worst outcomes for each option is determined i.e. options with highest possible costs
  • Regret decision rule- options which would minimize the lost opportunity by choosing a particular proposal are determined
  • Expected value decision rule- profitability level for demand is determined. This helps to weight the outcomes for each option with comparison and contrast analyzed. The option with lowest weighted average cost is settled for.

4       Simulation modeling:

Factors considered by financial projections, sensitivity analysis and decision matrices as techniques of assessing business risks are encompassed into one quantitative simulation model of the organization and its environment to assess the best strategic options

Simulation modeling as a technique of analyzing risks has its own shortcoming namely:

  • Danger of failing to encompass the most important uncertainties and risks due to gross over implication of reality
  • It is highly complicated as it requires a very large number of variables
  • Difficulty in assessing key data e.g. competitor reactions leading to poor decision making.

5        Heuristic   models

These models help in identifying solutions in a systematic manner. They apply most and best in complex situations where there are many proposed qualified options. All the decision criteria are listed. A computer is used to search the various options until one that satisfies the criteria is found. By so searching the best of option is settled for.

 

PROJECT TERMINATION.

As it is to all contractual relationships, termination comes to every project. A project is usually conceived, born, lives and dies when time matures.

The termination of a contract does not necessarily mean failure or success and there may be positive as well as negative outcomes on the part of either or both of the parties in the contract.

At times, project death may be quick and clean but more often it is a long process and there are times when it is practically impossible to establish when that death occurs.

At the time of death of a project, the joy of discovery is past. Problems may have been solved, bypassed, lived with and ignored.

The client may be delighted, angry or reasonably satisfied. The termination process may be easy or complicated depending on the circumstances that have led to the termination.

 

There are several ways of terminating or closing out a project namely:

  1. Termination by extinction. Project extinction occurs when the project activity suddenly stops although there is still property, equipment materials and personnel to disburse. The project may have been terminated because it was successfully completed or because the expectation of its failure was beyond reasonable doubts. When a decision is made to terminate a project by extinction, the most noticeable event is that all activities on the substance of the project cease to exist.
  2. Termination by addition. This occurs when a project is merged together with another one making the new project quite different from the original one.
  3. Termination by starvation. This occurs when it is impolitic to terminate a project but its budget can be squeezed. It normally applies to unsuccessful projects. The project may have been suggested by a special client or senior executive and terminating it out rightly would be an embarrassing acknowledgement of managerial failure. Usually a few project team members may be retained for the sake of pleasing the authority and nobody may be allowed by the top management to inquire about the progress of such a project.
  4. Termination by integration. This is where the output of the project becomes a standard part of the operating system of the clients or sponsoring firms. It is mainly applied to successful projects.

 

 

When to terminate a project.

The decision to terminate a project pre-maturely by whatever method is very difficult to make but all the same decisions must be made however radical they might be.

Projects tend to develop a life of their own, a life seemingly independent of whether or not the project is successful. In view of the foregoing, a project may be terminated under one or more of the circumstances hereunder:

  • The project becomes inconsistent with organizational goals.
  • The project becomes impractical or non-value adding.
  • The management becomes insufficiently enthusiastic about the project and stops supporting its implementation.
  • The project scope becomes inconsistent with the parent organization’s financial strength.
  • The project becomes inconsistent with the notion of a balanced programme in some or all areas of the parent organization’s technical interests and cost.
  • The project takes longer than reasonable time to get practically completed.
  • The project deliverables are excessively overtaken by technological advancements.
  • The project becomes substantially unprofitable.
  • Some unavoidable events occur that make the implementation of the project practically impossible or radically different from the original concept.

 

Primary duties of the termination manager.

