What is Construction Contract Management?
Construction Contract Management is the process used to manage the rights, obligations, procedures and deadlines contained in a Construction Contract throughout project delivery.
For a Contractor, that commonly includes understanding the final Contract, allocating responsibility within the project team, managing contractual notices, Variations, Extensions of Time, Payment Claims and claims, keeping appropriate records, monitoring unresolved contractual issues and completing the outstanding requirements after Practical Completion.
The detail needed depends on the Contract and the project. A short Subcontract with relatively simple obligations does not require the same systems as a heavily amended Head Contract containing strict notice requirements, extensive design obligations, significant security, Liquidated Damages and complex claims procedures.
Construction Contract Management Services
Blaze Business & Legal can assist where the problem sits in the Contract itself, the way the project team is administering it, or the connection between contractual requirements and project commercial performance.
This can include reviewing the Contract Management requirements arising from a Construction Contract, assisting with project mobilisation and handover, developing or reviewing Contract registers and processes, dealing with difficult Variations, EOTs, claims and payment issues, reviewing contractual correspondence, identifying unresolved contractual exposure and supporting senior management where a project is moving away from its expected commercial position.
Legal advice is provided by Rachelle when Blaze Business & Legal is formally engaged as your Lawyer. Commercial Management and Construction Business Improvement services can also be provided separately, either where the work does not require legal advice or where you would like this extra layer of commercial insight.
Construction Contract Review can be provided before signing, while Contract Management assistance can continue into project delivery where required.
Contract Management starts with the final Contract
One of the first Contract Management problems on a project can arise before physical work has properly started.
The tender team, Lawyer or Commercial Manager may have worked through several versions of the Contract and negotiated amendments to clauses dealing with delay, Variations, design, payment, liability, security or other significant risks. The Project Manager then receives the executed documents without a clear explanation of what changed during negotiation.
In some businesses, project personnel continue referring to an earlier tender copy because that is the version saved in the project folder or attached to an old email. This becomes particularly dangerous where Special Conditions substantially amend the General Conditions or where tender qualifications and negotiated departures form part of the final agreement.
Contract mobilisation needs to establish exactly what documents form the Contract and which version is authoritative.
The Project Team needs to know what was negotiated
A good Contract Review can identify and negotiate significant risk before signing. That work loses much of its practical value if the negotiated position is not transferred to the project team.
The handover should concentrate on provisions that affect delivery. A Project Manager does not usually need a Lawyer to read every clause aloud. They do need to know about unusual notice periods, Variation procedures, EOT requirements, design obligations, approval processes, programme requirements, payment procedures, security, reporting obligations and any significant risk that could affect the project.
This becomes particularly important where an onerous clause could not be removed during negotiation. The project team then needs to know that the risk remains and how it will be managed.
For significant Contracts, the Contract Review and project handover should therefore connect rather than operate as two unrelated exercises.
A Construction Contract needs to be converted into project actions
Construction Contracts are written as legal agreements, not project management manuals.
The project team needs to work out which provisions require action during delivery, what triggers those actions, who is responsible and when something needs to happen.
A Contract Obligations Register can be useful for more complex projects. It might record key notice periods, submission requirements, programme obligations, insurance dates, security requirements, reporting obligations, approval processes, Payment Claim requirements and other provisions that need active management.
The register should come from the actual Contract. Reusing a previous project’s register without checking the new Contract can create problems because notice periods, processes and risk allocation often change from one project to the next.
A useful register is also selective. Copying every clause into a spreadsheet can create a large administrative document that project staff stop using.
Who is actually responsible for managing the Contract?
Construction projects often have several people touching the same contractual issue.
A Site Manager may identify additional work. A Project Engineer may obtain the instruction. A Contract Administrator may add it to the Variation Register. The Project Manager may discuss it with the Principal. The Commercial Manager may assess its cost and recovery.
The Contract still needs someone to take responsibility for the required contractual action.
The business should be clear about who prepares notices, who checks them, who can issue them, who maintains the registers, who submits Variations and EOTs, who manages Payment Claims and who has authority to agree changes to price, time or scope.
