Complete Guide to Contracts Administration for Professionals

Contracts Management & Administration Basic Course Section 2

Moving to the second section of our course. The Contracts Types.

I would like to talk about the Contracts Categories; I would like to say that Forms and Types are various, yet all contracts have several similarities and some differences, Though these differences may have a major impact.

The Basic concept is about risk allocation.

In this Section, I will use 4 methods to categorize the contract types; I will talk about the contract's types according to the contract's formation, the payment terms, the scope of works, and according to the condition types.

Also, I will go through other types of contracts and agreements which are popular in the field.

1st Method of Categorization:

Contracts have several types according to their formation including Written Contracts, oral contracts, implied contracts, unilateral contracts, and bilateral contracts.

In detail, I would like to introduce the types as follows:

1. For the Written Contracts: These contracts are documented in writing and typically include all the terms and conditions of the agreement. They can be in the form of formal legal documents, such as a sales agreement, employment contract, or lease agreement.

2. Oral Contracts, the Oral contract are verbal agreement between parties without a written document. They are based on spoken words and may be enforceable in certain situations, although they can be more challenging to prove or enforce compared to written contracts.

3. The Implied Contracts are not explicitly stated contracts or in a written format, but they are formed based on the actions and conduct of the parties involved. These contracts are implied by the behavior or circumstances surrounding the agreement. For example, when someone enters a restaurant, an implied contract is formed that they will pay for the food they order, or when you are asking for the price of a certain service or product, this means that you agree to pay the price, if you are asking for buying the service. In the construction field, this type of contract constitutes high risk, as if you are asking a supplier about the cost of goods and then he sends it directly to the buyer’s storehouse, how will you enforce the buyer to pay this cost of goods and how will you ensure that he commits to the payment terms.

Now, you can understand that this type of implied contract is not preferable by any means in the construction industry.

4. 4. Then we came to the Unilateral Contracts: In a unilateral contract, one party makes a promise in exchange for a specific action or performance from the other party. The contract becomes binding once the action or performance is performed or done. For example, a reward for finding a lost item is an example of a unilateral contract.

5. Then the Bilateral Contracts: Bilateral contracts involve mutual promises and obligations between two or more parties. Each party agrees to provide something of value or perform certain actions.

Employment contracts and sales agreements are common examples of bilateral contracts.

In Summary, Contracts can take various forms, including written, oral, or implied agreements. However, written contracts are generally preferred as they provide a clear record of the parties' intentions, reduce the risk of misunderstandings, and serve as proof or evidence in case of disputes. And it is the highly recommended type of agreement between the parties.

2nd Method of Categorization:

According to the payment methods contracts are classified into Several Types which are used in the Construction Industry based on the needs of the Parties, the Scope of works and services provided, and the risks allocation between them.

I will talk about the most widely spread types of contracts in the construction Industry, here are the most widely used types.

1- Lump Sum Contracts: In a lump sum contract, the contractor agrees to complete the project for a fixed price. The client pays the contractor a predetermined lumpsum amount for the entire scope of work specified in the contract. This type of contract provides cost certainty to the client and places the risk of cost overruns on the contractor. While this type of contract needs the employer's requirement to be preset accurately and needs the detailed design to be ready before the contract awarding to the contractor.

2- we have as well, the Unit Price Contracts: In a unit price contract, the contractor's compensation is based on the quantities of specific items or units of work completed. The contract establishes a unit price for each item or unit, and the final payment is calculated by multiplying the quantity completed by the agreed-upon unit price. Unit price contracts are commonly used when the quantity of work is uncertain or subject to change, and sometimes, it is used in certain types of works where the quantities may be easily varied with the various circumstances, such as the earthworks.

3- we have as well the Cost-Plus Contracts: In a cost-plus contract, the client agrees to reimburse the contractor for the actual costs incurred during the project, along with an additional fee or percentage to cover the contractor's overhead and profit. This type of contract provides transparency in cost tracking, but it places the risk of cost overruns on the client. And allocate the risk of keeping the cost records on the burdens of the contractor.

4- There is also, the Time and Materials Contracts: Time and materials contracts involve payment based on the actual time spent by the contractor's personnel and the materials used in the project, along with an agreed-upon markup or hourly rate for labor.

