CONTRACT MANAGEMENT

A contract is a legally binding agreement which recognises and govern the rights and duties of the parties to the agreement . A Contract is legally enforceable because it meets the requirements and approval of the law.

 An agreement typically involves the Exchange of Goods , Services , Money or Promises in all or any one of them .

Initially every agreement and promise between or among the parties in needed , in which Offer , Acceptance , Time or Duration and Consideration must be clearly mentioned and  enforceable at a court of law is a Contract.    

All contracts can be agreement but all agreement are not contract .

Elements Of Contract –

Agreement

Agreement should have an legal  Offer , Services , Purpose or Objective ,  without any lawful offer , No Agreement is valid . The Agreement should not be for any unlawful purpose or activity .

Acceptance

The Acceptance or Confirmation between the parties should be Mutual , Real and Genuine , there should not be any kind of  Blackmailing , Threats , Pressure . The person must have attain the legal age to accept any offer .

Consideration 

It is the most important element of any Contract , Consideration has  be mentioned clearly . Any kind of  promise or to be fixed in future  is not allowed in Contract. If consideration is not  mentioned . The contract would be treated as Null and Void.

Types Of Contract

According to the situation the Types of Contract may very depending on , Need , Location and Demand of Assignment . But  Mainly there are three types of Contract –

Fixed Prices

Under this category the consideration is Fixed or Lump sum and accepted by both or more parties. First party is agreed upon to pay the Fixed amount to the second party at the time of completion of  work or services within the specified time frame to the  second party , regardless the variations in the prices of raw material or in labour cost . These type of Contracts are recommended when the scope of services is completely defined and  final .

In few situation this type is  favourable  to the first party  but if the time of work done is increases due to any unforeseen circumstances , the recipient  party may suffer financial losses due to inflation in Raw Materials ,  Escalation in labour cost , Foreign currency rate fluctuations etc .

Cost and Charges Contract

In this categories the first party is agreed upon to pay to second party the actual cost of Material & Labour , and the prescribed Charges to the Contractor , in other words it is called Cost reimbursement , after checking all the vouchers and bills of purchase of material  from different vendors , date sheet of labour involved at end of the contractual  job or may be during the time frame as agreed upon between the two parties .

In this categories the first party may suffer losses due to price escalation , labour cost variations  and currency exchange rate and all .

This type is recommended if the scope of the work is expected to change during the contract period .

Material and Time Contract

This is hybrid type of contract combining the feature of fixed as well as cost and charges or cost reimbursable contracts .

This is suitable to use when the organisation is small in nature and the contractual requirement is not prescribed  and may be suitable for acquisition or hiring of expert , project staff required for a particular period . 

Contract Frame work

The major process of Contract Frame work / Life Cycle  are –

Preparation

Evaluation

Award

Administration

Preparation

This Era is not the days of only  hand shake promise or oral commitments  , those days are gone . As  we  discussed earlier that the agreement / contract should be in writing and must be enforceable at the court of law. If you are planning to get any work done through any outside agency , contractor ,or even by your friend or any family member . The contract document has to be properly Written , Accepted  and Duly Signed by both the parties , and any legal fees or charges should have been deposited to make the document authenticated by the competent legal authority.

The contract document should consist detailed agreement , Specific Conditions , General Conditions , Scope of work , Drawings , Specification , Quantities , Schedule time and schedule value .

Evaluation

 When the contract is duly prepared , now its time for Evaluation of the Contract critically ,  Contract evaluation is the process of reviewing a contract provided by a potential contracting partner to determine whether the terms and conditions  of the contract meet whatever  Criteria have been established and/or whether the terms of the contract are acceptable to all parties involved, or will need to be changed to be deemed acceptable.

Award

In this stage when the contract is prepared and evaluated now its time to Award the contract ,  Usually at this stage the eligibility of the proposals have been concluded. So it remains to choose the most preferable among the proposed  Contractors , Service provider. Before awarding the contract pre award meeting it is necessary to negotiate the Eligibility of Contractor , Prices , Time Frame , Quality control procedures, Proper Documentation , Mode and interval of payments , Obtaining the necessary permission and certificates from competent authorities , Approval of material , Proper equipment and machinery , Checking and confirmation of required license enable them to use machinery and equipment at the working site .

Administration

Contract administration refers to the task or function of ensuring that a contract (the contract between the owner and the contractor) is executed and in accordance with the terms of the contract. The contract administrator may be a representative of either party or may be a third party, depending on the terms.

The duties of the contract administrator flow from both the contractor  and the owner. Contract administration may include the tender stage and the post-construction stage.

During contract administration, the administrator  Observes conformity to the contract documents as well as the quality of the outcome. Contractual obligations include periodic site visits, Responding to Requests for Information , Issuing Instructions  and Notices from time to time and Assessing progress Claims and Issuing progress certificates, Contract price adjustments and assessing claims for adjustments of time.

Contract administration includes Mobilisation of work smoothly and  properly . Strong Communication among  parties , Various  service provider , Vendors ,Suppliers , Man power supply agencies . Schedule and Cost management is one of the key area to control , because any escalation in time and cost would result to financial losses .

During work in progress various types of Claims arises as break down of machinery , physical injury to labour  working there. To assess the loss to the person concerned and settle down all  the dispute in very short time  is one of the main concern of administrator.

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Sources – Jitendrasxnblogs / site has strict sourcing guidelines and relies on peer-reviewed studies, academic research institutions, related books and journals. We always avoid using inauthentic references.

https://www.gatekeeperhq.com

https://www.icertis.com

https://www.cips.org

Disclaimer –

This article / blog is for information purpose only, but by no means it is a complete and exhaustive explanation on the whole topic, nor it’s intended as a substitute for therapy.