Contracts are an important part of running a construction business. They serve as a record of commitments for both parties. Well-drawn out contracts can mitigate the risks of disputes and can ensure compliance and collaboration. This is why the administration and management of contracts are important for successful execution of construction projects. However, often the terms contract management and contract administration are used interchangeably. The two are different. As a leading contract and claims management consultant we share with you useful insights on how contract management differ from contract administration:
What is contract administration?
The key difference is that contract administration refers to the planning work that goes into creating the contract before it has been finalised.
Contract management focuses on the implementation of the contract after it has been finalised. During the phase of contract administration, employees or representatives of both sides send out requests for proposals, iron out the details of the contract arrangement, negotiate on price, delivery schedules, and performance expectations. In simple words, contract administrators plan, draft, and close off the contract process.
Contract administration involves:
- Defining the scope and deliverables: The execution of a project is dependent on how well a contract is drafted. Contract administrators are responsible for clearly laying out expectations, including the scope and deliverables. It is the loopholes that can often lead to claims and disputes.
- Include a detailed timeline: It may seem like the obvious but contract administrators have to give a detailed timeline. Often big construction projects are completed in phases. Each phase should have start and end dates and what happens if those deadlines are missed.
- Sort out finances: The financial terms of the agreement should be clearly defined by the contract administrator. This includes the value of the contract, payment intervals, and the process to address the need for any additional expenses.
- Anticipate and identify risks: Construction projects are complex and inherently risky. Identifying those risks and having relevant clauses to deal with them can help prevent both parties from suffering.
What is Contract Management?
The need for a contract management process arises after a contract has been executed. Thus, this requires to ensure that the terms and conditions contained within the contract are adhered to. During this phase, circumstances may change from the time the contract was signed. Contract managers not only ensure that all parties adhere to signed terms and conditions but also make necessitating modifications to the contract agreement should there be a need.
Contract management process involves:
- Keep a track of project status: Contract managers are responsible for monitoring and evaluating projects to ensure execution within the project scope Any deviance from the same must be properly documented.
- Manage paperwork: By organising all documents, contract managers make it easy to find an agreement or track down dates, terms, and other specific contract details.
- Document evidence: In case of claims disputes, paperwork is the most important thing that can strengthen the company’s stance. Contract managers must document all evidence and vet all claims related correspondence and communication between all parties.
- Archive critical records paperwork: Contract managers also archive critical records and documents for safekeeping and easy retrieval later on.
- Conduct routine audits: Contract managers conduct routine audits and check all aspects of the contract that impact how your contract is executed.
Looking for a contract and claims management consultant?
We, at Contract Square Pvt Ltd, have highly experienced and knowledgeable contract experts who can help your construction company in the administration and execution of contracts. To know how we can help your construction company, call us at 9051739355.