Project Cycle

1
Procurement & Contract Mgt

Delivery System
Procurement system
Contract Method
Contract Type

2
 Contractual Arrangment

Contractual
Arrangements

Unilateral / Multilateral
optional / if contract
contract

Bilateral
contract

3
 Delivery System

Delivery System

Force Account,
Finance/Build
Design Bid Build
Design Build Operate (BOT)
(DBB)
(DB) or Turnkey

Facility / Construction Alliance and

Management System Outsourcing

4
 Contract

Total General
Contracting Contracting

Contracting
Method

Sub Special
Contracting Contracting

5
 Contract Type

Bill of quantities /
Unit Rate contract

Hybrid
Lump Sum
Contract
Contract
Contract
Type
Item/Schedule Special
Rate Contract Contract

Cost plus Fixed /

Percentage /
Incentive Fee

6
 Contract Management
Contract is a written agreement between or among two or more
parties whereby each party promises to do or not to do
something and agrees to terms , conditions set out in the
contract.

It is an administrative law which is the legally binding part of

the contract.
These promises and terms shall be enforceable by law and
incorporates the rights, obligations and Remedial rights of
each contracting parties.
In other words, A Contract is an Agreement between two or
more parties to do or not to do something for a certain
consideration that fulfill the following seven requirements:
 Contract Management
Contract is a written agreement between or among two or more
parties whereby each party promises to do or not to do
something and agrees to terms , conditions set out in the
contract.

It is an administrative law which is the legally binding part of

the contract.
These promises and terms shall be enforceable by law and
incorporates the rights, obligations and Remedial rights of
each contracting parties.
In other words, A Contract is an Agreement between two or
more parties to do or not to do something for a certain
consideration that fulfill the following seven requirements:
Parties are capable of contracting: Lawful and Capable
Consent of contracting parties is necessary: Intent
Object of the contract is sufficiently defined, possible and
lawful: Legal and Distinct
Use of Contract form prescribed by law, if any: Standard
Payment for the Promise: Consideration
Constitute two parts: Offer and Acceptance
Parties enter into Agreement: Agreement
Lawful and Capable is to mean they are legally allowed to
enter into contract and provides statements of facts
(statement of opinion + Knowledge) for their ability to
perform their obligations. Misrepresentations of facts both
from Fraudulent or Innocence actions are liable for damages
and / or rescission.

Intent is willingness or consent by the contracting parties to

create a legal contract.

Legal and Distinct is a description of both the promises and

considerations (including rights and obligations) clearly and
distinctly stated and they should be practicable and legally
binding.
Standards can be conditions, forms, formats, schedules,
instructions, etc which are created for use as part of contracts.

Consideration can simply be interpreted as ‘price for the

promise’ which involves a benefit accrued from the offeree in
exchange for the promise the offeror is bound by the contract.

An Offer is an indication that one party is willing to be bound

by specific terms set out in the contract. An offer can remain
open unless conditioned for termination using the following
ways:
•Refusal or Counter Offer
•Closure of the Offering organization
•Non – Acceptance with in the offer time
•Failure of the offer condition

An Acceptance is the key for the formation of a contract which

must be absolute, indication of consent,, and communicated to
the offering entity by the offeree.
An Agreement proves the existence of a contract; there are
situations where it can be considered as there isn’t. For
instance, if contracts violate statutorily prohibited conditions
such as promoting gambling; and / or also violates unlawful
conditions by the common law such as agreements to commit
civil wrongs, discrimination, against the benefit of the state, to
promote corruption, that devalue the value of one party, etc.

Following these characteristics; While the contract is

understood as the sub - framework of the law which can be
understood as the private law, the law provides a framework
within which the services and works of the construction
industry is governed with.
The purposes of a contract are therefore:

•To enforce law or bind conditions between or among the

parties agree to procure services / works / goods
•To clearly show the Terms and Conditions of contracts the
parties agree with
•To clearly show the Rights and Obligations of performances
from the contracting parties
•To clearly show remedial measures in cases for non -
performances
•To identify special risks and their treatment
•To clearly show handling provisions for price, completion
time, requirements variations adjustment systems, Changes in
cost and legislations and their dispute resolution mechanisms
Contract can be of three types; namely,
•Unilateral or Optional or If Contract
• Bilateral, and
•Multilateral

Unilateral or Optional or If Contracts are contracts

which are recognized by law where the promise by one
party is binding and if the performance is carried out by
the other party who is not bound merely by embarking
on the performance required.
Synallagmatic or Bilateral Contracts are contracts
entered to promise for an obligation performed in the
future where both (two) parties are mutually bound. Such
obligations are often termed as Executory.

