Under the BOQ/Item rate contract term "Time is the essence of the Contract "how does the Scope/Quantity variation affect the contractor's performance on a fast track project and what are the remedies available to the Contractor to safeguard his business interest? Please share your experience. Saving Changes...
Sungjoon,I agree with your views !Wish,you should have shared your experience.Thanks anyways !
The contract management by the contract experts should be inclusive in the project management as soon as the contract documents have been signed between the client and contractor.
I would say that once the construction project begins, what the project manager can do to minimize the possibility and adverse impact from the unexpected variation to the scope of the works is to strongly use the project management approaches from the initiating stage to the closing stage. All Knowledge Areas in PMBOK might be strongly applicable from the beginning of the project, especially contract management and risk management. Relevant processes should be tailored or added based on the project situations.
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1 reply by Chandrashekhar Thatte
Feb 14, 2017 6:32 AM
Chandrashekhar Thatte
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Sungjoon,you are absolutely on dot ! At the initial stage of my career I learnt the important lesson from my mentor "Manage the Contract to Manage the Project ". Having learnt the art of understanding the contract provisions and it's implications (direct/implied) in handling/executing a project and managing risks with right application of communication and inter personal skill in generating contemporaneous records ; managing Projects was not difficult.A lesson to be learnt by Project Managers !
The contract management by the contract experts should be inclusive in the project management as soon as the contract documents have been signed between the client and contractor.
I would say that once the construction project begins, what the project manager can do to minimize the possibility and adverse impact from the unexpected variation to the scope of the works is to strongly use the project management approaches from the initiating stage to the closing stage. All Knowledge Areas in PMBOK might be strongly applicable from the beginning of the project, especially contract management and risk management. Relevant processes should be tailored or added based on the project situations.
Sungjoon,you are absolutely on dot ! At the initial stage of my career I learnt the important lesson from my mentor "Manage the Contract to Manage the Project ". Having learnt the art of understanding the contract provisions and it's implications (direct/implied) in handling/executing a project and managing risks with right application of communication and inter personal skill in generating contemporaneous records ; managing Projects was not difficult.A lesson to be learnt by Project Managers ! Saving Changes...
Senior Projects Manager | Field & Marten AssociatesNew Westminster, British Columbia, Canada
Feb 14, 2017 4:34 AM
Replying to Chandrashekhar Thatte
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I agree with you.However,this may not always be a financially win-win situation for him.Consequences of ordering variation towards the end of the project imposes greater liability (being under contract obligations) on the Contractor to take resources augmentation measures to complete the project in time and if the contractor is unable to augment adequate resources in a short span leading to project time overruns , he runs the risk of being penalized under Liquidated damages contract provision.
I am not sure I totally agree with this as if the client ordered this scope variation then normally the contrsctor will submit a time and cost variation order and upon approval from the client they will proceed. I do not see any financial liability to the contractor as long as thsi change was imposed by the client.
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1 reply by Chandrashekhar Thatte
Feb 15, 2017 6:58 AM
Chandrashekhar Thatte
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Contract/bid document is drafted by the Employer or PMC and found to be generally biased (in our region) with unconscionable terms viz.1) Quantity variation +/-30 % 2) Extension of time (EOT) without compensation 3) Absence of term on delayed payment.Under these conditions there are hardly any remedies available to the Contractor to safeguard his business interest?
Saving Changes...
Mudassar KhanProgram (Project )Manager| Woodward Canada IncPeterborough, ON, Canada
I agree with Rami Kaibni and Sungjoon , However one should also case studies to justify the arguments Saving Changes...
Satish SharmaCertified SAP S4Hana 1909 Financials Expert| FreelanceNew Delhi, India
Lots of insiht onto construction project management practice area, thanks to Chandrashekhar.
I am not sure I totally agree with this as if the client ordered this scope variation then normally the contrsctor will submit a time and cost variation order and upon approval from the client they will proceed. I do not see any financial liability to the contractor as long as thsi change was imposed by the client.
