Contract Administration and Tendering – Roads and Infrastructure Magazine

CCI Principal George Strohfeldt provides some valuable advice on Tendering and Administering Construction Contracts in the February Issue of Roads and Infrastructure Magazine. 

“Contractors need to understand how the tender process works for both their private and public-sector clients and use this knowledge not to make silly mistakes that prevent them from winning. Companies need to use their knowledge of the process to gain an advantage over their competitors,” Mr. Strohfeldt says.

Check out February’s issue of Roads and Infrastructure for the full article and promo code. 

Subscribe to this magazine by visiting the Roads and Infrastructure website.

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The Engineer as Superintendent

(from the Contractor’s Perspective)

To begin with is important to identified the role and principal characteristics a Superintendent must have to deliver successful projects. The Super is the person in charge to perform the role of an independent contract administrator and administer in accordance with the drawings and specifications, under the umbrella of the contract conditions. It is also an intermediate party between the owner or principal, the designer, and the contractor. One of his most important responsibilities is “the duty of fairness” which means it needs to take the role with impartiality, fairness, and honesty. Moreover, the super needs to have appropriate technical knowledge, experience, and skill in undertaking this role.

Civil-EngineersThis is an extremely important role to the project outcome. A Superintendent with poor reputation (Amongst Contractors) can and do cause less keenly priced tenders, for that reason the position selection requires special care.

Superintendents need touse their knowledge to deliver engineering inputs, appropriate contractual understanding, accurate communication, good negotiation skills, ability to be decisive, recognise the importance of timelines of all decisions and its impacts, establishing an appropriate level of trust between the key positions of the project: principal, designer and contractor and maintaining good working relationships on and off site.

This position carries on a level of authority stipulated in the contract, that need to be clearly understand. Regarding the “Duty of Fairness” many superintendents do a good job in these respects. However, others are prone to shortcomings in these areas. This is not entirely surprising given the following inherent difficulties or conflicts of interest:

  • AS2124 and AS4000 recognise that the superintendent has these conflicting duties. Clause 23 of AS 2124-1992 requires the principal to ensure that the superintendent is honest, fair, diligent, and reasonable.
  • Similarly, clause 20 of AS 4000-1997 requires The Principal to ensure that the Superintendent fulfil all aspects of the role and functions reasonable and in good faith
  • The Principal may directly employ the Superintendent

As an example: The Superintendent may be the designer in this case it can be over protective with the design unwilling to entertain alternatives, unwilling to allow improvements upon their design or inefficiencies to be highlighted to the principal. This can cost the client in lost savings. It may also be protective of design errors, unwilling to let the principal know about these and usually have tendency to leave problems with the contractor. Further potential problems that can corrupt impartiality, fairness and honesty are:

  • A us/them attitude, can reflect a lack of trust and /or a desire to play games.
  • Excessive desire to wield power and/or “feed” one’s ego
  • An excessively conservative safe personality
  • The Principal virtually always pays the Superintendent therefore the desire to prove their worth.

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Focusing now in the Superintendents technical knowledge means they must have the ability to apply their knowledge and experience, need to be able to make sound engineering decisions, be able to take drawings and specifications as a sound technical base and then apply true engineering ingenuity and creative solving problem skills and more importantly always achieve best possible results not only standardised results.

In addition, appropriate contractual understanding is a key factor in the development of a superintendent career, to achieve this a good working knowledge of the contract condition is required. Also, an effective escalation process must come into play in other words a system of requesting escalation of any given issue of disagreement up to the next level of authority, unresolved contractual issues can be very wasteful and dangerous in all sorts of ways including cost of course.

Overall, a superintendent must be impartial, fair, and honest, foster good working relationships, bring experience, skill and the right attitude towards the different situations that might arise on site, always be a good communicator, a negotiator, a decision maker and clearly understand their level of authority.

Roadwork’s and Civil Engineering Claims – A Contractor’s Perspective

Under a roadwork’s or civil engineering contract, the ‘rules of the deal’ are set out in the various documents that comprise the contract including the letter of acceptance, contract conditions, scope of work, specifications, drawings and pricing and other schedules, etc.

The payment due to the Contractor is the by way of the lump sum or unit rates the parties agreed to when the contract was formed, plus any cost adjustments (additions or deductions) due and claimed under the terms of the contract.  Similarly, the date by which the Contractor has to complete the works is the agreed contractual date, but adjusted as claimed and allowed for under the terms of the contract.

The contract will specify the circumstances under which the Contractor can make a claim for increased costs for specified events arising during contract performance.  This may include changes to scope resulting in variation claims, and unforseen physical conditions resulting in latent condition claims.  Similarly the contract will specify the circumstances under which the Contractor may make a claim for an adjustment to the date for completion of the works.

As well as usually specifying the circumstances under which such claims can be made, the contract also often defines the processes the Contractor must follow in making such claims.

Thus the Contractor’s entitlement to make a claim for additional cost or time depends on the terms of the contract.  In making such claims, the Contractor is usually required in the first instance to notify the Principal of its intention to make such a claim.  This step may have a time limit on it, and failure to notify the Principal of its intention within the required time may result in the Contractor losing its right to make a subsequent claim.

The Contractor then needs to prepare and submit an appropriately particularised (enough details) and substantiated (enough proof) claim to properly ‘make out’ its claim.  Once submitted, the Principal or its representative (sometimes the Superintendent) assesses the claim, determines its value and advises the Contractor accordingly.  The Principal or its representative usually has the right to reject claims made outside contractually specified time limits; or a claim that is not adequately particularised and substantiated.

