The Money Files

Project procurement is full of jargon – it can seem like a totally different language at times. Here are 7 contract terms that you should know.

1. Waiver

A waiver is where you voluntarily surrender an option under the contract. It’s a concession. You ‘let the supplier off’ the term because it suits neither of you to carry it out. This could be, for example, in the situation where enforcing a contract clause or requirement would turn out to be prohibitively expensive for both parties, or is no longer needed.

2. Warranty

This is another way of explaining a guarantee. It’s where you need assurance from your supplier that the terms of the contract are going to happen. Warranties tend to be limited by time, so it would be unusual to get one that lasted a lifetime. Just like with your dishwasher at home, your supplier will probably provide a warranty period.

Warranties are contractual – it’s not a best-endeavours guarantee. As a result, if the contract isn’t delivered as you expect you can call on the warranty and get compensation.

Warranties are a good negotiating point for developing the contract. You could work with both parties to get an extended warranty added into the contract if you felt it would be worth it.

3. Claim

A claim is a request for compensation. It has to take place according to the terms of the contract, so your contract should specify how you can make a claim and what sorts of claims are going to be appropriate under this agreement. In other words, it’s a type of dispute that you can resolve through negotiation together.

Claims administration is the process of reviewing and agreeing on claims. You’re discussing whether you (or the supplier) has a valid point. If you do, you’ll use the change control process to potentially amend the contract as necessary to allow the claim to be met.

4. Breach

You might also hear this referred to as a default. When there’s a contract breach it means that a requirement of the contract has not been met.

In severe cases (a material breach), the party who didn’t do the breach can be released from the contract. This often relates to non-payment of fees or if the party can be shown to have broken some kind of significant contractual term. If that applies to you, the other party can walk away. You have no further hold over them and the contract is broken.

Typically this results in some kind of financial compensation and if your business was the one who caused the material breach, the other party could apply for punitive damages or fines. These can cover loss of earnings from the contract or other losses.

5. Performance Bond

Performance bonds are a way to ensure your business doesn’t suffer if your supplier doesn’t do what they promised. These can be appropriate if your project is at significant risks from the vendor failing to deliver.

They work like this: a pot of money is put aside to compensate you in case the vendor fails to achieve the terms of the contract. If they can’t deliver, you get the cash instead.

These can be hard to set up because they are particularly valuable when working with small or volatile organisations which probably don’t have the cash to lock away until the contract is completed.

6. Force Majeure

This is a contract clause you will see all over the place, from your household insurance policy to software contracts.

It simply means that if things happen that are beyond the control of the contracting parties (in particular, the party supplying the services or goods) then they don’t have to compensate you – they can be released from their contractual obligations.

Examples of things that are beyond their reasonable control are extreme weather like floods, wars, terrorist attacks, hijacking and crime.

7. Change Control

OK, you’re probably very familiar with change control systems. They apply to contracts too.

Any changes to the contract need to be managed professionally and with input from both sides. Everything is normally documented within the contract, at least at high level. Sometimes the detailed change process or a change form is included as an appendix or schedule to the main contract.

Pay attention to what contract change terms apply to your contract as they can vary.

Contracts should have a glossary or definition of terms, and that can help you unpick all the unfamiliar language. Always get a lawyer to read over a contract before you sign it and make sure that everyone knows what they are getting into. Contracts support both parties, but only if you agree to terms that work for you both from the beginning!

I’ve been thinking a lot about benefits recently. It was the feature of a week of discussion questions in my Facebook group, and I’m leaning more and more towards benefits being something that the project manager has to get involved with. This idea that we deliver the outputs and then the permanent organisation magics up the benefits is feeling more and more like old style thinking.

So I was delighted to get a copy of Benefits Realization Management: Strategic Value from Portfolios, Programs and Projects, from Carlos Eduardo Martins Serra even though I was a bit daunted by the length of it.

I shouldn’t have worried.

Despite looking pretty boring on the outside (I was holding it with the title obscured and a colleague said he thought it looked like a modern-day book about religion), inside is hugely practical.

Every few pages it feels like there is a table or diagram succinctly explaining a concept. Here's my interpretation of how to close the value gap by using benefits to jump you to where you need to be.

The book starts with the ‘strategic alignment’ angle that is so crucial to project management right now, but quickly moves into a discussion of project success and how value is created in the business. That’s all tied back to benefits.

Part 2 is where you start to get into the author’s model for the management of benefits. The Enterprise Benefits Realisation Management process is explained simply. I liked the fact that there is adequate focus on the people responsible for benefits realisation: for all I said at the beginning about project managers taking a more active role in benefits, I’m aware that we can’t (and shouldn’t) do it all.

Essentially this part is a flexible framework for translating business strategy drivers into benefits and then planning how to get them and making it happen. This is a huge part of project governance – we don’t do projects for fun, we do them to get the benefits!

