These is the first in a series of blogs that will discuss the importance of creating a Contract Administration System that will help you better track your contracts and improve your chances of recovering full payment. Below are the first 2 of 10 steps to create a Contract Administration System.
But first, why set up a Contract Administration System?
It is becoming increasingly difficult to get owners to pay for change orders and claims. Many contractors lose their chance to recover on these claims because they fail to comply with the contract or fail to appropriately document their claims. A Contract Administration System will put your company in a position to understand the contract’s requirements at the beginning of the project and arm you with the knowledge of how to document and preserve your claim.
1. Read and understand the contract.
Yes, you will need to read and, more importantly, understand the contract. Someone in your office must be familiar with the all of the requirements of the contract, including the procedure to notify the owner about project problems, such as a change in site conditions or how to request a change order. An owner will have little difficulty rejecting your company’s claim if you fail to comply with the basic notice requirements of the contract.
2. Identify the risks for the project.
Discuss the project risks with your management team. Brainstorm and list the risks that could be involved with this project. A few might include:
- Defective Design
- Differing Site Conditions
The majority of the risks you identify will likely be present on all of your projects. By knowing the potential risks associated with the project at the front end, you will be in a better position to respond to those risks should a problem arise.
A Contract Administration System is an invaluable tool that will put your company in a much better position to recover what is owed under the contract, be it through a change order or making timely application for payment. In future posts we’ll discuss the remaining steps necessary to create a Contract Administration System.