For Contractors to preserve their contractual rights to make such claims under the contract and to ensure their claims have a reasonable chance of success, there are three golden rules for contractors to follow:

  1. Read, understand and follow the claim notification and submission processes specified in the contract;
  2. Have a contract administration system that ensures adequate records are kept to support any claims that need to be made.
  3. Ensure claims are properly formatted and made out and so as to be self-explanatory and self-supporting (i.e. adequately particularised and substantiated).

Some contractors don’t have the skills in-house or are too busy to follow these steps. Either way the result can be money is left ‘on the table’. An experienced claims consultants can assist in this process. Money can be saved if the consultant is prepared to guide and train the Contractor’s staff in claim identification, record keeping and claim preparation. But don’t wait too late as opportunity and entitlement can be lost.

Problems with Local Government Outsourcing and Some Solutions

Local Government outsourcing in the traditional areas of construction and supply has been in place for many years. However, for most Councils outsourcing of services has been steadily increasing over the past 20 years. Services contracts require contractors to perform work once undertaken by employees before the commercialisation push of the 1990s. Typical services outsourced include maintenance, cleaning, mowing and vegetation control and the like, through to consultancy agreements for professional services.

Both the traditional construction outsourcing and the growing services sectors have seen a rising number of conflicts and disputes in their administration in recent years.This has occurred for a number of reasons, including:

  • Increasing complexity in service requirements, contract forms and project delivery models.
  • Probity problems arising in the tender phase and with the award of contract.
  • Inadequately skilled contract administrators available to Local Government as a result of staff retirements, staff turnover and loss of key staff to higher paying industry sectors.
  • An associated lack of adhesion to existing systems and procedures and a failure to maintain, update and enhance these systems and procedures as necessary.
  • Failure to properly document at the front end of these contracts in terms of scope, specifications, Principal s project requirements, performance KPIs and service level agreements.
  • Lack of understanding of the contract Superintendent s and Project Managers potentially competing functions.
  • Failure to resolve conflicts and disputes in a timely and cost-effective manner.

The outcomes include:

  • Inconsistent and sometimes inadequate management of both the tender and contract administration phases.
  • Failure to achieve Councils technical and commercial objectives.
  • Budget and time overruns.
  • Failure to satisfy the procurement requirements of Local Government legislation.
  • Unwelcome audits and political problems.

CCI specialises in Local Government and can assist in resolving these problems by:

  • Guiding staff to rebuild and implement relevant tender and contract administration systems and procedures;
  • Training and mentoring staff to improve their skill base CCI delivers its training programs Australia wide and can tailor in-house courses to its clients specific needs.
  • Reviewing key contract documents prior to release and conduct ad-hoc or scheduled audits to keep contracts on track and on budget.
  • Assisting with the assessment of claims and commercial management of contract disputes.

Further information on CCI s services can be found at www.ccintl.com.au

10 Ways to Avoid a Battle with a Contractor

1.           An understanding of the basics of contract law is important if a contract administrator is to carry out his or her job successfully.

2.           The commercial conditions of contract are imperative to the profitability of a contract. However, the commercial conditions of contract can be overlooked by those more interested in the technical and day-to-day aspects of the work.

3.           Most technical requirements of contracting are contained in the drawings, specifications and other relevant documents such as programs and methods of payments.

4.           Roles and responsibilities of the main entities involved should be known.

5.           It is imperative to understand the need for contract documentation and records as they relate to site activities.

6.           Contract set up includes identifying the various tasks and procedures involved, the development of a contract administration procedures manual and the various coordination activities required.

7.           Conditions of contract provide rights and obligations of those involved in the contract and provide guidance on vetting contract conditions.

8.           Variations are generally provided for within a construction contract to enable the Principal or the Superintendent to order the Contractor to perform works that vary from the original contract scope. Delay can often occur in a construction contract and disruption may be defined as an interruption to the planned work sequence or flow of work.

9.           The majority of construction claims are brought by Contractors against Principals.

10.         A dispute resolution clause should be considered to be included in the conditions of contract.

George Strohfeldt

Register for courses presented around Australia by Contract Control International on the website www.ccintl.com.au

Why not utilise a contract management plan?

A contract management plan can be utilised for all type of contracts including construction, services and supply contracts and even consultancy agreements.

It is a useful tool for identifying and managing risks to ensure a successful outcome of the contract.

It also assists in value-for-money outcomes being achieved.

Even a relatively simple low-risk contract will benefit from a well prepared contract management plan (or simple check list).

This should ensure that important obligations are not overlooked and the overall intent of the contract is achieved.

Whilst the format and content of a contract management plan will vary with the type of contract being administered, generally speaking it contains a summary of the key contract documentation and all related information in simple terms.  It is really the “guidelines” for managing the contract.

Contract management plans typically contain a summary of contract details such as:

  • key contacts,
  • dates and milestones,
  • roles and responsibilities of personnel,
  • the contract terms and conditions,
  • communication and reporting requirements,
  • performance indicators and measures,
  • pricing and payment conditions, and
  • risk assessments.

The detail required in a contract management plan depends on the risk and complexity of the contract—ranging from a simple summary of key details to comprehensive documents for more complex contracts.

While all stakeholders should contribute to the development of the contract management plan, the contract manager or team is usually responsible for its development. Most of the work required for developing a contract management plan can and should be done before the contract is awarded.

The level of planning for a contract management plan should be commensurate with the value and risk of the contract being administered.

About the Author
George Strohfeldt is Principal of Contract Control International Pty Ltd.  He is a Chartered Professional Engineer with over 30 years of industry experience.
His skill areas encompass dipute resolution, providing contractual advice, contractual and security of payment claims preparation, assessment and management, commercial negotiations, preparation of tender and contract documents, probity auditing, risk, opportunity and value management workshops, risk assessment and loss control, and workplace training.

Register for courses presented around Australia by Contract Control International on the website www.ccintl.com.au