I find that having liquidated damages in a contract from my client helps me as a project manager.

Companies often want to avoid having liquidated damages in the contract.

However, as a project manager, I find it is a lot easier to get resources within the company to assist with the completion of a project if there are liquidated damages or penalties for late completion in the contract.

This makes senior management take the project more seriously. They are then less likely to reallocate resources away from your project and are more likely to give you resources to your project when requested.

Tagged with: liquidated damages • resources

Filed under: Contract • Risk

Avoid the use of superlatives in contracts and documents.

E.g. “all, make sure, assure, insure, as necessary”.

These can be interpreted as making a guarantee.
It would be better to use phrases such as “The company shall report observed failures of the contractor to the client”, instead of “The company will inspect all of the work to make sure it complies.”

This means you are not responsible for work you don’t do, you just report failures. If you leave the “make sure it complies” part, your company could be held liable for failures that are out of your control and not part of your work.

Generalisations should be avoided. Specifics are better.

Tagged with: generalisation • guarantee • liability • specifics

Filed under: Contract • Documentation • Risk

Make sure to allow for inflation in cost estimates.
Particularly allow for large increases in raw material costs (e.g. stainless steel, copper).

This is important in the tender preparation process. You don’t want to offer a fixed price and find that your material costs go up dramatically.

It is common to put a clause in your contract/offer conditions that allow for price increases on certain parts of your work if the material costs increase above a set percentage.

Tagged with: conditions • Cost • estimate • inflation • materials • Tender

Filed under: Contract • Cost • Tender

Clarify the terms and conditions with the new project manager.

If the client changes during a project (or the client project manager changes), then you as the project manager should make sure to clarify all the contract terms and conditions, deliverables, and scope with the new client or client’s project manager.

Obviously the scope will need to be clarified, but it is also important to go over with the new client or project manager all the finer details of the contract to avoid any uncertainty or surprises on their part.

It is not ideal just to let them read the contract. Good communication is important and a proper discussion of the existing terms will make a smoother business relationship.

Tagged with: Client • Communication • conditions • Contract • deliverables • details • Scope • terms

Filed under: Communication • Contract • Documentation

It is important to clarify the ownership of drawings your company produces.
Make sure the contract or agreements clarify the ownership of drawings and documents.

Some clients may expect the drawings or designs to be their property once a project is delivered. If your company’s drawings or designs are proprietary or are designs you use on other projects you will need to state that your company keeps the ownership in the contract.

If you don’t have this in the contract, it can make a difficult sticking point with the client at a later stage in the project.

Tagged with: Client • Contract • designs • drawings • ownership

Filed under: Contract • Design

Make sure you get a signed agreement before work is started on the project.

This is important both from getting the signed contract from the client, but also to do the same if you are using subcontractors.

Make sure the agreement allows you to terminate the subcontractor

Get written agreement to all terms and conditions.

If agreement is a long process and you have to instruct the subcontractor to start some work, make a written authorization and get it signed and set a cost limit to that work.

If your company decides to begin work before getting formal written approval to proceed you must get approval from management as high up as possible in your company. You must also be aware that the risks on the project have substantially increased by not having a written contract.

Tagged with: approval • Contract • sign

Filed under: Contract

Know the scope of your contract. Read it often. As a project manager it rules your role on that project.

Make sure you clarify the scope with all stakeholders to be sure you all understand it the same way. (Client, designers, drafters, managers, contractors, etc).

Tagged with: Contract • Scope • stakeholders

Filed under: Contract • Scope

Make strong, clear language in the contract documents so that your company’s duties are very clear.

This avoids problems later on in the project.
By making the duties clear (the scope) you avoid the problem of extra duties being added to the project that are not paid for.

A clear scope should be clear, and understood by both parties in the contract.

Tagged with: Contract • duties • Scope

Filed under: Contract • Scope

Make sure your team has a comprehensive project work plan.

This should show details of design assumptions

Tagged with: assumption • Design • plan

Filed under: Design • Planning

Don’t admit to errors or omissions until you consult with a proper internal team (managers, project director, financial, legal).

If you are admitting an error, make sure it is actually you or your company at fault and not the client or contractor.

However, don’t waste a lot of resources on the above if it is a small mistake on your company’s part and can be fixed easily, cheaply and with no other ramifications. (e.g. you specified table E flange on one pipe but pump to match it comes with table D flange, this may be only $100 to fix, you should make sure that as project manager you have the authority to authorize small fixes like this quickly and easily).

Tagged with: errors • legal

Filed under: Contract

Be wary of low bids by contractors.

Get a number of bids. Compare and check why a low bid is so low.
If a low bid is accepted, be especially careful in your documentation, communication, contract conditions, and liabilities.

Be aware that by taking the lowest bid (especially if it is significantly lower than the others) you will be increasing the risk that the contractor won’t be able to deliver to the quality and schedule you require.

Tagged with: bid • contractor • Procurement • Risk

Filed under: Contractors • Procurement • Risk

If the project you are tendering is going to have complicated design or a design that is unusual or new to your company or industry then make sure you allow extra budget to cover it.

This is for the extra work in design checks and making sure it is adequate fot the scope.

It is also to cover the costs of responding to RFI’s (request for information) from the contractors that must construct the design.

Tagged with: budget • Design • Planning • Tender

Filed under: Design • Planning

Do a proper risk analysis before bidding for and accepting a project.

• Be especially aware of “first of its kind” projects for yourself, your company, or your industry (industry level is particularly risky).

• If the project is the first of its kind kind in that industry, the client should pay for prototyping, research, etc.

• Be wary of giving warranties on first of kind for that industry.

Tagged with: Risk

Filed under: Planning • Risk

It is important in a project to keep very good documentation.

It should be complete, organised, and easy to search (not unorganised folders on lots of team members desks where no on knows where parts are).

• This improves the projects legal standing.
• Reduces miscommunication problems.
• Clarifies scope, variations, design, etc.
• Allows team members to easily find and access project information (without having to go around asking other team members)
• Allows new team members or a replacement project manager to join the project easier.
• Reduces wasted time.
• Allows audits to run smoothly (I find that if your documentation is properly organised the auditors give you a lot less hassle, and you get a good audit report).

Tagged with: Documentation

Filed under: Documentation

When preparing a tender, signing a contract, or making a purchase order, be careful to check a potential client’s or contractor’s track record. They may be a known litigator.

Your company may keep a record of problem companies.

Preference would be to find an alternative supplier/contractor, or to not pursue the project.

If there is no alternative then you must be extra careful with the wording of the contract. You should also have senoir management review and approve the contract before signing it.

Tagged with: Client • Contract • contractor • litigator • supplier

Filed under: Contract