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12.5 Contract Administration
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Contract administration is the process of ensuring that the seller’s performance
meets contractual requirements. On larger projects with multiple product and service
providers, a key aspect of contract administration is managing the interfaces
among the various providers. The legal nature of the contractual relationship makes
it imperative that the project team be acutely aware of the legal implications of actions
taken when administering the contract.
Contract administration also has a financial management component. Payment
terms should be defined within the contract and must involve a specific linkage
between seller progress made and seller compensation paid.
Contract administration includes application of the appropriate project management
processes to the contractual relationship(s) and integration of the outputs
from these processes into the overall management of the project. This integration
and coordination will often occur at multiple levels when there are multiple sellers
and multiple products involved. The project management processes that must be
applied include:
Project plan execution, described in
Section 4.2,
to authorize the contractor’s work at the appropriate time. Performance reporting, described in
Section 10.3,
to monitor contractor cost, schedule, and technical performance. Quality control, described in
Section 8.3,
to inspect and verify the adequacy of the contractor’s product. Change control, described in
Section 4.3,
to ensure that changes are properly approved and that all those with a need to know are aware of
such changes.
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12.5.1 Inputs to Contract Administration
.1 Contract. Contracts are described in Section 12.4.3.1.
.2 Work results. The seller’s work results—which deliverables have been completed and which have not, to what extent are quality standards being met, what costs have been incurred or committed, etc.—are collected as part of project plan execution ( Section 4.2 provides more detail on project plan execution).
.3 Change request. Change requests may include modifications to the terms of the contract or to the description of the product or service to be provided. If the seller’s work is unsatisfactory, then a decision to terminate the contract would also be handled as a change request. Contested changes, those where the seller and the project management team cannot agree on compensation for the change, are variously called claims, disputes, or appeals.
.4 Seller invoices. The seller must submit invoices from time to time to request payment for work performed. Invoicing requirements, including necessary supporting documentation, are usually defined in the contract.
12.5.2 Tools and Techniques for Contract Administration
.1 Contract change control system. A contract change control system defines the process by which the contract may be modified. It includes the paperwork, tracking systems, dispute resolution procedures, and approval levels necessary for authorizing changes. The contract change control system should be integrated with the integrated change control system ( Section 4.3 describes the integrated change control system).
.2 Performance reporting. Performance reporting provides management with information about how effectively the seller is achieving the contractual objectives. Contract performance reporting should be integrated with the integrated project performance reporting, described in Section 10.3.
.3 Payment system. Payments to the seller are usually handled by the accounts payable system of the performing organization. On larger projects with many or complex procurement requirements, the project may develop its own system. In either case, the system must include appropriate reviews and approvals by the project management team.
12.5.3 Outputs from Contract Administration
.1 Correspondence. Contract terms and conditions often require written documentation of certain aspects of buyer/seller communications, such as warnings of unsatisfactory performance and contract changes or clarifications.
.2 Contract changes. Changes (approved and unapproved) are fed back through the appropriate project planning and project procurement processes, and the project plan or other relevant documentation is updated as appropriate.
.3 Payment requests. This assumes that the project is using an external payment system. If the project has its own internal system, the output here would simply be “payments.”
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