Contract Administration

A contract is a written agreement, enforceable by law, between a procuring entity and a supplier, contractor or service provider for the provision of goods, works or services.

Contract administration involves all activities related to the monitoring of suppliers, contractors and service providers’ performance in the fulfillment of their contractual obligations, and to ensure appropriate actions are taken to promptly remedy any deficiencies observed in contract implementation, scope or terms and conditions.

Where does it start?

Preparation for contract administration begins with planning, which should begin during the bidding and selection process. This planning includes the nomination of contract administrators, a strategy for undertaking periodic performance review, the timeframe for certifying performance and acceptance of contract deliverables in order to avoid payment delays, and an understanding of the contract terms and conditions to ensure effective oversight.

Although the actual planning begins during the selection process, contract administration actually starts upon the signing of the contract, which is the point at which the parties to the contract are bound by its terms and conditions. [Read more…] about Contract Administration Basics

The defects liability period is a form of warranty that is guaranteed either by the retention of the contractor’s performance security and corresponding bank guarantee, at the end of the period of performance of the contract. The defects liability period can also be covered by retentions made from payments to the contractor over the life of the contract. These retentions are usually no more that 10% of the contract value.

The defects liability security is kept to cover any repairs or defects found in the infrastructure built by the contractor. If a defect in the infrastructure is detected during the defects liability period, the contractor is notified and given the opportunity to repair the defect southafrica-ed.com. If the contractor is unable or unwilling to repair the defect, the purchaser has the right to use the funds retained for such purposes from the contractor.

Once the defects liability period passes, if no defects were discovered or those discovered were satisfactorily repaired by the contractor, the retention money is returned to the contractor or the defects liability guarantee released as stipulated in the contract.

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It is important to distinguish between the suspension of a contract (the temporary cessation of contract performance), and the suspension of a supplier, contractor or services provider. The former may be invoked by either party to a contract for specific reasons defined in the terms and conditions of the contract, such as Force Majeure. The latter is a decision made by the purchaser to suspend the other party from participating in the bidding process (debarment) or from signing a contract with the for a stipulated period of time as a result of a breach of contract or other offenses stipulated in the public procurement rules.   Contracts should contain a provision for either party to suspend or terminate the contract under certain conditions. Grounds for suspension or termination of a contract are usually stipulated in the General Conditions of the Contract.

A contract suspension does not necessarily lead to termination. The reasons must be contemplated in the contract. An example of a situation that could lead to contract suspension is the temporary inability of a supplier, contractor or service provider to comply with the contract terms and conditions for reasons beyond their control (Force Majeure).

Whenever any deficiencies are observed during contract administration, the first step is to verbally address the issue with the other party. If results are unsatisfactory after this verbal notification, then it should be communicated formally and the other party given a certain period of time to remedy (cure) the defect. If the deficiency is not remedied within the stipulated timeframe, contract suspension or termination should be considered after taking into account other available remedies.

Contract suspension should be considered before contract termination, because one of the main objectives of procurement is to award contracts in order to satisfy particular requirements https://cheska-lekarna.com. Additionally, the cost implications (considering time lost and other dependent procurement requirements), of having to re-tender to select another supplier, contractor or service provider, should also be carefully considered before quickly deciding on contract termination prior to exhausting all other possible measures.

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Considered primarily immediately after contract award, it is ideally during the selection process that the contract administrator should be identified and allowed to participate in the preparation of the contract administration plan.

A contract administration plan contains all the details of the contract necessary for monitoring contractor’s, supplier’s or service provider’s performance over the life of the contract.

A contract administration plan also identifies all deliverables due over the life of the contract and how inspection and reporting on the contract will be carried out, and by whom lien.

The contract administrator must be familiar with all contract milestones and terms and conditions in order to properly monitor and evaluate performance, and identify any instances of non-compliance as they may arise.

Finding a quick resolution to any discrepancies identified during contract implementation, helps to avoid undue delay in contract completion.

To be effective, contract administration should be a joint effort and not the responsibility of only one entity. The goal of the procurement process is to award contracts in order to fulfill the requirements of the requesting entities. Goods and services are procured to satisfy the needs of an organization libido-portugal.com/. The procuring entity processes requests for goods and services, and before the contract is awarded, consideration must be given to, and preparations made for, contract administration in order to reduce the risk of failure to successfully complete the contract and to fulfill the corresponding need.

Given that, to be effective, the procurement process needs the collaboration of many sectors and departments (requesting entity, finance, technical capabilities for developing the specifications, sometimes engineering know-how), the administration of the resulting contract should also be a combined effort of many departments/entities (procurement, requesting entity, user, finance, etc.) to see to it that the risks of substandard performance and unsatisfactory completion is minimized.

The bulk of contract administration (overseeing performance) responsibility should be with the entity that is closest to where the contract is executed, because it is there that the opportunity exists for early detection of any breach of contract or substandard performance of goods received or services rendered.

Rather than expect any one entity, such as procurement, to be responsible for contract administration, it is preferable to have all the entities (including procurement) involved, and the extent of their participation should be commensurate with the value they can add to the process, given the importance of their expertise to the effective administration of the contract.

To effectively determine this, it is necessary to develop a comprehensive contract administration plan with the participation and buy-in of all entities involved and a thorough understanding of the responsibilities that each has in the administration of the contract.

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