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Contract Administration

You have a Contract or Agreement in place. That's the easy part done, now it is over to the Contract Administration part of the project. A contract should have a pro-active Contract Administration system run by or on behalf of the Principal / Owner.

Outlined below are some of the Contract Administration services that we could assist with:- A good place to start with Contract Administration is to properly administer the correspondence. In it's very simplest form you can easily adopt the following (see the attached registers):

ALL outgoing correspondence must be registered and allocated a separate, consecutive number. You can have more than one register if necessary, start one at 101 and another at 201 etc. Reinforce with the Contractor that unless it is in writing from you they don't get paid for it!

It is easier in the long run for all concerned if each item of correspondence is "single subject" i.e. write two letters/emails at the same time if two subjects are involved. For site based issues, as far as practical, correspondence should be single trade issues i.e. it is easier for the Contractor to pass straight on to a Subcontractor.

Against EVERY item of correspondence in the outgoing register you should insert an estimated value ($+ - or Nil). Extensions of Time (EOT's), if applicable should be noted in the comments column.

At regular meetings the correspondence register should be tabled (without your estimate of values if you like) and agreement reached on which items of correspondence can be "Closed Off" at an agreed value ($ + - or Nil).

Agreement on the "Nil" value items can be very important. It is not uncommon for Principal's / Owner's to have an expectation that something has a Nil value and well after the direction has been given or agreed and the work completed that the Contractor puts in a claim for payment. With hindsight it may now be clear that it was actually a change that did attract a cost but if this had been put to the Principal / Owner at the proper time it would have allowed the Principal / Owner the opportunity of managing his business and possibly changing the direction.

This method of Closing Off correspondence has the benefit of forcing issues out into the open and onto the table. You may not like an issue but you are better of knowing about it. Ignorance is not bliss; it is bad management.

If the Contractor documents issues (particularly changes) you must raise some form of correspondence to at least acknowledge his letter i.e. you are controlling the contract and the purse strings, don't abdicate this responsibility to the Contractor.

The simple secret to the above is that ALL outgoing correspondence MUST be registered.

You can take this system further by flowing this Correspondence Out Register thru into a Contract Variation Certificate system and if this is the way you would like to go we can help you with that. As previously said, managing the correspondence is only a start but it is a good start.

Click on the following links to download sample Correspondence Registers: Correspondence_Out_Register   ..   Incoming_Document_Register

We would welcome the opportunity of expanding on any of the points mentioned above. Good Luck.


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email: john@contracts.com.au
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