The Contract Life Cicle
At any company, there are likely a number of contracting cycles occurring simultaneously. Depending on your company’s resources and capabilities, there may be a small team tasked with overseeing a rather wide/vast/considerable contract portfolio.
The majority of small and mid-size companies today have one centralized team that oversees all the contracts that the company enters into.
Larger enterprises tend to divide contract management responsibilities based on the department involved or affected by the particular contract(s).
However, poor Contract Management brings low efficiency, high risk and loss of money. They are the long-term result.
What type of contract do we need?
Deciding on the best contract for the particular requirements will always be a difficult decision. Contracts for construction projects must provide for a wide variety of project data (price, time, quality requirements) plus numerous legal issues.
Standard form contracts are preferable, when possible. When a standard contract will not do, consider making amendments to the standard contract.
Why use a standard form of contract?
These reasons include the following:
- to save time in drafting contracts;
- as a checklist of items to be agreed;
- to provide a negotiation benchmark;
- to benefit from case law on the interpretation of terms;
Checklist of items to be agreed
When drafting a contract from scratch it can be easy to overlook a potential scenario or a particular issue within a procedure.
This can then cause uncertainty and might result in a dispute. Without standard contracts to act as a benchmark, each party would approach the negotiations from the perspective of his or her own self-interest.
Final consideration
The use of the checklist is a first step to see if all issues are considered. It is common to find flaws during hiring (tender stage) and during contract management.
Tendering strategies can help to ensure positive results during contract lifetime management providing easy accountability, auditability, ensuring everything has been picked up, helping to reduce claims.
The financial failure of a contractor or key supplier can be catastrophic to a project/company.
It is necessary to understand contractual risks and know what to do in each situation.
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