This type of contract is often used when the scope of work is uncertain, and the project requires flexibility in terms of time and materials.

5- another type is Milestone Payments: Milestone payments are a payment structure commonly used in various contract types. The client pays out payments to the contractor based on predefined milestones or specific stages of completion achieved in the project.

Milestone payments help ensure that the project progresses according to the agreed timeline and allow for financial control at key project milestones. The milestone payments may be conditional on achieving the milestones within a certain duration and may be subject to deductions in case of delay in achieving the milestones.

In conclusion, I would like to tell you that The choice of contract type depends on factors such as the nature of the project, the level of cost certainty desired, the flexibility required, and the risk allocation preferences of the parties involved.

3rd Method of Categorization:

According to the scope of work, I will be describing Types of Contracts according to the Scope of Works required to be done.

First, Turnkey Project: A turnkey project, also known as a design-build project, is a comprehensive solution where the contractor takes full responsibility for the entire project from start to finish. The contractor is responsible for both the design and construction phases, as well as the coordination and management of all project elements.

Construction-Only Project: A construction-only project, also known as a design-bid-build project, involves the most common approach. In this case, the client takes care of the design and engineering aspects by hiring an architect or design team to develop the project plans and specifications, and sometimes the client’s in-house designers are issuing the design.

the key difference between a turnkey project and a construction-only project is that in a turnkey project, the contractor is responsible for both the design and construction phases and delivers a ready-to-use facility, whereas in a construction-only project, the client takes care of the design, and the contractor is responsible solely for the construction aspect based on the provided plans.

There is also another type of Contract which is the Management contract Under a management contract, the client hires a managing contractor who assists with various project management tasks, such as coordinating subcontractors, managing the budget and schedule, overseeing quality control, and providing recommendations to the client

In the Conclusion of the Contracts types according to the scope of Work, we have Turn-key contracts, Construction contracts, and management contracts.

4th Method of Categorization:

The last method of categorization is the types of Contracts based on Contracts Conditions.

Based on the Contract conditions the contracts are divided into two main categories;

Standard conditions of the Contract and Customized Conditions of the Contracts (Ad-Hoc).

The most popular Standard Conditions of the Contract are FIDIC, NEC, JCT, and ICE. While the most popular standard forms used in The Middle East and North Africa are the various types of FIDIC templates.

But for the customized conditions, this is usually prepared by lawyers’ offices and specialized contracts managers, and used by the company that uses the same contract conditions for many packages of similar kinds of works or with very similar circumstances but with minor edits and modifications.

Other Forms of Agreements and Contracts:

Another type of contract and agreement you should know about is the Joint Venture which is formed to serve a specific project only, and may be held between 2 parties or more.

We have Consortiums as well which is a formation between 2 or more parties also to serve one or more projects without creating a common legal entity.

There is the also the Public-Private Partnership (PPP) Contracts which are commonly used in mega governmental projects in which the government needs the experience and the funding support from the private companies and the Private companies fund the governmental projects versus having shares from the revenues and returns of such projects’ operations.

Other types such as BOOT: Built own operate and transfer contracts and BOLT Built own lease and transfer as well as BOOLT which is Built own operate lease and transfer contracts may also be used as may be needed for accomplishing and completing the projects.

We refer to Non-disclosure Agreements with NDAs in which this agreement does not constitute a legal formation between the parties, while it is a commitment between the parties to keep the confidential information exchanges for a certain purpose confidential for a specific duration.

Finally, we use the term MOU to refer to a memorandum of understanding for a specific purpose, usually for specific types of partnerships in the future.

The End of Section:

Now, I came to the end of the categorization section, and I will be moving to the construction project outline section, in which you will know about the various relationships between the project’s parties, hence, you will know about the relations created and developed the need to have different types of agreements

Contracts
Management & Administration

Basic Course
Section 3

Now we are moving to the third section of the course, and I will be talking about Selection the Contract type, and the perfect contract formation which is a very important and critical decision in the Project Life cycle.

The relationships between the parties within the project are the most critical decision that will significantly affect the project's success.

While there are several factors shall be assessed before making such a decision; The main factors affecting the selection of the Contracts’ types within the project are,

the complexity of the project.

the readiness of the design and its level, or it is just the Employer requirements that are only available,

adding to the allocation of the risks required to be held or shared between the parties,

Another factor is the experience level and qualifications of the Contractor, the time and the budget allocated for the project are also crucial factors that affect the contracts formation decision.

