Contract Administration and Practice, Essay Example

Abstract

Project companies that identify risks and manage them are likely to achieve contract completion. In an infrastructure project, a project manager encounters obstacles that hinder the effective execution of construction activities. A project manager should ensure that the project team accesses the resources needed to complete activities. Via collaboration among stakeholders in the NEC4 ECC main option C contract, the project team will realize objectives or goals. The efficient completion of the contract is based on the comprehension of team members’ activities and cooperation. A forecast helps estimate costs that might interfere with the NEC4 ECC main option C contract completion date. The forecast also shows the costs which will be incurred throughout the project’s progression.

Introduction

Contract administration refers to the process involving contract management between the employer, client, and contractor. In the construction of the large water supply scheme based on the NEC4 ECC main option C contract, an assumption is that the construction process will be completed if the contractor will effectively utilize the funds within 36 months. However, unforeseen consequences might lead to increased pressure necessitating the contractor to halt the construction process. The NEC4 ECC main option C contract contains different clauses useful to avoid conflicts in case objectives are not realized within the period. For example, the resolution clause W3 and the secondary option clauses are useful in preventing disputes. Although the clause in the NEC4 ECC main option C contract is helpful in conflict resolution, the project has to be completed as scheduled to enable the project company to earn income from sales. This report aims to provide the project company’s month 20 report and forecast its total prices in the NEC4 ECC main option C contract. Contract administration methods’ implementation in a company leads to asset management, risk mitigation, and the realization of goals through performance contracting.

Risks to the Construction Contract and Overall Scheme

The first risk that might interfere with the construction contract’s effectiveness is a poorly designed scope in the NEC4 ECC main option C contract. This risk affects labor acquisition and the address of productivity issues that might hinder the contractor from completing the large water supply scheme in 36 months. According to De Magalhães et al. (2017, p.2), “During the construction stage, the materials wastes are related to factors such as transportation damages, improper handling, excess offcuts caused by unskilled labor, unplanned storage…” The inadequate address of productivity issues might hinder the project company from building the scheme and ensuring that it is in operation without stoppage. Indeed, a new project requires an expertly designed scope to ensure no longer construction schedules that might delay the project’s delivery. A poor design scope in the NEC4 ECC main option C contract is a huge risk that will affect the project’s productivity goals. Construction companies cannot keep up with the increased demand for their services if they cannot address productivity issues (Magalhães et al., 2017, p.2).

Design errors are another risk that might hinder the contracting parties in the NEC4 ECC main option C contract from realizing objectives. Dosumu and Aigbavboa (2017, p.848) indicate that “Construction is complex and uncertain in nature…” The authors’ claim implies that production functions in the construction process cannot be met if there are design errors. For example, architectural defects might affect the project’s completion. The design errors arise from the contract administrator’s ineffectiveness in assessing the building contract to ensure effectiveness and duties are allocated among skilled individuals. Experts with adequate knowledge about contractual obligations are unlikely to cause errors during construction. However, design errors due to negligence in the decision-making process lead to disputes due to contractual agreements’ dishonor. During the contract process, the design errors cause disputes hindering the contract administrator from realizing objectives. This is why the NEC4 ECC main option C contract contains the dispute avoidance and resolution clause W3 to avoid conflicts resulting from design errors in the project.

The third risk in the NEC4 ECC main option C contract is financial risk characterized by unexpected material costs. Ineffective resource utilization might affect the project’s productivity. Alaghbari et al. (2019, p.1) propound that “Poor labor productivity is one of the main causes of cost and time overruns in construction projects.” Resources such as labor and construction materials are not used to improve productivity when there are rising costs. In the construction context, a rise in materials costs hinders the project’s completion. Inadequate implementation of building materials interferes with the construction process’s efficiency. Still, delays arising from the increased costs for acquiring construction materials will lead to budget deficits. The challenge in materials acquisition in the NEC4 ECC main option C contract will hinder the project manager from completing the construction project as scheduled. This is why the contract contains the project bank account clause that will serve as a channel for funding the large water supply scheme’s construction. Increasing costs serve as constraints to the project’s completion (Alaghbari et al., 2019).