Job titles do not resolve this problem. Two businesses can use the title Contract Manager for very different roles.
Authority also needs to be clear. Project personnel should understand the difference between discussing a commercial position, recommending it internally and having authority to bind the business.
What is the difference between Contract Management, Contract Administration and Commercial Management?
There is no universal division between these roles across the construction industry.
Contract Administration usually covers the day-to-day processes required to administer the Contract. Depending on the business, this can include notices, registers, Variations, EOTs, Payment Claims, correspondence and other routine contractual processes.
Contract Management commonly includes broader oversight of those processes, significant contractual issues, claims, risk and the overall contractual position of the project.
Construction Commercial Management extends further into project forecasting, procurement, subcontractor exposure, margin, cash flow, reporting and broader commercial performance.
In practice, one person may perform parts of all three functions. The important issue for the business is whether the work is being done properly and whether responsibility is clear.
Site events need to be connected to Contract requirements
The site team will usually know when something has changed on the project. Access is late, information is missing, the Principal changes the design, another contractor interferes with the works or additional work is requested.
The Contract Management problem is working out what needs to happen next under the Contract.
The same event can require several actions. A design change might affect scope, time, cost and the construction programme. It may require a notice, Variation submission, EOT notice, further particulars and supporting project records.
This is where construction knowledge and Contract knowledge need to work together. A person who understands the Contract but has little visibility over what is happening on site can miss the event. A site team that sees the event but does not understand the contractual procedure can miss the required action.
Why are contractual notices commonly missed?
Most missed notices do not occur because nobody knew there was a problem.
The issue is more often that the problem was discussed repeatedly in site meetings, RFIs, emails and telephone calls without anyone checking whether the Contract also required a formal notice.
Construction Contracts can contain notice requirements for delay, Variations, latent conditions, access, discrepancies, directions, claims, suspension and other events. The required timeframe, recipient, contents and method of issue can differ between Contracts.
For Contracts with significant notice requirements, a Notice Register can help the project team monitor notices issued, responses received, outstanding actions and relevant deadlines.
The register cannot replace somebody understanding what events trigger a notice. Contract Management therefore needs both a system and people who know when to use it.
Variations need to be captured when the change happens
A Variation problem often starts well before anybody sends a price.
The project team first needs to understand what changed, who instructed it, whether the instruction was authorised under the Contract and whether the work falls outside the existing scope. The Contract may then require notice or other action before the additional work proceeds.
The records created at that stage can become important later. Instructions, drawings, RFIs, photographs, labour records, plant records, Subcontractor costs and programme information can all become relevant to valuation or entitlement.
A Variation Register should therefore show more than a list of quoted amounts. Management needs to know which changes have been identified, which have been notified, which have been priced, which remain unsubmitted, what has been approved and what remains disputed.
Detailed guidance about Variations belongs on the Construction Contract Variations page. For Contract Management purposes, the important point is that the Variation process needs to start when the change occurs, not several months later when somebody reviews project margin.
Unresolved Variations can distort project forecasts
The commercial effect of poor Variation Management becomes clearer when the project forecast is considered.
A Contractor may already have paid labour, plant, suppliers and Subcontractors for changed work while the corresponding Head Contract Variation remains unapproved. The project has incurred the cost even though recovery remains uncertain.
Senior management therefore needs more information than the total value of approved Variations.
The forecast should distinguish between approved amounts and material unresolved amounts, with an appropriate assessment of expected recovery. If a project team simply includes the full value of every pending Variation in forecast revenue, the expected margin can look better than the current contractual position supports.
The opposite problem can also arise where a well-supported entitlement is omitted from the forecast entirely.
This is one of the areas where Contract Management and Commercial Management need to connect.
EOT Management needs more than an updated program
Program management and contractual EOT Management are connected, but the construction programme does not determine contractual entitlement by itself.
When delay occurs, the project team needs to identify the cause, relevant dates, affected activities and the effect on completion. The Contract may also require notices, particulars, updates, evidence of mitigation or other procedural steps.
The operational forecast completion date and the contractual Date for Practical Completion can therefore move differently.