In other words, we can say simplify that the types of contracts shall depend on 2 main aspects the readiness of the Project data and the required outputs.

To be able to understand the possible contract types we must go through all the possible relations which may be held within a Project.

Despite what is written in books and various articles, I do not remember that I once read about how it works! Yes, how it works is an important topic that I do not remember anyone giving me a few minutes to illustrate. For this, I am here today to tell you about, how the construction of a project works. During the Construction of a project; several activities are held, hence, there is a need for several entities to hold such various activities. Look at the image shown herein on this slide for a couple of minutes and imagine the complexity of the project. I will tell you quickly a list of activities that may be held within the shown image and the types of personnel involved herein on the site. First of all, we need a security guard for the site security, a time-keeper for staff recording manpower tracking, a safety supervisor, one or more, land surveyors, trackers drivers, cranes operators, adding to the equipment and material suppliers and subcontractors, adding to quality control engineers, contracts specialists, planners, cost control staff, and we may use as well a public relation offices to coordinate the out of site activities with the authorities and collect the required permits, we will use also other staff like technical labor, supervisors and engineers for different trades and different entities; I mean you will find the staff with all its grades working with the owner of the land, the consultant, the main contractor and the other contractors or specialized contractors. Adding to all of those, I will not forget the staff at the headquarters of such companies who are working for the design of the works, the procurement of the material, and the ensuring of process compliance like the quality assurance staff. The existence of all these personnel and their different companies created the need to have different types of contracts to cover all of these relations.

Moving to the formal part of the knowledge and to conclude the previous image.

We can tell that there are several Procurement strategies for a project, yet, We have 2 main procurement strategies Traditional form in which the design shall be provided by the Employer either by the Employer’s team or by the Consultant who is hired by the Employer. And the other procurement strategy is the Design-build form, in which the Employer hires the Contractor and transfers the risk and responsibility of providing the design to the Contractor and his team or the designer who is hired by the Contractor.

Other various procurement strategies are used based on the project needs and the required outputs, as well as time and budget for the project and the Risks and Responsibilities needed to be performed by each party.

Let’s have an organized walk through a Construction Project Outline more formally and organized diagram to illustrate the probable relationships.

In this hierarchy, I tried to use the maximum valid relations which shall regulate and create the different contractual forms.

The Owner, Employer, Developer along with Investor or Financial Institute, or the Investor or the Financial Institute may be the Owner in some cases; however, these terms are used for the Project owner and the one who shall have the upper hand in the project regarding determine the final outputs of the project.

The Basic responsibility of the Employer’s staff is to determine the needed outputs from the project and accordingly prepare the Employer’s requirements. And Main liabilities of the owner's firm are to secure the project funds and allow the contractors the required time to achieve the needed tasks.

Let’s have an organized walk through a Construction Project Outline more formally and organized diagram to illustrate the probable relationships.

In this hierarchy, I tried to use the maximum valid relations which shall regulate and create the different contractual forms.

The Owner, Employer, Developer along with Investor or Financial Institute, or the Investor or the Financial Institute may be the Owner in some cases; however, these terms are used for the Project owner and the one who shall have the upper hand in the project regarding determine the final outputs of the project.

The Basic responsibility of the Employer’s staff is to determine the needed outputs from the project and accordingly prepare the Employer’s requirements. And Main liabilities of the owner's firm are to secure the project funds and allow the contractors the required time to achieve the needed tasks.

As the Staff appointed in the owner’s firm shall be the team who decides the following relationships within the project and while the most popular projects’ building strategies are the Traditional contracting form and the Design-Build form, we can say that the Relations between the Project parties may include the following:

The first Scenario is that an Employer hires a contractor for the design and build of the project with a lumpsum contract.

Or the Second Scenario is that an Employer may hire a Designer or consultancy office to provide the design of the project with a service contract agreement and then hire a Main Contractor to execute the works.

The Service Contract agreement which we just mentioned 1 minute ago may be based on several payment terms either lumpsum fees or percentages from the progress or daily or hourly rates. These contracts also may be based on standard conditions like the FIDIC white book or may be based on customized conditions as well (AD-hoc).

