Performing Contract Administration

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Contract administration is the process of ensuring that the seller lives up to the agreements in the contract. The project manager and the contract administrator must work together to make certain the seller meets its obligations. If the seller does not fulfill its contractual requirements, then legal remedies may ultimately be pursued.

Another aspect of contract administration, especially on larger projects with multiple sellers providing various products, is the coordination between the contractors. The project manager or contract officer schedules and confirms the performance of the sellers so that the deliverables, schedule, and performance of a contractor do not infringe or adversely affect the performance of another contractor.

Within the contract there must be the terms for payment. Typically the performance and progress of the contractor is directly linked to payments it receives. The project manager must track performance and quality to approve or decline payment as needed. The contract should define the metrics for acceptance to avoid disagreements on performance.

Preparing for Contract Administration

The contract is needed as a guide for effective contract administration. The contract dictates the requirements and expectations of the seller and the buyer. The obligations of both parties should be in alignment with the contract; if not, disagreements, delays, and even work stoppage can ensue. In addition to the contract, there are three other inputs to contract administration:

• Work results The seller’s work results must be completed according to the requirements of the contract. As part of project plan execution, the seller must meet the quality standards of the performing organization and expected schedule of completion and stay within the anticipated costs and the specified range of variance.

• Change requests Change requests can complicate contract administration. The performing organization’s Change Control System has to mesh, somehow, with the seller’s Change Control System. Changes to the project that affect the contracted work require changes to the contract, addendums to the contract, or a new contract for the additional or changed work. In some instances, the seller and the buyer may disagree about the cost of the changes. These differences may be labeled as claims, disputes, or appeals—they can ultimately can slow the project progress if they are not remedied.

• Seller invoices Within the contract, the terms for payment are specified. The terms for payment may stipulate under what conditions the seller will provide an invoice for the work completed. In addition, the buyer may specify when and how the invoices are paid (for example, “Net 30 days from receipt of the invoice”).

On the Job 

If the seller’s performance is unacceptable and a resolution to the problem cannot be found, the performing organization may elect to cancel the contract. This termination of the contract is also handled as a change request within the Change Control System.

Completing Contract Administration

The actual process of completing contract administration relies heavily on communication between the project manager, the contract officer, and the seller. The communications plan may have considerations for how and when the communication between the buyer and seller should take place and what the purpose of the communication should be. There are three primary concerns, in addition to communication, within contract administration:

• Contract change control system The contract change control system defines the procedures for how the contract may be changed. The process for changing the contract includes the forms, documented communications, tracking, conditions within the project, business, or marketplace that justify the needed the change, dispute resolution procedures, and the procedures for getting the changes approved within the performing organization. The system is part of Integrated Change Control.

• Performance reporting Performance reporting is the communication between the project manager and management on how the seller is performing under the guidelines in the contract. Performance reporting is part of communications and should be documented within the Communications Management Plan.

• Payment system Sellers like to be paid when they have completed their obligations. How the sellers are paid is controlled by the payment system, which includes interaction of the project manager and the Accounts Payable department. The performing organization may have strict guidelines for how payment requests are submitted and approved and how payments are completed. On larger projects, the project management team may have specific procedures for submitting the payment requests.

Reviewing the Results of Contract Administration

Contract administration calls for communication between the seller and buyer, the project manager and the vendor, and the stakeholders. There must be significant documentation of the agreement that both the buyer and the seller agree to before the procured work begins. Once the procured work, service, or product has been delivered from the seller to the buyer there must be agreement that the delivery is in alignment with the original agreement.

As part of contract administrations there are three outputs of contract administrations:

Correspondence

The performance of the contracted work, the contract obligations, and the procedures of the performing organization generate correspondence between the buyer and seller. The correspondence often takes the form of warnings, letters of discontent, and project performance reviews from the buyer to the seller. This correspondence can serve as documentation for legal action if disputes arise between the buyer and seller.

Contract Changes

Both approved and declined changes are documented as to their cost, time, and effect on the project and the procured work. Changes that are approved require updates to the project plan, subsidiary plans, and possibly to other project documentation.

Payment Requests

If the project is using an external payment system, there will be communication between the buyer and seller, and between the buyer and the external payment system. If the performing organization is handling its own payment processing, this output would simply be payments.

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