Today there is a general recognition of a need to increase the level of professionalism in the construction industry which is creating a growing demand for more qualified professionals. While great attention has been focused on training craft labor and tradesmen, there has been less consideration for the development of middle management roles, such as Contract Managers. Many companies do not yet understand how increased project complexity has created the need for a new class of Contract Manager, nor the potential for adding value to a Project.
Construction Contract Management or Contract Lifecycle Management (CLM) is the process of managing contracts, from the creation through to execution, and eventually termination or renewal of the contract.
Globally, Contract Management is becoming increasingly important for companies that want to control their projects more effectively while reducing cost and schedule risk. Contract Management is also the best discipline to manage change and resolve conflicts to avoid potential claims.
Traditionally, Contract Management has been viewed as rudimentary administration that is performed by clerks. Fundamental tasks such as billing, payment, and the recording and filing of contractual documents further diminishes the perceived significance of this role to drive value. This scenario is generally present when the available resources do not have the right skills and experience and therefore lack the confidence to engage in an effective Contract Management process.
The consequences of a hands-off approach are informal relationships between the client organization and contractors, lack of transparency and control and unforeseen deviations in contracts.
In todays’ dynamic and complex project environment, Contract Managers require a unique skill set that goes far beyond the traditional role of a Contract Administrator. Contract Managers need to be familiar with multinational environments, multi-jurisdictional matters, and different legal systems. Further, with global companies entering local markets, Contract Managers very often need to be bilingual, speaking both English and the local language.
An effective Contract Manager also requires multidisciplinary skills to be able to coordinate effectively with other areas of the project, such as Safety, Construction Management, Project Controls, and Site Engineering. The Contract Manager needs to establish the terms and conditions of the contract that define the legal and technical boundaries. The contract should be used as a management tool and driver to manage project risk and generate win-win relationships with mutual gain and added value. At the same time, even the best contracts cannot anticipate all possible situations that may occur, and the Contract Manager must have the ability to be flexible.
Proactive Contract Management involves systematic reporting on contracts in an organized and efficient manner, understanding risks, anticipating problems before they occur and quickly implementing corrective actions. This allows management to react in time and steer the project in the right direction.
Close monitoring and oversight of the contractor’s efforts by the Contract Manager are essential and maintaining a positive and productive working relationship with contractors is equally important. Today a successful Contract Manager working on large and complex construction projects in an international environment requires a unique combination of legal, technical, strategic, as well as the softer interpersonal skills. Understanding the significance of the role and the affects proper Contract Management has on the outcome will help guide us in further defining these roles and developing professionals who can contribute considerably to the ultimate success of the Project.
Written by Jonas Nitschack