CONTRACT MANAGEMENT Format No.

P:IS:II:08
PROCEDURE
Rev.00 31 Mar 2018

1.0 PURPOSE

The purpose of this Procedure is to set forth the process for managing all types of
contracts during the course of the project.

2.0 SCOPE

This procedure is applicable to all projects managed by Synefra Engineering &

Construction Ltd., in the capacity of Project Management Consultants, unless contract
management is out of the purview of Synefra per its contract with the client.

3.0 RESPONSIBILITY

Head - Contracts & Procurement department will be responsible to follow, document and
implement the process.
Head – e-PM is responsible for approvals.

4.0 DEFINITIONS

No special definitions apply to this procedure.

5.0 METHOD

Contract management for any project is broadly divided into three phases:

a) Pre award phase

b) Post award phase
c) Closure phase

Pre award phase

Various stages involved into this phase are as described below:

 Preparation of thumb rule estimates – Immediately upon preparation of client

brief and after understanding client needs, a conceptual estimate of the project
needs to be approximated in order to have preliminary knowledge of project
estimate.

 Prequalification of project consultants – It is important to identify the type of

consultants which are required to fulfill the design needs of the project. Project
management team needs to set up a prequalification process to understand
capability of the consultants to be appointed.

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 CONTRACT MANAGEMENT Format No. P:IS:II:08
PROCEDURE
Rev.00 31 Mar 2018

 Consultant appointment – Consultants are appointed by floating Requests for

Proposal to short listed consultants who are having background in providing
services for similar types of projects. Proposals are then evaluated on various
parameters such as technical capability, fees proposed, etc. Recommendation for
appointment is made after the completion of the negotiation process and with due
inputs from the client.

 Conceptual design and preliminary estimate – Once the consultant is

appointed, the conceptual design is prepared with continual interaction and inputs
from the client. The preliminary estimate is to be prepared by the design consultant
and validated by the project management team. This is one of the important stages
where the team needs to make a decision on adoption of a procurement strategy.
Various procurement contracting alternatives are available; some of them are listed
below:

o Item Rate Contract

o Design & Build Contract
o Design, Bid and Build Contract
o Lump Sum Contract
o Maximum Price Contract
o Fixed Price Contract
o Partnership Contract
o Alliance Contract

 Tendering process – Upon the finalization of the type of contracting system to be

adopted, the works are divided into various packages and detailed estimates along
with the tender document are prepared. The tendering process normally involves
the following sub steps:

o Vendor approval:
 Prepare a list of suggested vendors; approved by client
 Perform vendor visits, if required
 Document submittal checklist review
 Prepare vendor evaluation matrix
 Prepare final list of approved vendors

o Bid preparation:
 General conditions of contract and fiscal terms approval by client
 Tender drawings, specifications and bill of quantities validation
 Compile tender documents

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 CONTRACT MANAGEMENT Format No. P:IS:II:08
PROCEDURE
Rev.00 31 Mar 2018

o Tendering and technical negotiations:

 Pre-bid meeting
 Issuances of tenders to pre-qualified vendors
 Issuance of any related addendums
 Review of vendor proposals and submitted documents
 Prepare techno-commercial comparative statements
 Technical negotiation meeting
 Prepare revised techno-commercial comparative statement
 Logic note on selection of vendor

o Commercial negotiations:
 Commercial negotiation meetings
 Prepare final cost comparative
 Vendor finalization

o Issue of Purchase Order / Work Order / Contract:

 Pre-award meeting
 Issue of Letter of Intent
 Regret letter to unsuccessful bidders
 Receipt of acceptance to Letter of Intent from vendor
 Issue of Purchase Order / Work Order / Contract

Post award phase

Upon the award of works, the tender documents are transformed into a contract between
the client and the contractor. The immediate step after the award of works is to coordinate
for completion of the formal agreement between the parties. As part of the legal
comittments, the contractor is bound to submit certain documents such as Contractor’s
Insurances, Bank Guarantees, Labour License, Provident Fund, Client Indemnity, Cash
flow statements, etc. The Project In-Charge needs to coordinate with the contractor and
ensure any and all submissions are made by the contractor before issuing any advance
payment to him.

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 CONTRACT MANAGEMENT Format No. P:IS:II:08
PROCEDURE
Rev.00 31 Mar 2018

As work progresses, the contractor submits invoices in periodical manner as per contract
terms and the certification of invoices needs to be managed effectively to:

a) Avoid delays
b) Repetitive works
c) Ensure accuracy in certification

Some of steps to ensure effective invoice certification management are listed below:

a) Standardization of format for abstract sheet, certificate of payment, measurement

sheets, reconciliation statements, etc.
b) In case the number of vendors is more, adopt an invoice submission cycle to avoid
too many invoices getting submitted at same time.
c) Adopt a ‘Joint inspection method’ for certification of work done in a periodical
manner and jointly with the vendor.

d) Prepare a checklist to ensure:

1) Vendor has submitted all the supporting details

2) All necessary deductions such as mobilization advance, retention, debit notes,
noncompliance reports, etc. are made.

Changes, extra items, variations, etc. become unavoidable during execution of works.
However, an effective procedure needs to be adopted for documentation of all the vendor
claims, changes, variations, extra items, etc. during course of any contract. Refer:
Change Management Procedure (P:IS:II:18)

Cash flow management and preparation of a cost report is the most important during the
execution phase of contract management. It is also important to adopt the most suitable
method for the documentation of the cost reporting system. Cost reports should include,
but not only be limited, to following important documents:

 Cash flow chart

 Graphical presentation of cash flow through earned value method
 Project budget, committed project budgets, budget under commitments
 Financial report and forecast
 Status of items under procurement and supply chain management
 Vendor wise summary of invoices certified and under certification
 Change control log
 Update on vendor submittals such as insurance policies, bank guarantees, etc.
 Summarized statement of material supplied by clients.

Disputes if any are to be resolved as per the terms and conditions agreed in contract
document.

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Closure phase

Upon completion of works, the vendor needs to handover the facility and submit a final
invoice with the necessary documentation. General steps to be following during this phase
are as listed below:

 Vendor submits all guarantee/warranty documents, operation and maintenance

manuals, snag list completion report, testing and commissioning report, as-built
drawings, shop drawings, etc.
 Completion certificate is issued to vendor by Project In-Charge
 Necessary approval from statutory and/or government authorities are in place
 Vendor submits final invoice with necessary supporting documents and fulfilling all the
contractual obligations
 Any/all pending disputes resolved
 After certification of final invoice by Project In-Charge as per stipulated norms in
contract document and vendor submits No-Claim Certificate
 Vendor completes defect liability period

6.0 REFERENCES

 Certificates of Payment F:IS:71

F:IS:72
F:IS:75
 Closure and Transfer Management Procedure P:IS:II:19
 Vendor Claim Settlement Procedure P:IS:III:16
 Change Management Procedure P:IS:II:18

7.0 RECORDS

Necessary records to be maintained in soft and hard copies at the Head Office for all
projects.

8.0 PROCESS FLOWCHART

Refer Process Flowchart on Pages 6 - 8

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