The last risk in the NEC4 ECC main option C contract is poor project management that might hinder the successful completion of activities. Project managers without expertise will not mitigate obstacles that might hinder the project’s completion. According to Ogunde et al. (2017, p.2), “Most professionals have self-accrued the title of Project Manager without the adequate knowledge and skill.” Project managers that are unknowledgeable will not apply skills and use techniques to complete project activities. The project phases such as conceptualization, planning, and execution will be improperly implemented, leading to the client’s dissatisfaction. In this case, the unsuccessful implementation of the NEC4 ECC main option C contract project is due to project managers’ inadequate expertise. Ogunde et al. (2017) indicate that adequate knowledge and skills are fundamental to attain objectives in project management. However, a low level of professional training has hindered project managers from meeting the project requirements. Poor project management coupled with an undefined project mission will hinder personnel selection and realization of objectives (Ogunde et al., 2017).

Contract Mechanisms for the Project Company

In the NEC4 ECC main option C contract, the project company can manage the risks’ impacts through contract mechanisms. For example, X7 is a secondary clause for delay damages. The contractor is entitled to the secondary clause to overcome risks in project management. Kharisov et al. (2020, p.11011) maintain that “Conducting transparent and open public procurement is an effective way to balance the positions of many suppliers in the market.” Scrutiny of proposals will enable the project company to evaluate options and minimize costs. The contracting parties in the NEC4 ECC main option C contract must enforce the secondary clauses to realize the project’s completion. An example of a strategy that will enable the project company to attract skilled contractors is creating competitive procedures. Contractors will be necessitated to optimize their bids, and the project company will minimize the risks incurring from the project work’s contracting. Price reductions will also be achieved through competitive procedures, enabling suppliers to provide materials at lower costs.

The second mechanism is the project bank account clause which will be used to channel funds to eliminate obstacles to the project’s completion. According to Bugrov and Bugrova (2019, p15), “The starting block of the conceptual model for choosing a price model for a project is the drivers.” Based on the quote, the project company must determine its pricing dimension to eliminate the risk of the unexpected increase in material costs. The project company should identify how to conclude the NEC4 ECC main option C contract by solving the pricing dilemma. For instance, the project company should focus on the project bank account clause to finance the large water supply scheme and realize its target function. Price control measures will enable the project company to avoid excessive price overstatement from the suppliers. Irrefutably, the involvement of relevant controls during the signing of the contract will ultimately lead to the effective execution of processes. This implies that the pricing dimension is the contract’s foundation. The project company should determine the price priorities based on the project’s context in the NEC4 ECC main option C contract. Companies can also use alternative pricing strategies to achieve a low starting price for the contract (Hasnain et al., 2018).

Another contract mechanism is the X13 secondary clause used in performance bonding. The contract mechanism facilitates satisfactory completion of the large water supply scheme. According to Lippert et al. (2017, p.47), “Distress survey data were collected on the sections using established distress criteria.” In this case, the authors refer to the significance of data collection after the project’s completion. Data collection’s significance is to help establish whether performance objectives were met in the NEC4 ECC main option C contract. Regular monitoring of performance metrics will enable the project company to achieve sustainability. For instance, annual reports will provide information about the construction activities. In case of inefficiency in the construction project, the contractors will have to change the techniques to meet the contracting parties’ objectives. Harms will be eliminated by ensuring that the contractor demonstrates reasonable skills and care under the X15 secondary clause. Performance monitoring is a defensive strategy that enables companies to mitigate risks through prevention strategies (Lippert et al., 2017).

The last mechanism is the X20 secondary clause that contains the performance indicators. Through the indicators, the project company will mitigate the hazards by sharing the risks to offset adverse consequences. For instance, poor project management is a hazard that can be eliminated by focusing on performance indicators. Undeniably, risks are unexpected, but the company must accept them as this is the preliminary stage for their elimination. Acceptance that there is poor project management will help to discern whether the contract has its intended effect or it will be ended to mitigate risks. Best alternatives to the negotiated agreement will be determined through the inclusion of various negation styles. As a result of unforeseen consequences, contractors might not focus on a higher profit markup but the construction’s success. Better management is critical to lower unit costs and realize construction objectives. Thereby, the project company will overcome the risk of poor project management by instituting experts to manage the construction process.

Actions to Take as a Project Manager Under the Contract

Under the clauses contained in the NEC4 ECC main option C contract, there are different actions that the contractor can take. For example, the contractor can conduct resource planning under the project bank account clause to ensure that adequate resources are availed to complete the large water supply scheme. Issa and Tu (2017) maintain that project managers define the scope and avail resources needed for the effective execution of activities. The project company has not availed adequate resources, and this has hindered progress. The pipe supply contract is part of the project company’s activities. However, the pipe supply contract has hindered the project company from meeting its objectives. This is due to the delays in the delivery of pipes from France. Adjustments will be made to ensure that resources are locally supplied to overcome the production risks. In this case, the local supply of resources will eliminate delays and improve efficiency. There will be no obstacle to interfere with the project life cycle as resources will be availed to meet the activity plan. Availability of resources enables project managers to complete activities as per the time frames (Issa and Tu, 2017).