A project may be forecasting a substantial delay while only part of that delay has been recognised contractually. Management should be able to see that position because it can affect Liquidated Damages exposure, negotiations with the Principal, Subcontractor management and the expected commercial outcome.
Detailed EOT requirements should be addressed under the particular Contract and linked to the dedicated Extension of Time content rather than repeated in full on this page.
Project records need to support the position the Contractor may later have to establish
When a significant claim develops, one of the first questions is often what records exist.
Reconstructing several months of project events from memory is difficult. Staff may have left, the programme may have changed several times and the people involved may remember the sequence differently.
Useful records will depend on the issue. Site diaries, photographs, RFIs, drawings, meeting minutes, correspondence, programmes, labour records, plant records, delivery documents, invoices and Subcontractor records can all become relevant.
The Contract Management system should therefore consider what evidence the business may need while the events are still occurring.
This does not mean creating documents for the sake of creating documents. The purpose is to make sure important project events and their consequences can later be established from reliable contemporary information.
Meeting minutes need to be reviewed, not simply filed
Project meeting minutes can record instructions, delays, access issues, disputed responsibility, Variations and agreements about future work.
They can also record the Contractor’s position inaccurately.
A minute stating that the Contractor agreed to complete additional work at no cost, accepted responsibility for delay or agreed that an issue had been resolved should not sit uncorrected if that is not what occurred.
The person responsible for Contract Management should therefore review material meeting minutes and deal promptly with entries that require correction.
This is particularly important where project personnel attend numerous meetings and the formal contractual correspondence is being handled by somebody else.
Payment administration needs to connect with the Contract and applicable legislation
Construction payment processes have both contractual and statutory elements.
The Contract can prescribe when Payment Claims are made, how work is valued, what supporting information must be provided and when payment becomes due. Queensland construction businesses also need to comply with and understand the Building Industry Fairness (Security of Payment) Act 2017 where it applies.
Contract Management should track Payment Claims submitted, assessments or payment schedules received, amounts certified or scheduled, disputed deductions, payments received and outstanding amounts.
Variations and other claims also need to feed into the payment process where appropriate. It is possible to have a well-maintained Variation Register and still have poor cash recovery if approved or claimable amounts are not being carried through into Payment Claims.
Detailed Security of Payment advice should sit on the relevant supporting page. The Contract Management page only needs to establish that payment cannot be managed as an isolated accounts function.
Head Contract and Subcontract Management need to work together
A Contractor’s obligations to the Principal do not automatically pass through to its Subcontractors.
The Head Contract may contain short notice periods, programme obligations, design requirements, reporting requirements or other commitments that depend on information or performance from Subcontractors.
If the Subcontract does not address the relevant obligation, or its procedure is too slow to allow the Contractor to meet the Head Contract requirement, the Contractor can carry the upstream risk itself.
This should be considered during Subcontract drafting and procurement, but it also needs to be monitored during project delivery.
For example, the Contractor may need Subcontractors to report delay events quickly enough for the Contractor to comply with an EOT notice period under the Head Contract. Waiting until the Subcontractor later submits a detailed claim can leave the Head Contractor dealing with a notice problem upstream.
Contract Management should therefore consider the relationship between the Head Contract and significant Subcontracts, rather than administering each document separately.
Claims need to be managed while the underlying events are current
Larger construction claims rarely appear fully formed at the end of a project.
They usually develop from events that occurred weeks or months earlier. Notices, programme effects, cost information, instructions, records and contractual correspondence accumulate over time.
If those elements have not been managed properly, preparing the eventual claim becomes slower and more difficult.
For significant claims, management should be able to see the contractual basis, notice status, records available, amounts being incurred, time effects, submissions made, responses received and what needs to happen next.
The Construction Contract Claims page should own the detailed claims content. The Contract Management issue is making sure the project does not reach the claim stage with major gaps in notices, evidence or commercial information.
Contract Management reporting should help management make decisions
A project can produce large quantities of Contract Administration data without giving senior management a useful view of the contractual position.
Management reporting should concentrate on issues capable of affecting project value, time, cash flow or risk.