Now we know that the Project may include 3 parties Employer, Designer, and Contractor.

It is good to know that we may have also a Project Management Consultancy PMC which shall represent the Employer and manage the Project with several parties and ensure that the Employer’s or Owners’ requirements are met. By the way, this party as well may be named Contract Administrator.

Now we knew that the project has 4 parties till now; Employer, Project management Consultancy, Designer, and Contractor.

It is also good to know that we may have a 5th party who is the supervision consultancy whose basic role is to supervise the technical approvals for the works or part thereof.

I would love to draw your attention to the moment that we are having now like 4 contracts with different conditions, and payment terms which cover the following relations: the Employer and the Designer, The Employer and the Supervision consultant, and the Employer and the Project manager and the Employer and the Contractor.

The Employer may have other entities in contractual relation with him as the specialized labs and test centers, and the governmental authorities who are authorized to issue the permits required by him. The Employer as well may have direct relations with some suppliers and specialized contractors. These relations shall be governed by various types of Contracts and contract conditions.

Adding to that we have the chain of relations under the Contractor which deserves to spot it in deep.

I need now to move to the chain of relations under the Contractor which deserves to spot it in deep.

Now you can see in the current slide that several relations may be cascaded from the Contractor.

First of all, the Contract as I cleared in the previous slide will have a contractual relationship with the employer. This relation shall be regulated with a certain type of contract. Under this, the contractor may have the responsibility of either the construction only or the construction and the design responsibility as well. Based on the responsibilities assigned to the contractor, he will hire the following parties.

A designer issues the design or reviews an already existing design.

Specialized contractors shall be named Subcontractors in this case. The Subcontractors may hire other subcontractors which are named sub-subcontractors in this case. We will find also material suppliers.

We can find also a contract held between the Employer, the contractor, and the Dispute adjudication board to support resolving any issues and/or claims that may appear along the project life cycle.

We can find the Contractor may hire specialized labs, a site service company for facility services, a security company, a catering company if needed, a transportation company, a camp management company if needed, and specialized audit firms as quality assurance and quality control entities.

The determination of the parties needed shall be according to the project complexity, scope of work, and requirements.

The contractor and these parties are getting into several contractual agreements in various forms.

The Contractor is to hire his successors from Subcontractors and suppliers, he may prepare in-house templates which allow for minor edits or he may buy ready-made templates including FIDIC books for Subcontracts.

Regards,

Reem Elhodhod

Contracts Management & Administration Basic Course Section 1

In the first section of this course, I will be Talking about the Contract as a document; What is a Contract? Did you ever ask yourself what Is the contract and why shall I be committed to the contract, upon being a part of it?

You must know that a contract is a legally binding agreement between two or more parties that outlines the rights and obligations of each party.

The Contract is a document or document that establishes the terms and conditions under which the parties agree to perform certain actions or provide goods or services.

The contract typically includes essential elements such as an offer, acceptance, consideration, and mutual consent and verification for the capacity and authority of the parties to enter into a contract. These elements together must be present for a contract to be valid and enforceable.

We have to ensure also that the Contract also must serve a lawful purpose or a purpose not opposing any laws.

In summary, a contract is a legally binding agreement that sets out the rights, responsibilities, and obligations of the parties involved, providing a framework for conducting business.

Also note that the terms which I used in this slide as offer, acceptance, consideration, rights, responsibilities, obligations, entitlements, and parties are all contractual and have detailed meanings;

For that this course is for basic knowledge only, I will be describing these terms in detail in another course for specialized personal usage. So, if you are interested and if you are willing to know more about contracts, claims, and risk management keep following me, and track my other courses that will cover all your questions and needs.

Contracts management and administration are crucial processes that must be held continuously during the Project life cycle, as running these processes effectively helps the organizations to maximize the value of their agreements, ensure the efficiency, productivity, and profitability of the projects and minimize risks, and achieve the company desired outcomes.

By properly running the contracts management and administration process the company will ensure that it will meet the project's milestones, and budget cost and achieve the scope of work with the required quality.

The contract is the project manual, if you read it & properly execute all the obligations and entitlements as mentioned in it, you will find that your company targets will always be met, assuming that, you have good and balanced contract documents.

Moving to more details; I would like to highlight that People are always confused between contract management and contract administration processes.

