Change management - In support of a streamlined approach
- Is it just us or is contract management on projects, large and small, still wildly clunky and inefficient? Presumably AI will remedy this issue in short order but for now, it seems to us that each client, contractor and system is different, and none of them are perfect or even really passable. What is going on.
- We’re still running contract administration for clients in Excel spreadsheets. However what we do at the beginning of a project is setup a streamlined spreadsheet across all contracting parties in the supply chain. Really we are talking for “change management” – aka variations. That is, we dictate that the spreadsheet must be used by downstream subcontractors, then the principal contractor, then the developer client. All parties are using in essence the same form of spreadsheet.
- Obviously, some information will be commercial-in-confidence to the head contractor, with information which that head contractor does not wish to share with subcontractors. Think, schedule of rates. Still, that can be troubleshooted with a simple fix.
- The key feature to such a spreadsheet is to mandate a schedule of rates card across the project. All schedule of rates have a “unique reference number”, such that the downstream subcontractor is using the same URN for a “dump truck” (for example), but the rate which the subcontractor sees will be different to the rate applied by the head contractor to the same URN. So each contractor uses the URN for the kind of rate, although the rate itself will vary depending on who is claiming against who.
- When the head contractor receives the claim from the subcontractor, the head contractor simply copies the subcontractor’s data into its own spreadsheet form (which is essentially the same), and formulas do the rest. There is of course a verification exercise for the head contractor to do, in checking the day-dockets match the hours claimed for the plant and equipment claimed. Still, in an instant, there is no more manually moving figures around and shuffling numbers into a different upstream claims document. All individual claim documents then translate over to a separate register, such that the total claims management/variation position is identified.
- Of course the head contractor, if engaged under a design and construct agreement, may have additional costs to pass upstream to the client as a result of a change/variation. For example, design consultant hours or internal engineering costs. We pass those costs upstream via a separate part of our spreadsheet dedicated to design hours, which allows more descriptions than the usual schedule of rates multiplied by the number of hours of plant and machinery.
- Such a spreadsheet can work with different pricing strategies for change orders. That is, not just retrospective records of costs incurred but also to be used as a tool for forecasting costs to be incurred and pricing change orders on a lump sum basis (which is obviously more risky for the contractor but potentially more lucrative as well).
- We’ve developed our streamlined approach with considerable success. If implemented early on in a project, all parties can recommend bespoke customisations which they’d like to see included. For example, the data can be manipulated to spit out certain reports that one party would particularly like to see.
- Each party will need to have project contingencies recorded elsewhere, but having separate spreadsheets is commonplace and in our view, the slight burden of needing to refer elsewhere for project contingencies is outweighed by the significant benefit of streamlining the claims process.
- We are familiar with differing software on the market but still, in our view it doesn’t quite cut the mustard with what is needed to really reduce the administrative burden on projects. Let’s see where the next generation of software takes us.
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