A spectre is haunting the contracting community.
In modern days, contracting in all sectors is affected by the spectre of cost reduction, mostly due to the shrinking of operating margins for production and manufacturing companies. This in turn forces operators to seek price reduction of their outsourced services, which reflects on the downstream “food chain”, where everybody is seeking cost reduction in order to survive with decreasing selling prices.
Similar constraints apply to the ever tighter delivery terms required for new contracts, resulting in further increase of project risk profiles, as liquidated damages may be the straw that breaks the camel’s back. Under these predicaments, it becomes natural to look for every possible means to round up such tiny margins, or at least to protect them, lest the contract economic result ends up in the deep red. Hence the necessity to consider claims and to defend against possible passive claims.
There is broad agreement nowadays that a good system of Contract Management represents one of the most effective means to achieve this. A deep knowledge and an accurate management of all contract clauses and provisions allows both parties to ensure that the performance of the contract strictly adheres to the framework and the provisions negotiated. No matter who first introduced these techniques, nowadays both Owners and Contractors make extensive use of Contract Management and Administration as a body of knowledge incarnated in a well defined professional profile.
Contract Management services are often provided by specialized consultants putting their wealth of experience and track record at the services of the company in need. This kind of services have many facets, from formation and training to coaching and training-on-the-job of company’s executive and employees, up to temporary management, assigning expert Contract Managers to work inside the company’s structure.
This scheme allows to work side to side with the Project Manager and his/her team to advise and act in order to manage key contractual aspects in a professional and consistent manner. As a longer term result, the team will grow and develop this kind of professionalism for future projects.
Using these - indeed not cheap - services in times of crisis might sound like a paradox, but in times of crisis no stone must be left unturned when the survival of the company is at stake.
There is nothing more likely to start disagreement among people or countries than an agreement Elwyn Brooks White, American writer