The differences between Contracts management and contract administration are explained simply in a few words. The Contracts management process is concerned with the formation and closing of the Contracts while the Contracts Administration process is more of a day-to-day operation.

I would say that both processes are important aspects of the contract lifecycle, though they involve different activities and responsibilities.

In more detail, Contracts Management refers to the overall process of overseeing contracts throughout their entire lifecycle, from initiation to closure as It involves strategic planning and coordination to ensure that contracts are effectively managed to achieve the desired outcomes.

In steps, the Contracts management process includes the following activities:

1. Contract Planning, which is Identifying contract requirements, objectives, and risks, and developing a strategy for managing the contract.

2. Contract Negotiation and Development, which is Engaging in discussions and negotiations with the other party/parties involved in the contract to establish mutually agreeable terms and conditions and Drafting and reviewing the contract document, ensuring that it accurately reflects the agreed-upon terms and conditions.

3. Contract Execution, which is Facilitating the signing and implementation of the contract, ensuring that all parties understand their roles and responsibilities.

4. Creating the Contract Amendments, which is Managing changes to the contract, such as drafting amendments or extensions, as required.

5. Then the Contract Closure phase, which is Ensuring the proper contract closure, including finalizing deliverables, conducting evaluations, and handling any necessary documentation.

On the other hand, the Contracts Administration focuses on the day-to-day management and execution of contracts.

The Contracts administration involves the operational and administrative tasks required to maintain and support ongoing contractual relationships.

The Contracts administration process includes the following activities:

1. Keeping Records is done to maintain accurate and up-to-date records of contracts, including relevant documentation, correspondence, and amendments.

2. Ensuring the Contract Compliance, by ensuring that both parties adhere to the terms and conditions outlined in the contract.

3. Follow the Performance Monitoring by Tracking and evaluating contract performance, including milestones, deliverables, and service-level agreements.

4. Facilitating effective Communication between all parties involved in the contract, addressing inquiries, resolving issues, and coordinating activities as may be needed.

5. Perform the Risk Management process by Identifying and managing potential risks associated with the contract, such as contractual breaches, non-compliance, or delays.

While Regarding the Risk management processes it will be illustrated separately in an independent lecture.

In summary, contracts management focuses on the strategic planning of the contracts, while contracts administration deals with the day-to-day operational tasks involved in managing contracts and ensuring their successful execution.

Again, I would like to highlight and stress that, both functions are crucial for effective contract execution and achieving desired outcomes; including company and projects’ goals.

Regards,

Reem Elhodhod

Contracts
Management & Administration

Basic Course
Section 4

Here we are moving to the fourth section of the course, where in it I will be talking about the contracts manager and the contracts administrator roles and the differences between both of them.

All the previous relationships which we described in the project outline section, created the company's need to hire Contracts managers and Contracts administrators.

The Contracts manager is needed to decide and select the format of the contracts and the contracts administrator is required to administrate the relationships and run the formed Contracts.

All the parties named in the previous section as Employers, Consultants, Contractors, Subcontractors, and Suppliers need to hire Contracts managers to arrange the formation of the contracts and decide and finalize the proper contract format and the proper and balanced contractual relations and responsibilities.

Also, the same entities need to hire contract administrators to perform the day-to-day operations of the contract throughout the project's life cycle.

I will extend the talk about the roles of the Contracts manager and the Contract administrator to another course, I will be talking particularly about how to hold these tasks in detail, the character that you need to have to fit in this job & the detailed knowledge that you need to know to be a qualified practitioner.

But for the time being & as this course is only for interested people but not for qualified practitioners, I will be sharing, in brief, the main roles and responsibilities of the Contracts manager & the contracts administrator.

The contracts manager works in the Pre-award phase and the closing phase of the project, and his role covers Contract selection, Contract Negotiation, and Development, Drafting the Contract Amendments, and Follow up Contract Closure.

The Contracts administrator works in the post-award phase, and in other words, we say the contracts administrator is working on day-to-day operations, and his work includes tracking and keeping day-to-day Records

Ensure Contract Compliance and Performance Monitoring, Follow the Communication matrix, and perform and facilitate the Risk Management plans.

Again, if you have the intention to be specialized in the field of contracts management and administration, it is better to follow my other detailed course for specialized contracts specialists and practitioners.