Resource planning and scheduling are critical decision-making processes that enable project managers to overcome obstacles and enhance activities. According to Issa and Tu (2017), the selection of feasible project schedule alternatives leads to eliminating impediments to progress. Resource assignment will be effectively done to overcome resource unavailability instances that might interfere with the project’s feasibility. The project company’s structure is effectively outlined, but execution within unsatisfactory time frames has affected the NEC4 ECC main option C contract’s production process. The structure’s alteration will ensure that activities are executed within satisfactory time frames. For instance, there will be no poor integration between the planning and scheduling of the project activities. High resource utilization will be achieved through effective scheduling to eliminate project delays that might overrun the company’s budget for the project. Elimination of an infeasible project plan will help eliminate the gaps between planning and project scheduling (Issa and Tu, 2017).

The second action is analyzing and managing the project risks in case of changes in the law. This action is contained in the X2 secondary clause that deals with the changes in the law. The government, banks, and investors are some of the stakeholders that will determine the project’s success. These stakeholders may also pose risks to the project’s completion and hinder water sales to the municipalities. For instance, the banks and investors’ failure to channel funds to the project will constraint the planning and scheduling of activities. The government can also restrict the project’s completion in case of inefficient practices outlined in the NEC4 ECC main option C contract. The stakeholders’ needs will be evaluated and adhere to the requirements to overcome the project risks. Improved scheduling decisions will help realize objectives by overcoming challenges. Hurdlers and pitfalls are inevitable, but proper scheduling helps in the identification and management of potential risks. Elimination of risks enables project managers to enhance work activity through project scheduling (Seker and Zavadskas, 2017).

Identification of the project risks enables a project manager to minimize their impacts. For example, poor project management is a risk that will be eliminated through the early warning system and risk register provisions. Seker and Zavadskas (2017) maintain that construction managers must propose preventive measures to overcome risks. Conduction of a risk assessment will help identify hazards and their adverse effects on completing the NEC4 ECC main option C contract. Observance of safety measures throughout the construction period will lead to the project’s completion and water sale to the municipalities. The project team will also be trained to ensure that they know effective measures to eliminate risks in the working environment. Poor attitudes to the project’s completion will be eliminated as this might lead to the team’s deviation from the desired activities. Improved site safety and the mitigation of risks through skilled and trained team members enable project managers to enhance performance (Seker and Zavadskas, 2017).

The last action that will be executed based on the NEC4 ECC main option C contract is organizing the project team to eliminate risks that might lead to conflicts. This action will be done based on resolution clause W3 contained in the Contracts Act 1999. The project team has faced challenges in constructing the pumping station due to the contractor’s decision. The contractor’s inability to integrate prior planning processes before the project’s execution led to idleness. The project team failed to utilize the resources and construct the pumping station because of the contractor’s decisions. Poor decision-making processes hinder the project’s completion. Focusing on time management will lead to creating a plan needed to complete the project within the timeframe. Realistic deadlines for each activity will be set and communicated to team members. Maintenance of the project’s schedule through straightforward plans will help eliminate delays. Project managers that set examples for their teams motivate them to overcome problems and realize objectives (Seker and Zavadskas, 2017).

The project team’s organization will lead to customer satisfaction, leading to completing the NEC4 ECC main option C contract. Efficient project managers know how to keep clients up-to-date about the project’s progress. The contract’s stalling will lead to customer dissatisfaction as there will be no water delivery to the municipalities. A project team list will be made to assemble the team, allocate roles, and enhance the commitment needed for the project’s completion. Frequently occurring risks will be managed through team-building activities. The activities will facilitate the project’s successful implementation as the project team will remain responsible and determined to complete activities. The project team will achieve goals or objectives through collaboration. As per the resolution clause W3, successful completion of activities is based on team members’ understanding of the activities and collaboration to overcome obstacles that might lead to conflicts. Project managers who build productive teams are guaranteed to deliver project deliverables acceptable by clients (Seker and Zavadskas, 2017).