For a significant project, that can include current Contract value, unresolved Variations, significant claims, EOTs submitted and approved, forecast completion against the contractual completion date, potential Liquidated Damages exposure, disputed Payment Claims, security, retention and major contractual issues requiring a management decision.
Age also matters.
A significant Variation that has been unresolved for six months deserves different attention from an equivalent Variation submitted several days ago. The same applies to claims, outstanding instructions and disputed payment amounts.
The purpose of reporting is to identify where management needs to intervene, rather than simply proving that Contract Administration activity occurred.
Contract Management systems should suit the projects the business actually delivers
There is no reason to build an elaborate Contract Management system for every small project.
The level of control should reflect the size and complexity of the Contract, the risk allocation, notice requirements, design responsibility, security, Liquidated Damages, subcontracting structure and the commercial exposure if something is missed.
A smaller Contractor may be able to manage a straightforward project with several well-designed registers, clear responsibilities and consistent project routines.
A larger contractor running multiple complex projects may need integrated software, automated workflows and portfolio reporting.
Technology can help with document control, reminders, workflow and reporting, but the underlying Contract requirements still need to be identified correctly. A software platform cannot determine by itself whether a site event creates an entitlement or whether a project team has interpreted an amended clause correctly.
When should a Contract Management issue be escalated?
Project teams should be able to administer routine contractual processes without sending every notice or Variation to a Lawyer.
The business nevertheless needs to recognise issues that warrant senior commercial or legal input before they develop further.
Examples can include a significant disputed Variation, an EOT position that creates material Liquidated Damages exposure, a threatened termination or suspension, a proposed call on security, a serious payment dispute, an unresolved design responsibility issue or a contractual time bar affecting a substantial claim.
The timing of that escalation can affect the options available.
A Lawyer engaged while the relevant event is current can review what the Contract requires, what notices should be issued and what information should be preserved. Advice sought after the contractual process has already been missed necessarily starts from a different position.
Practical Completion does not usually finish the Contract
Operational attention often moves away from a project once Practical Completion has been achieved.
Contractual and commercial issues can remain open well beyond that point.
Outstanding Variations, final claims, defects, warranties, handover documents, retention, security and Final Completion requirements can continue to affect the project. Some of the remaining amounts can be substantial.
The Contract closeout process should therefore identify unresolved obligations and entitlements and allocate responsibility for completing them.
Security and retention deserve particular attention. Money can remain tied up simply because nobody has followed through on the contractual requirements for release.
Review recurring Contract Management problems across the business
A recurring project problem can point to an issue outside Contract Administration.
Repeated missed notices may indicate poor project mobilisation or unclear responsibilities. Weak Variation recovery may start with site record systems. Difficulty recovering Head Contract claims can expose poor Subcontract alignment. Regular problems with the same amended clauses can change the positions the business should take during future Contract Review and negotiation.
This information should feed back into tendering, Contract Review, Subcontracting, project mobilisation and internal training.
Businesses that deliver similar work repeatedly have an opportunity to improve their contracting position from what happened on earlier projects. That requires somebody to look across projects rather than closing the file and moving immediately to the next job.
What does a good Construction Contract handover cover?
A Contract handover should concentrate on the provisions that the delivery team needs to manage.
The project team should understand which documents form the final Contract, any unusual amendments, significant remaining risks, notice provisions, Variation and EOT procedures, payment requirements, programme obligations, design responsibility, security, insurance, reporting requirements and important project-specific commitments.
It should also establish the Contract Management responsibilities within the team and the registers or systems that will be used.
The handover can be brief for a straightforward Contract. A heavily amended or high-risk Contract warrants more detailed mobilisation because the cost of misunderstanding the Contract is materially higher.
What problems should a Construction Contract Management review identify?
A useful review should look beyond whether the project has the expected registers.
It should examine whether the team is working from the correct Contract, understands important amendments, knows who owns contractual actions, is issuing required notices, has captured outstanding Variations, is managing time and payment properly, has adequate supporting records and is escalating important issues at the right level.
The commercial information should also agree with the Contract Management information.
