Expert Views - Contractors Managing Risk

Minimising or at least managing contract risk will in all likelihood assist in preventing; deteriorating client relations, under recovery of entitlements, exposure to: liquidated damages, expensive legal intervention and increased liabilities.

Prevent matters from escalating

Appropriate focussed managed processes including monitoring of well managed projects can prevent matters escalating into costly and time consuming disputes.

Experience tells us that most disputes are the consequence of inappropriate engagement models or procurement practices, insufficient preparatory planning and design activity or contract and/or commercial procedures that are not implemented or are inappropriate.

The value of appropriate and implemented contract and commercial procedures

The challenge for all project teams is to ensure that matters are appropriately managed throughout the entire project cycle in order to prevent increased risk and any impact on profitability. Appropriate proactive contract and commercial procedures will ensure that risks are managed and profitability protected and maximised.

The contract and commercial procedures may include:

Programme Management and Reporting

A monthly or periodic programming review in respect of main contract and supply chain, which may include the impact of variations/change instructions, actions to mitigate delays, as built start and finish records for each programme activity, design release, procurement impact, causes of delay, acceleration measures, extensions of time.

Contract Administration and Record Keeping

Review correspondence schedule, both client and supply chain to ensure that all correspondence has been appropriately considered and responded to as necessary pursuant to contract terms and common law, that all contemporaneous records including diaries, photographs, video/DVD recording, marked up drawings, labour/plant/machinery resources etc have been accurately recorded.

Management of Key Risks

Periodically consider effectiveness of risk register and ensure that key risks have been identified and solution progressed and risk resolved. Key risks may include, design, management of consultants, specific procurement, power, tenants, party wall, international supply chain etc

Extension of time entitlements

It is necessary to establish and review a schedule of formal notices, both main contract and supply chain to ensure timely compliance pursuant to contract terms and common law and to consider extension of time entitlements and any appropriate mitigation. This will also include the impact on design release programmes in respect of consultants to enable procurement of the supply chain and construction on site.

Loss and/or Expense and/or Additional Cost Entitlements

Continual review of loss and/or expense and/or additional cost entitlements will ensure that applications for payment are made at the appropriate time or supply chain applications can be properly considered and evaluated and if appropriate rebutted. Loss and/or expense and/or additional cost applications may even involve claims against project consultants for such matters as late release of design or breach of other contract terms or poor performance.