Special Termination Managers are often used for closing out projects. The task of terminating a project is another project altogether in itself. The core duties of a Termination Manager include but not restricted to:

 

  • Ensure completion of the project, including tasks performed by subcontractors.
  • Notify the client of project completion and ensure that delivery is accomplished in compliance of the expectations of the client.
  • Ensure that project documentation is complete, including a termination evaluation of the project deliverables and preparation of the project’s final report.
  • Redistribute personnel, materials, and any other resources to the appropriate places.
  • Clear for final billings and oversee preparation of the final invoices or certificates sent to the client.
  • Clear the project with legal counsel. File for patents, if appropriate. Record and archive all nondisclosure documents.
  • Determine what records including manuals, reports, general paperwork to keep. Ensure that such documents are stored safely and securely for ease of future reference. The responsibility for document retention should be turned to the parent organization’s archive.
  • Ascertain any product support requirements, decide how such support will be delivered and assign responsibility.
  • Oversee the closing of the project’s books.

 

THE  USE OF ICT  SYSTEMS IN PROJECT AND  CONTRACT  MANAGEMENT.

Ever service industry has IT system that fits best according to its needs. IT systems help in enhancing effective and timely communication which is a driving vehicle behind efficient and contract management

They offer services such as:

  • Designing specifications
  • Filling approved contractor records
  • Filling contractors performance evaluation data
  • Preparation of contracting tender invitations
  • Automatic monitoring of contract progress
  • Preparation of numerous operating reports for management of the contract
  • Auditing of invoices and preparation of cheques for payment
  • Electronic data interchange communication
  • Filing list of approved or pre- qualified sub-contractors
  • Filing data on approved budgets
  • Updating expenditure against each project or contact undertaking

 

FACTORS FAVORING USE OF ICT SYSTEMS IN PROJECT CONTRACTING:

  • Both employer [buyer] and contractor must be ICT compliant.
  • Both should be integrated technologically.
  • Both must be competent in data accumulation.
  • Both must have almost all their activities computerized.
  • Availability of funds to buy, install and maintain the system.
  • Availability of skilled staff to manage the system.
  • Both must have larger volumes of activities.

 

 

 

BENEFITS OF ICT SYSTEMS:

  • Accurate information.
  • Increased product quality.
  • Ability to use a sophisticated technology.
  • Ability to do what couldn’t be done before more responsive to the market.
  • Provides inspiration to the visiting customers.
  • Gives an organization a positive image or good reputation in the market.
  • Provides firm ground for entry into new ventures.
  • Saves time i.e. information.
  • Reduced total product cost.
  • Ensures effective communication.
  • Quicker responses.
  • Less fatigue i.e. not tiresome.
  • Increased information confidentiality.
  • Occupies less space.

 

DISADVANTAGES

  • Very costly to buy and install and maintain
  • Possible disruptions due to breakdown, power blackouts etc
  • Requires highly skilled staff
  • May end up being obsolete as some contracts especially in construction industry are only for a specified period of time
  • May lead to job lay off
  • May face some resistance from workers
  • May reduce physical contact among stakeholders hence poor relationship
  • Any slight error may cause a big problem
  • Some of the products designed may end up being impossible to roll out
  • Only applicable in areas serviced by power

 

COSTS ASSOCIATED WITH  ICT SYSTEMS IN  PROJECTS  AND CONTRACTS.

An organizing that installs ICT system in managing project and contract activities stands to incur the costs below:

  • Cost of identifying data sources
  • Cost of collecting data from sources
  • Cost of purchasing, installing and maintaining IT system
  • Cost of checking and qualifying the data
  • Cost of transmitting data to destinations
  • Cost of aggregating and batching data
  • Cost of storing data safety and securely
  • Cost of paying electricity used in running IT facilities
  • Labor cost in terms of salaries, wages, allowances and other fringe benefits to the staff.

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Contractual relationship

Techniques of monitoring, evaluating and controlling of contract

Processing payments for contracts

 

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TOPIC 6 EMERGING ISSUES IN PROJECT AND CONTRACT MANAGEMENT

Challenges posed by emerging issues and trends in P  C& M

Ways of coping with the challenges in P C & M

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