Contract Management

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Overview

Engineering, Procurement and Construction (EPC) contracts are lump sum price contracts in which the contractor undertakes to complete defined scope of work and demonstrate performance of the project within agreed time schedule. In such contracts, the contractor takes-over the risks related to cost, technology and time schedule. Consequently, the purchaser cannot exercise control on execution strategy adopted by the contractor. As opposed to EPC contract, Engineering, Procurement, and Construction management (EPCm) contracts, contractor is responsible for providing services in accordance with contract and ensure completion of the project within the agreed time schedule. In EPCmcontracts, the purchaser takes-over most of the risks. Due to differing obligations of EPC and EPCm contracts, both the parties must adopt execution strategy consistent with the assigned risks.

Contract Review

After award of contract, the Client should nominate a contract administrator who is responsible to highlight important contract provisions which if overlooked during execution may put the Client in adverse situation. Some of the important clauses which will get highlighted are authorities’ approvals and consents, consequences for delay, extension of time, variations, differing site conditions and, remedy for defects during execution. Such review will caution the project teams of the time within which each party is required to notify the other of any impediment which may cause disruption to contract execution.

Variation

Business Processes are one of the most important factor for sustainability. This approach closely resembles other Total Quality Management or Continual Improvement process methodologies utilizing Industry Best Practices and is supported, through technology.

Review existing work processes
Perform Gap Analysis
Identify Waste Processes
Provide cost effective solutions
Identify, implement & customize IT driven tools
Prepare structured business work processes
Prepare operating manuals to allow knowledge transfer

Invoicing

Most contracts provide for payment to the contractor on a fixed time cycle. The payment may be associated with milestone completion or for the progress achieved during the period. Therefore, invoice must be supported by documentary evidence of the progress claimed in the invoice. Most EPC/EPCm contracts are based on fixed price concept. However, in some cases a contract may permit adjustment to compensation based on escalation formula and exchange rate variation for which a separate invoice should be preferred. Contract may specify restrictions on the total amount which can be drawn by the contractor based on a draw-down schedule (S-curve) agreed with financing institution.

Contract Administration

Contract administration is a process which ensures that the contract is executed consistent with the specification. Contract administration techniques, when employed from the beginning, enable contractual relationships to be developed in a controlled environment and leads to a systematic project close out preventing litigation. The contract administrator is responsible for all correspondence on contractual issues, variation to the contract, identification of commercial changes which otherwise may be variation, resolution of any dispute which may arise and coordination with legal team. All these functions are discharged under the control of the Project team.