You will know the differences between the 2 roles in more detail, I will be sharing forms and templates as well for your use during the project's life cycle and I will talk about how to develop your skills in one or both directions.

The contract administrator and the contracts manager both have an important role in managing contracts within an organization.

While their specific responsibilities may vary, certain personal qualities are beneficial for individuals in these roles.

Here are some qualities which are necessary for contract administrators and contracts managers:

While for the Contracts Managers, shall have the following qualities:

1. Leadership as the Contracts managers often oversee a team of contract administrators and may be responsible for providing guidance, assigning tasks, and ensuring overall contract management efficiency.

2. They shall have Strategic thinking skills and abilities as Contracts managers should possess a strategic mindset to align contract management practices with the organization's goals and objectives.

3. The Shall possesses Relationship building skills as Building and maintaining strong relationships with clients, vendors, and internal stakeholders is essential for contract managers. This includes effective communication, negotiation, and conflict resolution skills.

4. Collaborative character to be able to run the Contract lifecycle management: They should have a comprehensive understanding of the entire contract lifecycle, from initiation to closeout, to ensure contracts are effectively managed at every stage.

5. Financial awareness as Contracts managers often deal with financial aspects of contracts, such as pricing, budgets, and cost analysis. Solid financial acumen helps them make informed decisions and optimize contract performance.

6. They shall hold a Consistent character as they are required to perform Continuous improvement: Contract managers should have a drive for continuous improvement in contract management processes, systems, and strategies. Staying updated on industry best practices and emerging trends is important.

Let’s start with the Contract Administrator:

1. The Contract Administrator shall be Detail-oriented: Contract administrators need to have a keen eye for detail to ensure that contracts are accurate, complete, and comply with relevant legal and regulatory requirements.

2. The Contract Administrator shall be Organized: They should possess strong organizational skills to effectively manage multiple contracts, maintain records, and meet deadlines.

3. The Contract Administrator shall be Analytical: Contract administrators often review contracts, identify potential risks or issues, and analyze terms and conditions. Strong analytical skills help them evaluate contract performance and make informed recommendations.

4. The Contract Administrator shall be Problem-solving: Contract administrators will always be responsible to identify and resolve contractual issues or disputes that may arise during the contract lifecycle.

5. The Contract Administrator shall have Adaptability skills: The ability to adapt to changing circumstances, such as contract amendments or evolving business needs, is important for contract administrators to ensure contract compliance and effectiveness.

The qualities can vary depending on the specific requirements of the organization and the industry in which the contract administrator and contracts manager operate.

While we discussed the traits and qualities required for each role; I would like to stress the Common qualities which are common between both roles.

1. Communication skills: Effective communication is crucial for contract administrators as they need to liaise with various stakeholders, including clients, vendors, legal teams, and internal departments. Clear and concise communication helps in conveying contractual obligations and resolving disputes.

2. Negotiation skills: Contract administrators may be involved in contract negotiations, so having negotiation skills can be valuable in securing favorable terms and resolving conflicts.

3. Risk management: Contract managers need to assess and mitigate potential risks associated with contracts, including legal, financial, and operational risks. Being able to evaluate risks and implement appropriate risk management strategies is crucial.

4. Ethical Conduct: Contracts involve sensitive information and trust between parties. Maintaining high ethical standards is crucial in contract management to ensure confidentiality, integrity, and fairness in dealing with contracts and related parties.

All these qualities are needed to perform the job, yet several practices can be performed to develop and enhance your skills and abilities, if you want to know more, follow up my detailed course for the Contracts manager and Contracts administrator roles and skills. The course will include practices & tips to develop your skills.

Regards,

Reem Elhodhod

To conclude the Contracts Management and Administration basic course

I believe we have covered the meaning of the Contracts and how it is legally binding, we talked as well about the various contract types with different categorization means.

We have covered the basic differences as well between contract management and contract administration.

Then you knew about the most commonly used types of contracts which serve the relations between the projects’ parties.

And finally, I hope you know the basic role as well for the contracts manager and or the contracts administrator during the contract's formation and or during the contract running.

I would like to stress also that the closing phase of the project is as important as the starting phase.

While I will cover in detail what shall be done during the project life cycle, especially during the closing phase adding to the start phase and the full project duration.