Contract Administration

The monitoring of the seller's performance and making sure that they fulfill their requirements is known as contract administration. For the test you should realize that contracts are legally binding and therefore there may be legal issues associated with monitoring them. The processes that are applicable to contract administration include project plan execution, performance planning, quality control and change control.

Inputs to Contract Administration

For the test, you will need to know that contracts, work results, change requests, and seller invoices are inputs to contract administration. You will likely see some questions concerning changes that are contested that can result in claims, disputes or appeals.

The decision to terminate a contract because the seller's work is unsatisfactory would be handled as a change request.

Tools and Techniques for Contract Administration

Like other aspects of project management, there are several types of change control systems and contract administration is no different. The three tools and techniques for contract administration include a payment system, performance reporting and a contract change control system.

As expected, the contract change control system describes how changes to the contract are to be made. Performance reporting is a way that the seller is kept in line with the requirements of the contract by keeping everyone informed. The payment system simply describes how the vendor gets paid.

The term "fait accompli" has been seen on the PMP test. This term describes when one party tries to convince another that one or more of the contract terms are not important in order to distract them or coerce them into the contract.

Outputs from Contract Administration

Contract administration has three outputs: correspondence, contract changes, and payment requests. The easiest way to remember these outputs is to acknowledge that all contracts have some type of written communication that originates from them. This correspondence is necessary for any type of changes to occur. After everyone is satisfied with the results, payment is made to complete the transaction.

A contract can be terminated if the seller's work is unsatisfactory or violates the terms. However, this may be debated through the legal system. Contested changes are called claims, disputes, or appeals.

Contract closeout will be discussed later in this book, but it is important to note that a completed contract is different from a closed contract, because a closed contract may not be fully completed in regard to the requirements of the contract. Early termination of a contract is an example of contract closeout.

The contract can only be changed by utilizing change-control processes to make sure that any changes are properly approved and that everyone is aware of the changes. This type of contract affects the project manager because it may involve review by some public or government agencies.

The contract terms and conditions impact the project manager because they are the constraints in which the project manager must fulfill the project requirements. Changes in the contract and undefined work are handled through change requests, and the change-control management process is utilized to review and implement these changes.