How Outlined Events May Impact Total of the Prices and the Price For Work Done

The NEC4 ECC main option C contract’s outlined events may impact the project’s total prices and price for work done by increasing the costs. For example, resource acquisition is an event that affects project completion. A project may not deliver the promised results when there is an increase in the materials’ costs. Project completion’s activities include formalization of reports and project closure. Project team management may also impact the total prices by increasing the training costs. Effective execution of roles and the realization of goals is based on the project team’s ability to execute activities and meet objectives. However, increased costs due to the training of the project team might affect the project’s completion. For instance, budget deficits arise when resources are channeled from the project’s scope to other activities. In this case, there will be a stoppage of the project hindering NEC4 ECC main option C contract closure. Thereby, the outlined events will lead to increased costs and a budget deficit leading to the project’s stoppage.

Based on the outlined events, the project’s total prices under the NEC4 ECC main option C contract will be altered. According to figure two, it is forecasted that the total prices will increase. The factor that might lead to the increase in the total prices is the costs used to acquire the materials. The project company might not complete the construction contract within the timeframe. The delay in the project’s completion might also hinder the project company from earning income through water sales to the municipalities. The forecasted total costs are fundamental to the project company as the information will be integrated into the project planning to eliminate budget deficits. The forecast also indicates the costs that will be incurred during the project’s progression. The project company will be necessitated to adopt a time-phased budget as the initial costs established during the project’s implementation might not be adequate to achieve project completion.

Figure Two: Cost Forecast  

Conclusion

To sum up, project management in the NEC4 ECC main option C contract is critical for the effective execution of construction contracts and the mitigation of risks. Contract administration methods’ implementation in a company leads to asset management, risk mitigation, and the realization of goals through performance contracting. Based on the scenario, design mistakes are the source of conflicts that might prevent the contract manager from achieving targets. The difficulty of materials procurement would keep the project manager from finishing the construction project as planned. Rising costs also serve as limitations to the completion of the project. The project manager should focus on dispute avoidance and resolution clause W3, a project bank account clause, and the secondary clauses to establish suitable actions needed to construct the large water supply scheme. The contractor should consider critical decision-making processes such as resource planning and scheduling to resolve challenges and complete the construction project before the end of 36 months. Therefore, effective project implementation to mitigate risks at the end of month 20 will enable the contractor to realize its goals, leading to NEC4 ECC main option C contract’s completion in the 36th month.

References

Alaghbari, W., Al-Sakkaf, A.A. and Sultan, B., 2019. Factors affecting construction labor productivity in Yemen. International Journal of Construction Management, 19(1), pp.1-13.

Bugrov, O. and Bugrova, O., 2019. An algorithm for selecting the pricing model for a construction contract.

De Magalhães, R.F., Danilevicz, Â.D.M.F. and Saurin, T.A., 2017. Reducing construction waste: A study of urban infrastructure projects. Waste management, 67, pp.1-14.

Dosumu, O.S., and Aigbavboa, C.O., 2017. Impact of design errors on variation cost of the selected building project in Nigeria. Procedia Engineering, 196, pp.847-856.

Hasnain, M., Thaheem, M.J. and Ullah, F., 2018. Best value contractor selection in road construction projects: ANP-based decision support system. International Journal of Civil Engineering, 16(6), pp.695-714.

Issa, S. and Tu, Y., 2017. Integrated multi-resource planning and scheduling in an engineering project. Journal of Project Management, 2(1), pp.11-26.

Kharisov, I., Artamonova, I., Bilenko, P., and Sborshikov, S., 2020. Mechanisms for optimizing procurement activities in construction based on cost management of contract works. In E3S Web of Conferences (Vol. 217, p. 11011). EDP Sciences.

Lippert, D.L., Wu, S., Ozer, H., Al-Qadi, I.L., Meister, J.F., Renshaw, G., Barry, M.K., Said, I.M., Espinoza Luque, A.F., Safi, F.R. and Murphy, T.R., 2017. Construction and performance monitoring of various asphalt mixes in Illinois: 2016 interim report. Illinois Center for Transportation/Illinois Department of Transportation.

Ogunde, A., Olaolu, O., Afolabi, A.O., Owolabi, J. and Ojelabi, R.A., 2017. Challenges confronting construction project management system for sustainable construction in developing countries: Professionals perspectives (a case study of Nigeria). Journal of Building Performance, 8(1), pp.1-11.

Seker, S. and Zavadskas, E.K., 2017. Application of fuzzy DEMATEL method for analyzing occupational risks on construction sites. Sustainability, 9(11), p.2083.