Construction Contract Administration – The Basics

Construction Contract Administration involves a process of activities which help to manage the design, contract agreement and its construction process of any development project with proper control.  While poor construction contract management lead a project to unnecessary disputes and claims, a proper contract administration would lead any project to end up within the stipulated budget and time frame.

Construction projects undergo different stages. It all starts from the concept and developed as a design. After that, a team of consultant will take necessary actions to develop the design and to seek suitable contractor to construct the developed design. After the tendering stage and after awarding the contract to the selected contractor, construction phase starts. At the construction stage, there is more risk involve including time and cost management. In case both time and cost not administered, the project will end up without giving the expected results to the owner. This is where contract administration is important for any construction project’s success.

Construction Contract Administration

Though it is not easy to describe the whole process involved in Contract Administration, here I discuss the important stages and important terms with related to construction projects and Contract administration.

What does it mean by Contract Administration in Construction projects?

Contract Administration involves all necessary activities for a construction project performance from the initial stage to its final stage. These activities include monitoring of the project performance with the agreed contractual obligations between the parties to the contract.

What is a Contract?

In simple terms, a contract is a mutual agreement created between two or more parties. The main purpose of a contract is to ensure the parties involving to a contract aware of their obligations and they fulfill the obligations.

Different stages of a Construction Contract

While parties involve in a construction contract include Employer, Employer’s representative, Architect, Engineer, Quantity Surveyor and contractors it is also important these parties to fulfill their obligations to deliver a successful project completion.

Typically, a construction project undergoes few different stages.

  • Design Stage
  • Tender Stage
  • Construction stage
  • Handover and final account stage

In all these stages of any construction project, Contract Administration plays a major role in contract monitoring and risk controlling.

When does Contract Administration process begin?

Construction Contract Administration

Contract administration process begin together with the project planning stage. During the planning stage, it is necessary to determine the contracting system to follow for the specific project. Mainly this can be two types.

  • Design then Build
  • Design and Build (Turnkey projects)

In planning stage of any development project, it is necessary to appoint the contract administrator.

For the purpose of describing the whole Contract Administration process as a brief, here I chose the Design then Build Contract system with different stages of it.

Design stage Contract Administration

In this stage, the employer is with his conceptual plan in mind. Most of the projects, a project manager will be appointed at this stage. Contract Administration duties during this stage includes monitoring and controlling both cost and time under the pre-determined terms with the Employer.

As the next step in design stage, it is necessary to present the design brief by the Employer’s Project Manager which also include the necessary authority requirements to develop the initial concept. Usually design brief include the details related to the development such as land use, compliance required by authorities, functional requirements, allocated budget and suggested development period.

Once the design brief is presented, design team will prepare the final design including the drawings.

Once the design drawings are available, next step is to prepare the specifications and contract documents. Usually Contractor Administrator for the project will prepare the contract documents.

At this stage contract documents will be prepared and contractual matters will be discussed for the proposed project.

During this stage, Risk allocation will be discussed. It is important to determine what risks to pass to the contractor and what are the risks undertake by the Employer.

In this stage, it is necessary to determine important factors that are related to the construction risks such as Construction Period, Liquidated Damages, Defects Liability Period, Payment terms and Retention Sum.

Contract Administration during the Tendering Stage

Construction Contract Administration

Procurement is an important stage for any project and this is the stage where more Contract Administration work involve. It is necessary to determine the tender procedure and prepare the tender documents. In most construction projects, tender documents will be part of the contract documents. Therefore it is important to check the tender documents thoroughly before calling for bids.However with new construction plans bidding software,the tendering process is easier and the tender evaluation doesn’t require much time.

Once the tender closing is reached, the next step is tender evaluation. This is another important task involve in Contract Administration process of a construction project.

In this stage, Consultant QS or Contract Administrator has the responsibility of determining evaluation criteria. Tender evaluation criteria can depend on technical proposal, time and price. However, there will be a series of tender clarifications in terms of tender questionnaire, tender interviews and clarifications. Design team will involve in the tender evaluation process by checking and recommending the construction proposals. After the evaluation process, then next stage is Award of Tender.

Letter of Award, Contract Documents and construction drawings are the important things to prepare during this stage to award the tender and to sign the contract agreement between the parties to the contract.

Contract Administration during Construction Stage

In this stage it is necessary to understand the contract document and the obligations to each parties. During the construction stage more risk is involved in terms of both time and money. At the same time, it is also necessary to get the work done with the required quality and as mentioned in the specifications.

Construction Contract Administration

Contract Administration during the construction stage involve progress claims, variations to the contract, claims including Extension of Time and other legal matters. Usually the Contract Administration team is aware of the binding contract and its clauses. Contract Administrators, Quantity Surveyors and Contract Engineers mainly involve in the process in different roles and responsibilities.

In different countries, different forms of contract are used. In Singapore, SIA Form of Contract and PSSCOC are the widely used Form of Contract for both private sector projects and public sector projects.

Construction Contract Administration during Completion and Final Account Stage

Contract Administration during the maintenance, completion and Final account stage is mostly similar in different form of contract. In this stage, it is necessary to monitor the defects, warranties if necessary and any other liabilities. Once all the obligations are fulfilled, it is necessary to prepare the Final Account Certificate. Adjustments to the contract document in terms of variations, liquidated damages or penalties should indicate in Final Account.In this stage,release of retention money is included too.

Although above mentioned process is a brief of Contract Administration, it is not such a simple process. It includes more risks and in some cases there are disputes to solve. Therefore Contract Administrators and Quantity Surveyors play a major role in delivering a project within the stipulated contract obligations.

When does Construction Contract Administration process end?

Usually Contract Administration process will end up with the acceptance of the project. This can be done after completion of a project with due performance or termination of a contract due to poor performance of any of the parties to the contract.

Most of the times Resolution of Disputes can be done by negotiating. However, some disputes need arbitration or mediation.

After all, Contract Administration plays an important role in Construction Project Management. Through Contract Administration, project risk is monitored and controlled. Also, a good Contract Administration process is important for a successful project delivery.

Amila Gamage

Author: Amila Gamage

Amila Gamage is a Contracts Engineer with more than 16 years experience in construction sector. She writes this blog to share her experience and knowledge in the field of Contract Administration. View all posts by Amila Gamage