If a Variation Register shows substantial unresolved work but the project forecast assumes full recovery without assessment, there is a commercial issue. If the programme shows significant delay but the EOT Register does not explain the contractual position, management does not have a complete view of the project’s exposure.
This is the type of connection that should be tested in a Contract Management review.
Construction Contract Management support from Blaze Business & Legal
Rachelle Hare works with construction businesses on both the legal terms of Construction Contracts and the commercial systems used to manage them during delivery.
Her experience includes private legal practice, General Counsel and in-house legal work, Contract Management and Commercial Management inside construction businesses. This means she has dealt with the same Contract from different positions: reviewing and negotiating its wording, advising project teams about contractual issues and managing the commercial effect of those issues during delivery.
Blaze Business & Legal can assist with a specific Construction Contract, a difficult live project issue or broader Contract Management systems across the business.
Where the work involves Legal Services, Rachelle acts as the Lawyer. Where the issue is broader project Commercial Management or Construction Business Improvement, those services can be scoped separately.
Book a Free Chat to See How We Can Help
Use the free chat to explain the Contract, project or recurring Contract Management problem. We can work out what help is required and whether the next step should be a fixed-price Legal Service, project Contract Management assistance or broader Commercial Management support.
FAQs About Construction Contract Management
1. What is Construction Contract Management?
Construction Contract Management is the practical management of the rights, obligations, procedures and deadlines contained in a Construction Contract. For Contractors, this commonly covers notices, Variations, EOTs, Payment Claims, claims, contractual correspondence, records, securities and project closeout.
2. When should Contract Management start on a construction project?
Contract Management should start before or at contract award because the project team needs to understand the final Contract before delivery accelerates. Significant contractual requirements identified during Contract Review should be transferred into the project mobilisation process.
3. What does a Construction Contract Manager do?
A Construction Contract Manager commonly oversees contractual obligations and procedures during project delivery, including notices, Variations, EOTs, claims, payment issues, correspondence and contractual risk. The exact role varies considerably between construction businesses.
4. What is the difference between Contract Management and Contract Administration?
Contract Administration generally refers to carrying out the day-to-day processes required by the Contract. Contract Management often includes broader oversight of those processes, significant contractual issues, claims, risk and the overall contractual position of the project.
5. Why is Contract handover important?
Contract handover gives the delivery team the information needed to manage the Contract that was actually signed. It should identify important amendments, remaining risks, notice requirements, Variation and EOT procedures, payment requirements and other provisions that affect project delivery.
6. What should be included in a Contract Obligations Register?
A Contract Obligations Register should capture the requirements that need active management under the particular Contract. These can include notice periods, reporting, program requirements, insurance, security, submissions, approvals, Payment Claims and other project-specific obligations.
7. How does poor Contract Management affect project profitability?
Poor Contract Management can affect profitability where the Contractor incurs costs but fails to preserve or establish its contractual entitlement to recover them. Variations, EOTs, claims, payment deductions, unresolved Subcontract issues and unreleased security can all affect the final commercial result.
8. Does Contract Management include Subcontracts?
Contract Management should include significant Subcontracts because the Contractor may depend on its Subcontractors to meet Head Contract obligations. The upstream and downstream procedures need to work together where the Contractor relies on Subcontractor information, notices or performance.
9. Does Contract Management continue after Practical Completion?
Contract Management usually continues while contractual obligations or entitlements remain outstanding. These can include defects, final Variations, claims, Final Payment Claims, warranties, retention, security and Final Completion requirements.
10. When should a Construction Lawyer be involved in Contract Management?
A Construction Lawyer should be considered where the project team needs legal advice about significant contractual rights, obligations or risk. This commonly arises with substantial disputed Variations, time bars, EOT and Liquidated Damages exposure, termination, suspension, security calls, major payment disputes or complex design responsibility issues.
Book a Free Chat About Your Construction Contract Management
If you have a specific project problem or Contract Management issues are recurring across several projects, tell us what is happening.
Blaze Business & Legal can look at the Contract, the way it is being administered and the commercial effect on the project, then identify what assistance is actually required.