Multilateral Contracts are contracts entered to promise

for an obligation performed in the future where all (three
or more) parties are mutually bound.
 Contract Management and its Processes

Contract Management is the management of its

Processes, Stakeholders and their Performances
along the Planning, Implementation and
Monitoring + Evaluation Cycle of the functions of
Management.

Contract Management process can be idealized

into three major processes. These include Contract
Formulation, Contract Administration, and Closing
of Contract Processes .
Contract Formulation: involves two sub processes,
namely; Negotiation and Signing of Contract
Agreement. Negotiation is a process by which Project
Owners together with their professional representatives’
deal with the recommended winner of the tender on the
requirements of the tender exclusively which will
become the bases for contractual agreements.
Contract Agreement when signed forms the contract
document which will be the bases for Contract
Administration. A Construction
Contract Document includes:
•Signed and Sealed Form of Contract Agreement
•General and Particular Conditions of Contract,
•Technical Specification and Methods of Measurement,
•Priced Bill of Quantities, Drawings and General Notes
to drawings if necessary, and
•Forms, Formats and Schedules.
Contract Administration: Contract Administration is
a process that ensures the successful completion of the
project under consideration with substantial compliance
of the Terms of the Contract. As a result, the following
activities or tasks are included in Contract
Administration services:

•Identifying contractual responsibilities of Stakeholders.

Reviewing the Terms of Contract Documents
Extract Monitoring Responsibilities
Preparing Monitoring Responsibility Summary Sheets
•Record, Monitor and Evaluate Progress of Mobilizations,
Works and Completions.
•Report Project Status daily and / or periodically and
Completions.
•Certify qualities of materials, shop drawings, samples,
workmanships and works.
•Measure Works, Record Site Potentials and Certify
Payments and Completions
-Take off sheet are used for Measurement of Works
-Method of Measurement is according to standard practices
-Method of Measurement is according to standard practices
-Site Potentials such as material, equipment and Manpower
on site together with appropriate site organization is
recorded
-Advance, Interim and Final Payments are certified
•Administer contract changes.
-Issue Change Orders including Clarifications
-Evaluate and Certify Additions and Omissions
-Evaluate and Certify Provisional Quantity and Provisional
Sums
-Evaluate and Certify Remedial Rights
-Evaluate and Certify Claims
-Prepare Contract Changes Status Sheet
•Mediate Disputes.
Such services are carried out to ensure projects are
completed successfully and:

-To Follow up and Evaluate Project Cost, Time and

Quality.
-To Ensure Health, Safety and Environmental
Requirements.
-To Ensure Project fitness for its purpose or intended
objective.
Closing of Contract: Closing of Contract looks into issues
related to Maintenance Period and Remedial works,
Dealing with Left Over Claims and Disputes, if any, Closing
of Accounts and Completion Certificates.

Maintenance Period and Remedial Works:

Construction works are subjected to Maintenance Periods
(Usually One Year) in order to reveal quality problems
overseen by supervisors.
Left Over Claims and Disputes: If claims and disputes are
not settled before provisional certificate of completion, they
can be dealt during this phase.

Closing of Accounts: Final Accounts together with the

release of remaining retention moneys and performance
securities are carried out in accordance with the current
situation at the time of closing and Final Payment
Certificate is issued.
Completion Certificates: This is to entitle that the
contractor is no longer responsible afterwards if satisfactory
performance is proved by Maintenance Period and its
certification, Outstanding claims and disputes are settled,
and closing of accounts are made. Completion certificate is a
certificate that concludes the contractual agreement and will
not be considered binding there after unless otherwise it is
proved illegal.
As a contract administrator, u need to see
Payment certificate
Progress report
 Payment Certificate Components

IPC In general on FIDIC clause 60 require the IPC to reflect

the following items in the order shown:
Work Done
plus Variations
plus Day works
plus Contract Price Adjustment (CPA)
less Retention
plus Materials on Site (MoS)
less Advance Payment
plus Any other amount
Work Done
Bill of Quantities (BoQ). The various tasks and items of
work to be undertaken and as described on the drawings
and in the specifications are all detailed in the BoQ.
Variations
New Works. During the course of a contract the need for
previously unforeseen or unwarranted works often arises

Revision of Billed Rates. Most contracts allow for a

revision of the billed rates/contract price in the event that
the quantities of work vary by more than a specified
percentage.
Daywork
It is almost impossible to anticipate every single item of
work which will be required during the course of a project.
This is particularly so when the works involve working
below the natural ground level or when emergency works
are necessary. For this reason contracts usually call for unit
rates for particular grades of labour, plant, equipment and
materials.

