By Ryan Ashworth, Civil Engineer at PEAKURBAN
Poor contract administration can lead to lower development profits, protracted disputes, missed settlements and sub-standard infrastructure.
Whether it’s a lack of site experience, a poorly constructed contract or just a lack of understanding of what’s required, it seems to be a common problem we hear throughout the development industry. At PEAKURBAN, our approach to Contract Administration is different. We think about it more as Contract ‘Management’ rather than ‘Administration’. Whilst both are important there are key differences between the two functions and these differences can significantly influence the outcomes on a project.
Contract Administration (or CA) is a more transactional based, ‘post box’ function. Tasks performed are predominantly process based, i.e. process progress claims, receive contractor reports, process variations, maintain the contract documents, issue drawings and organise meetings. Often, it seems the CA role is performed by unsupervised, junior staff members being thrown into the deep end and working it out as they go along. There is no need for a relationship with the Contractor in the CA role.
What we believe Developers expect is senior, experienced people performing a Contract Management (CM) role i.e. a driven person that actively leads and manages the project. They are responsible for relationship management, dispute resolution, investigation and assessment of variations raised by the Contractor or as a result of design changes, monitoring of KPI’s, quality auditing, escalation of issues as required, contract reporting and the chairing of regular meetings with all stakeholders. This role is an assertive, solutions focussed role.
With this clear delineation of roles, we can now further assess some of the issues that cause projects to run poorly and identify a few ways to reduce poor project outcomes.
- Right People, Right Role: The right people with the right experience need to run contracts. Too often the organisation administering the contract appoints whoever is available or whoever has spare capacity rather than match the task at hand with the skill set of the individual. The right balance between experience, technical and interpersonal skills are essential to successfully manage contracts;
- Balancing the risk: Applying a standard risk approach to all contracts is risky. Without the right balance of risk e.g. transferring all risk to the contractor, inevitably leads to a higher contract price, potential shortcuts and often costs the developer significantly more. For instance, often geotechnical certification of filling operations is transferred to the contractor. If they do not employ a competent geotechnical engineer, or implement only part time site supervision, then potentially non-compliant fill is placed, compaction not achieved and the development platform not fit for purpose. This risk then generally comes to light when developers are trying to settle lots and site classifications differ amongst stakeholders resulting in delays, contract terminations and reputations being tarnished.
- Assertively Manage Contracts, Don’t be a Post-Box: When representatives are onsite they shouldn’t be just enjoying the sunshine and undertaking site inspections. They should be looking ahead, troubleshooting issues, identifying potential causes of additional cost or delay and developing solutions to mitigate them. Planning the works program in reverse, starting from the plan sealing date and working backwards, ensures construction milestones are continually monitored and have the best chance of being achieved;
- Senior People Actively Involved: Senior people with greater site presence during high risk activities reduces risk of cost blow outs and time delays. For example, when high risk / high cost activities such as earthworks and pavement works are being undertaken, more time should be spent on site monitoring and inspecting the work. For example, the contract might call for 150mm of topsoil stripping but in practice, only 50mm needs to be stripped. Unsuitable material might just be wet, not unsuitable. Prioritising better quality material for road boxes to minimise pavement depth is another big cost saving opportunity;
- Contract Management from the Start: Gone are the days of simply pushing out designs, preparing a Bill of Quantities and tendering the works for a lump sum price. Construction and contract issues need to be considered from the day that design commences. Recently we worked on a site to design an efficient bulk earthworks and retaining wall strategy by collaborating with a civil contractor and geotechnical engineer during the design process. We implemented a topsoil blending strategy, determined depth to rock and designed the site with excess spoil, knowing that a nearby project required significant import fill. The earthworks outcome being more export but at a low cost with substantially less retaining wall costs; and
- Efficient Accurate Records Are Your Insurance Policy: Its essential to maintain accurate records of all site meetings, inspections and site directions. Unfortunately, there will be a time that these records will need to be accessed quickly and efficiently. What was the status of construction, who was on site, what instructions were issued? These are all very good questions neck deep in a problem and having this data at your fingertips will be important. We’ve commenced using a customised mobile site inspection app to enable the accurate capture, sharing and reporting of all site activities in real time. This allows for faster communication, transparency in process and improved management of issues.
Contract Administration is not Contract Management.
Next time you are seeking the services of a consultant to perform a ‘Contract Administration’ role, it might be prudent to ask about their level of Contract Management experience. It might make all the difference in delivering a project on time, within budget and to the quality standards that you expect.