The book also includes a couple of case studies: a few more might have been nice but to be honest I was reading it more interested in what I could do in my projects rather than much caring about what other people did. Your own context is always more valuable, I think, when the guidance is so clear about how to implement benefits realisation management that I was always thinking about what it meant for me.

The exception to that is the worked example in Appendix C which is a (fake) case study but it takes you through all the relevant templates as they would be completed for that organisation. This is helpful because you can see what is supposed to go into each section and plan what you are going to say for your projects.

Each chapter ends with review questions. I didn’t think these added much. If you are a student and want to check your understanding, great – do them. The answers are at the back so you can check your work. But if you are a professional, reading it because you want to do benefits realisation more effectively in your organisations, then I doubt you’ll spend much more time on these than a cursory glance as you turn the page.

In summary, I enjoyed it more than I expected and I think it will become a desk reference for me on how to manage project benefits. Recommended.

Benefits Realization Management is published by CRC Press.

In this video I look at 3 common reasons for going over budget, and point out some quick things you can do to put them right.

Platform construction at Liverpool Street station completes © Crossrail Ltd.

Infrastructure projects in the UK don’t always get good press, but that is starting to change. Crossrail, in particular, is spoken of in very high terms. At a training event I attended recently, one of the delegates was from the Crossrail team. She spent most of her time in a hardhat and overalls and getting out of the tunnels for the course seemed almost a novelty. The trainer called on her several times to explain to the group the ‘Crossrail way’.

And why not? Crossrail is delivering and making real change in London and going about it with good grace and excellent stakeholder relations from what I can tell.

Crossrail is the UK’s largest project for a generation. It’s a comprehensive programme of tunneling, station construction, railway and infrastructure work that affects 40 sites in London. It’s burning through £140m per month and it’s doing amazing things.

The programme, inspired by the learning legacy work done after the London Olympics, I imagine, has set up a comprehensive lessons learned site with a large section on project management.

The project and programme section covers:

• Project initiation and development
• Delivery and execution strategy
• Handover and transition (I shall definitely be browsing this area)
• Programme controls
• Audit and assurance
• Quality
• Sustainability strategy

So there is a lot covered, across a range of project and programme management disciplines and functional areas.

They are sharing how the work is done in minute detail. For example, you can download the change control and budget management procedure, along with a change control form. Then you can learn from how they have made those documents work for them and you benefit from all that expertise when you put your own together.

There are also documents that outline how Crossrail approached Earned Value and their estimating approaches. In fact, there are documents that cover pretty much everything.

The Documentation

Within the learning legacy document archives you’ll find a number of different file types.

Good practice documents are templates, processes and similar that have been shared for you to use (or modify). Note that they don’t talk about best practice.

There are micro-reports which are website pages (not documents to download although they might link to them) that focus on a short point.

There are case studies which include lessons learned and recommendations for future projects and programmes.

Technical papers take a topic and go in-depth. These are also peer-reviewed so you know you are getting a good quality, accurate document.

Finally, there are research summaries, which are shorter versions of research carried out by academics studying Crossrail – yes, universities are picking over what is happening there as well as practitioners.

The Value

I don’t work in construction, so some of the findings are less useful to me. However, if you do have a construction element to your projects, there is definitely value in finding out how other people ran projects – both the good and the not so good.

If you are preparing a business case or proposal you could also find some value here: many stakeholders and decision makers like statistics, so throwing in some research to show that you have taken on board learnings from other large programmes could well add weight to your arguments. Worth a try, eh?

My Key Takeaways

There is a huge focus on sustainability, and a lot of effort has gone into the legacy element of the project. It’s so important that a development like this is managed holistically over time and with consideration for the environment in all its forms around the build sites. There are documents in the learning legacy archive setting out how that focus has been achieved, which make interesting reading.

Finally, the overarching message of Crossrail is that it is about more than just the project management. If you have the time, browse the section on Talent and Resources as this covers their approach to managing the people side of this huge initiative.

I’m particularly impressed with how they have grown their own skills – knowing that skilled engineering resource is somewhat lacking, and wanting to make a difference to the local community as a legacy from the construction, they have embraced all the different ways to develop talent. From apprenticeship schemes to work with school children promoting STEM as a career choice, to creating an Academy to teach the tunneling and construction skills required, they’ve done a lot to ensure a pipeline of appropriate resources.

Your project might not have the budget (or the duration) to train young people in the skills you will need in 5 years’ time, but there are bound to be some key pointers here that you can take and implement on your own project initiatives.

I put this infographic together for you to highlight the common types of ways that project leaders and project financial analysts can carry out financial appraisals. These are all techniques that you can use in a business case or project proposal. I hope it's helpful!

The content of the image is drawn from Carlos Serra's book, Benefits Realization Management.