Contract Price Adjustment (CPA)

Proven Cost Method.
Formula Method.
Retention
In addition to the performance security the Employer
usually retains a small percentage of all payments made to
the Contractor as a further, more readily available or liquid,
security.

The reason for this additional security is that the

performance security is provided by a third party and is
considered to be available for “more serious” failures by the
Contractor e.g. where the Employer is required to undertake
the completion or rectification of the works.
MoS
The value of the material component of some projects is
considerable and can impose a financial burden on a
contractor who would have to carry the cost of the materials
from the time when they are ordered and paid for until they
had been built into the works, claimed and paid for by the
client.
Provisional Sum
Provisional sums are amounts which are included in a
contract document for work which, at the time of
preparation of the contract documents, can not be fully
defined and may or may not be constructed.
Any Other Sum
Interest on Late Payments

Most of the ERA contracts include a provision for the payment of

interest, at commercial rates, to contractors, on all amounts not paid

within a specified period.

Claims

Contractors are often entitled to compensation in addition to that for

undertaking the works

E.g. if the employer fails to make the site available to the contractor, the

contractor would be prevented from commencing the works and would,

accordingly, incur additional costs due to men and machines standing idle.
 Contents of the Monthly Report

monthly report framework and content is repeated below for

ease of reference .

1 Project Information 7 Supervision and

Monitoring
2.0 Contractual Matters 8 Financial Report
3.0 Mobilization 9. Meteorological
Report
4.0 Works Programme 10. Environmental Report
5.0 Materials Report 11. Appendices
6.0 Progress of the Works 12. Photographs
Project Information
This section comprises the following sub-sections:

1.1 Description of the Project

1.2 Location Map
1.3 Typical Cross Sections
1.4 Basic Contract Data

This section provides a convenient summary of the project

and its components, location, budget, timing etc.
Contractual Matters
This section comprises the following sub-sections:

2.1 Bonds (guarantees) and Insurances

2.2 Removal of Obstructions
2.3 Possession of Site
2.4 Summary of Claims

Bonds (guarantees) and Insurance

The failure by the Contractor to provide the specified guarantees

and insurance will, in addition to placing the Contractor in
breach of the contract, place ERA in a very vulnerable position.
Mobilization

This section comprises the following sub-sections:

3.1 Site Establishment

3.2 Contractor's Plant and Equipment
3.3 Materials
3.4 Contractor's Staff Mobilization
Works Programme
This section comprises the following sub-sections:

4.1 Current Status

4.2 Monthly Work Programe
Materials Report
This section comprises the following sub-sections:

5.2 Quarries and Borrow Pits

5.3 Testing of Materials
5.4 Materials on Site
Progress of the Works
This section comprises the following sub-sections:

6.1 Narrative Report

6.2 Progress by Category
6.3Sub-Contracts
6.4 Problems/Solutions and Action Taken
6.5 Progress Straight Line Diagram
6.6 Progress Bar Chart with "S" Curve
6.7 Key Rates of Construction Table
 This is most probably the most important section of the Monthly

Report as it details the progress of the Contractor in relation to their

programme which will, in turn, indicate the likelihood of delays and

claims.
Supervision and Monitoring
This section comprises the following sub-sections:

7.1 Narrative Report

7.2 Staffing Matters
7.3 Survey Work
7.4 Design and Specification Modifications
7.5 Site Meetings
7.6 Site Visits
7.7 Key Correspondence
Financial Report
This section comprises the following sub-sections:

8.1 Financial Statement

8.2 Variations
8.3 Payments Made
8.4 Cash Flow

Meteorological Report
This section comprises the following sub-sections:

9.1 Narrative Report

9.2 Monthly Rainfall
9.3 Rainfall to Date
 Environmental Report
Implementation of the Environmental Management
Plan
Implementation of HIV/AIDS Awareness and
Prevention Campaigns
Social Issues including employment conditions, labour
standards and gender issues
Local authority and community liaison
Traffic Management
Safety