Contract management

Good construction contracts are the key to a goal-oriented, smooth and low-conflict construction process and the successful implementation of projects.

In addition to the explicit description of benefits, however, it is also often a game of additional responsibilities, conditions and demands hidden behind dryly worded legal gobbledygook and avalanches of text. And unfortunately, the communicative sense of contracts often takes a back seat and the process resembles a game of cat and mouse between the contracting parties. If you simply sign blindly, you are helplessly at the mercy of the other side.

We support you in writing, drafting and compiling contracts with your contractors, but also in the critical analysis and dispute of contracts on the part of your clients.

Insist vehemently on transparency and fairness as well as due consideration of your terms and your rights as a contractual partner at eye level.

We are happy to support this path with the following services:

Analysis, extraction and evaluation of contractual risks

Clarifications / specifications as a control instrument for the contractor

Negotiation protocols with counterconditions

Correspondence

Advice on the choice of the appropriate form of contract

Development of sample contracts and accompanying documents (such as schedules, planned delivery programs, responsibility flowcharts, etc.)

International construction contracts

The two most common types of construction contracts at international level are EPC “turnkey” and EPCM.

Each of these methods has variations that can be adapted to the project as needed; example (EPCC
Engineering
,
Procurement
,
Construction
and
Commissioning
), etc.

EPC (
Engineering
,
Procurement
 and
Construction
) means that the company is contracted to provide engineering, procurement and construction services (under the direction of the owner’s conceptual design). Think of contracts in the style of
Design & Build
 (TU, functional goal defined contracts) where the project is largely managed by the contractor and the cost risk and control is on the contractor, not are geared towards the client. The EPC contractor has direct contracts with the construction contractors.

EPCM («
Engineering
,
Procurement
 and
Construction Management
“): means that the company (e.g. construction management or architecture firm) is commissioned to provide planning, procurement and construction management services; in the sense of the classic architect service model, but without the typical standardization by HOAI or SIA. The executing companies are contracted directly by the client to provide construction services and are usually managed by the EPCM contractor on behalf of the client. The architectural or engineering firm is often referred to internationally as the Engineer referenced. The project is thus largely controlled by the client or on his behalf, and the cost and schedule risks as well as cost control ultimately lie with the client.

FIDIC Model Contracts

  • Conditions of contract for construction services for construction and engineering services designed by the client, “Red Book“
  • Conditions of Contract for Facilities and Design-Build for Electrical and Mechanical Facilities and for Construction and Engineering Services Designed by the Contractor, “Yellow Book“
  • Terms of contract for EPC/Turnkey projects, “Silver Book“
  • Short form of contract, “Green Book“
  • Developer/consultant contract, “White Paper

Contract management


Contract management
 includes the management of contractual negotiations between client and contractor,
implementation
 of contracts and making changes to contracts for technical, scheduling, personnel or financial reasons.

Another definition is as follows:

Contract Management
 includes all the activities within the broader concept of project managementThe term “contract management” refers to all activities within the broader concept of project management that deal with the formulation, development, administration, adaptation, processing and updating of all contracts within the framework of a project.

Systematics / Subfields
Contract Controlling
Contract management (contract execution responsibility)
Contract archiving

Background


Contract Management
 (contract responsibility) is often seen in practice as the foundation for the
business management
 It is therefore a global and complex corporate task. In this context, it should be noted that almost all the
Departments
 in a company along the
value chain
 are affected by this topic, i.e. each department has its own specific requirements for contract management, e.g.:

General risks that arise from poor contract management include:

  • Failure to comply with legal requirements
  • Uneven level of information/lack of topicality
  • Difficulty in finding contracts
  • Content risks of contracts
  • Loss of contracts/contractual elements
  • Missing deadlines, contract options, etc.
  • Poor machining process
  • Approval/release process not always transparent
  • High lead times, no contract controlling
  • Balance sheet and audit security (see also
    internal audit
    ).

Sub-areas of contract management

The sub-areas of contract management to prevent the above risks can generally be summarised as follows:

Contract Controlling
Contract controlling, as an essential component of contract management, is primarily concerned with active risk assessment in contracting and will not be dealt with further here in the context of the question on construction projects.

Contract Management (contract execution responsibility)
Contract management is an essential part of contract management for optimizing contract management. The basis of contract management is, among other things, the generation of revenue-relevant
Information
 (
metadata
 on contracts and contracting parties).

The focus here is of course also on the structuring of this information. However, in addition to the aspects mentioned above, optimization in contract management also requires the mapping of the relevant contract processes. These processes can generally be defined as follows:

  • Comparison and processing of offers (basis for draft contracts)
  • Contract drafting and negotiations
  • Contract / document reviews and contract structures
  • Approval processes (such as signatures)
  • Contract performance (in accordance with the terms of the contract)
  • Contract Controlling
  • Overview of the most important contract components (notice period, scope of services, billing, etc.).
  • Monitoring of deadlines, in particular dates and periods of notice of termination
  • Contract archiving
  • Automated invoicing – e.g. in the form of recurring invoices

Contract archiving

Contract archiving is a main component of contract management, along with contract administration and controlling. The focus here is on the unchangeable, long-term and revision-safe archiving of business or legally relevant documents (e.g., documents from the Contract text, draft contracts, images, minutes and
AGB
) in electronic form (
electronic archiving
). In addition to contract management and controlling, contract archiving also aims to optimize contract management.

In contracting, there is an enormous flood of information (e.g. e-mails with important comments on contracts, letters, addenda, different versions of contracts, references to other documents, etc.).

The objective is to collect all this information and to archive it centrally (central
database
) and to make it available for contract management and controlling.

Summary

Active contract management should cover all three of the above-mentioned areas with the aim of increasing the efficiency of a company’s business management. It should be noted here that the key data of a contract in everyday working life are often not sufficient for such objectives. Thus, in the context of optimal contract management – especially during negotiations – one needs at least an overview of the most important contract data as well as the possibility to access all contract details. However, without contract management software, contract-relevant documents are only available in files. In addition, different and unclear responsibilities make it difficult to find these documents and data.

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