Contract/bid document is drafted by the Employer or PMC and found to be generally biased (in our region) with unconscionable terms viz.1) Quantity variation +/-30 % 2) Extension of time (EOT) without compensation 3) Absence of term on delayed payment.Under these conditions there are hardly any remedies available to the Contractor to safeguard his business interest?
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1 reply by Rami Kaibni
Feb 15, 2017 10:44 AM
Rami Kaibni
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This is a very biased comtract and won't help any party to be honest. I wonder how contractors agree to sign contracts with such terms that fully expose them.
Ive worked in many places over the world, many projects, engaged in many contracts but the this honestly the first time I hear this. Even the PMBOK itself under the procurement section explains that contracts must be negotiated in godo faith and for a win - win situation.
In cases like this, the contractor have really no motivation to do any savings nor be committed and loyal.
Senior Projects Manager | Field & Marten AssociatesNew Westminster, British Columbia, Canada
Feb 15, 2017 6:58 AM
Replying to Chandrashekhar Thatte
...
Contract/bid document is drafted by the Employer or PMC and found to be generally biased (in our region) with unconscionable terms viz.1) Quantity variation +/-30 % 2) Extension of time (EOT) without compensation 3) Absence of term on delayed payment.Under these conditions there are hardly any remedies available to the Contractor to safeguard his business interest?
This is a very biased comtract and won't help any party to be honest. I wonder how contractors agree to sign contracts with such terms that fully expose them.
Ive worked in many places over the world, many projects, engaged in many contracts but the this honestly the first time I hear this. Even the PMBOK itself under the procurement section explains that contracts must be negotiated in godo faith and for a win - win situation.
In cases like this, the contractor have really no motivation to do any savings nor be committed and loyal.
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2 replies by Chandrashekhar Thatte and Satish Sharma
Feb 20, 2017 4:29 AM
Chandrashekhar Thatte
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In India,it continues to be a Seller's market where he dictates terms knowing very well that there are buyer's who will accept such biased terms.The Client is under a false notion of a win-win situation . Such terms ,generally,affect project completion and particularly in Industrial projects ; the production losses (due to delays) far outweigh the contractual penalties (limited to max.5 %of contract value). Additionally, in absence of a bonus clause there is hardly any driving force /motivation to bring the project back on track.
Feb 20, 2017 5:44 AM
Satish Sharma
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Rami,
Your frustration is very much right. But you will appreciate that construction industry in India is not that organised to set out clear workable terms in a contract.
The standards are used to frame a paper contract only, whereas in practice things mostly go out of hands towards end of a project.
In this area, mostly payments are deducted on pretext of issues in quality/quantity as have been pointed out by Candrashekhar previously in this thread.
Now the question is how does project management sort it out?
You might delve into the contract pricing types such as FFP, T& M or etc. but there is uncertainty with respect to acceptance of the deliverable, which must be addressed appropriately in order to safeguard the performing contract to save from undue delay's/deductions in payments.
Saving Changes...
Michael ZiyadehContracts Negotiator Sr. | Sikorsky, a Lockheed Martin CompanyBranford, Ct, United States
In the future, reject liquidated damages and put a cap on your liability. If desirable, your liability may not exceed the value of your effort.
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1 reply by Chandrashekhar Thatte
Feb 20, 2017 4:40 AM
Chandrashekhar Thatte
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Michael,your suggestion is difficult to implement here in India where the contract terms,unfortunately, are not negotiable.
This is a very biased comtract and won't help any party to be honest. I wonder how contractors agree to sign contracts with such terms that fully expose them.
Ive worked in many places over the world, many projects, engaged in many contracts but the this honestly the first time I hear this. Even the PMBOK itself under the procurement section explains that contracts must be negotiated in godo faith and for a win - win situation.
In cases like this, the contractor have really no motivation to do any savings nor be committed and loyal.
In India,it continues to be a Seller's market where he dictates terms knowing very well that there are buyer's who will accept such biased terms.The Client is under a false notion of a win-win situation . Such terms ,generally,affect project completion and particularly in Industrial projects ; the production losses (due to delays) far outweigh the contractual penalties (limited to max.5 %of contract value). Additionally, in absence of a bonus clause there is hardly any driving force /motivation to bring the project back on track. Saving Changes...
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