Best Practice for Clients – Contract Implementation

Ensure excellent safety performance

There are several reasons why poor safety performance is associated with poor project performance. Poor safety performance is associated with poor site management (lack of clarity of who should do what, where and how; poor housekeeping; poor access or lighting for example); poor safety performance indicates a lack of awareness and attention to detail by managers, supervisors and craft workforce; safety management that does not meet the expectations of the site workforce leads to poor industrial relations. So whilst this document is not primarily about safety management, good safety management is a relevant factor in achieving good productivity

Clients need to be aware that the standards and expectations they set will have a major effect on the safety performance of contractors on their sites.

Ensure that safety provisions in contracts are followed. Do not allow safety to be used as a tool to gain commercial advantage. Senior management on both sides should be visibly committed to high standards of safety performance and should be seen to rise above any commercial differences in order to promote these.

Visible senior management involvement in safety on site and regular engagement with suppliers and all personnel on site usually has a remarkable effect in improving safety performance

Avoid late or slow start-up

Both the client and supplier senior personnel that negotiate the contract should be the ones to deliver the contract. This ensures maximum continuity of understanding of the contract and maximises the accountability that runs through the entire contract award and implementation phase.

Give the contractor space to perform. The site and interfaces must be made available when contractually required in such a way that the contractor’s access is unimpeded

Time extension during construction

The client should make available a competent and empowered team who can deal with technical matters such as design approvals quickly and efficiently.

The client should promote good communications and good industrial relations on site but should remember that he is not the employer of the construction workforce. He should simply ensure that the industrial relations management practices agreed in the contract are being followed.

Clients should recognise that the contractor has the right to organise and schedule the work as he wishes except where explicitly stated in the contract.

Having contracted with the supplier to deliver something, the client should not then start to do it himself. In particular, the client should not start directing the site workforce. Not only is this disruptive but it can blur safety responsibilities.

Cost escalation

Apply the contract and its mechanisms for payment, changes etc.

Even if the contract is “lump sum” the client should aim to be well informed about the health of the contract from the supplier’s viewpoint. This helps eliminate surprises. It is human nature to hide problems in the hope that they can be fixed before they become apparent to senior management. Problems need to be identified early and the most appropriate resources brought to bear in order that they do not become magnified. Once a problem exists, the first reaction will be for each party to fall back on the contract as a means of limiting their exposure to it and this rarely leads to constructive problem solving.

Poor change management

Minimise changes. Clients frequently underestimate the disruptive implications of changes on project cost and schedule. Even small changes can require significant re-work from design through to site. They are almost always more expensive for the supplier to carry out than clients estimate. In addition, suppliers will negotiate the best price they can for variations and will be in a strong position to do this.

Clear lines of accountability in the client organisation will minimise change and help eliminate the “nice-to-haves” because someone (the project manager) will provide robust challenge in order to safeguard schedule and budget.

Where changes are unavoidable, best efforts must be made to negotiate the price and programme implications before going ahead.

Ensure that it is clear who in the client organisation has the authority to administer the contract and give decisions. Ensure that the entire client team is aware of this and adheres to it.

Keep good records of activities on site to ensure that evidence exists that can allow changes and claims to be dealt with efficiently.

Deal with changes and claims as soon as possible.

Project controls

Clients must have contract management processes that are aligned to the nature of the contract. Processes for lump sum contracts will be different from those involving schedules of rates or where the contractor is paid cost plus fee. Remember, however, that even in a more “hands off” arrangement such as lump sum, the client can never have too much information about what is happening on the project.

Conflict management

Understand the contract. Ensure that the rights and obligations of both parties are understood and adhered to.

The relationship between client and contractor should be one of mutual respect and both should work constructively in the interests of the project. It should be borne in mind, however, that the parties each have their own commercial objectives so there is a limit to how closely they can collaborate.

Good, trustful working relationships, particularly on site, can lead to a constructive “give and take” approach on small issues that help the project and do not harm the commercial interests of either party. There is a balance to be struck here between insisting on strict application of the contract and allowing local problem solving and relationships to flourish.

Do not interfere in the relationship between contractor and sub-contractor. Do not get drawn into disputes between them.

Have effective lines of escalation within both the client and supplier organisations. Use these to support the respective project managers but only when agreement at their level is not possible. Higher-level management should provide a “safety valve” when relationships become adversarial.

Time extension during commissioning and handover

The team who are eventually to operate the plant should be appointed at an early enough stage to allow them to become familiar with the plant so that they can take a full and effective part in the handover and commissioning process. If the plant operator is not organisationally ready to take the plant over or is not “bought into” the plant that is being offered they will concentrate on finding reasons why the plant is not ready for commercial operation.

Clients must ensure they nominate effective persons who can partner with the supplier’s engineers to agree snagging lists and accept plant into commissioning and commercial operation.

Clients should point out non-conformances as soon as possible: there should be no surprises at the end of the contract.