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hello and welcome to Mer's webinar titled contract Management in a nutshell principles and practices the focus for today is the three main phases of the contract management process uh my name is Al albas and I'm excited to share with you today some takeaways from some from my years of experience working for leading companies in North America and the Middle East over 30 minutes I will go over a number of slides after which I will open the floor for your questions we will then take another 30 minutes or so to answer your questions please feel free to type any question into the chat box you see it on the lower left corner uh of the window on your screen and I will I will uh I will we will capture them and we'll try to address them one by one at the end of this session okay then let's get started I guess uh the contract Management in a nutshell principles and practice uh we are going to talk about um this is a little bit brief a bio for myself uh my name once again is alaz I have a degree in mechanical engineering from Kuwait University I have also a master's degree in mechanical engineering from University of Jordan I have an MBA from Wayne State University in Detroit Michigan in the United States I am also a PMP certified uh professionally I've been working as a project engineer uh in Industrial Development Bank of Jordan I worked there for a couple of years and then I worked as a project SLC contract manager and dler Chrysler General Motors and Ford Motor Company uh that's I spent almost together like around 15 years all together there I also worked as a part-time lecturer in University of Phoenix and Baker College seven years ago I joined Merc a part of the staff currently I'm a partner with Mark so that's a little brief about myself and we're going to get started uh with the agenda uh we're going to start off today by defining contract what do we mean by by the word contract we're going to then after that we're going to go to different contract types and then we're going to talk about contract framework uh after that we're going to go with the contract preparation contract award and contract Administration those are the three main phases of any contract uh the first one is preparation then award and the last one is Administration other people address them by pre-award award and post award is the same thing but different you know um different conations sometimes uh the last thing we're going to do is some contract management best practices uh defining a contract how do we Define a contract uh contracts are basically uh you usually are defined as a as a binding agreement what do you mean by that they they are it's a binding agre between two parties or more uh to do something or to refrain from doing something uh so basically one party will pay probably another party in order to do something or sometimes to refrain from doing something what do you mean by binding binding means enforcable by law so if two parties are uh between them there's a contract between them and the reference for them in in case there was a conflict they end up going to court will be the contract so the Contex will be the reference for them and that's why the word binding so that's what the judge will look at it and that's why it is called binding so it's forcible by Court um the other part will be agreement the word agreement has three components uh it has an offer acceptance and considerations so when we say uh an agreement we we talk about we talk about three party three parts it will be an offer acceptance and consideration offer like somebody will offer something like I want to buy your car so I'm offering you my car and for a certain dollars amount uh the acceptance would be saying yes or or sending me an email saying yes or anything that show me that you accepted my offer and the last part would be um consideration which basically we are exchanging something of value this is overall the Gen the generic definition of contract it can be different from one country to another one culture to another one law to another uh this is the most western maybe definition of the contract and you know it can have a little bit different uh it can be a little bit different from one area to another but we we are going to stick for this time being to the generic form as I said earlier here there are six different elements of a contract and the first one would be is an agreement and again we Define agreement because as as has three different pillars or components and offer acceptance and consideration between two different part between between two or more competent parties and competent parties mean has capacity they have hold legal capacity and they have to have to hold uh mental capacity and they and a lot of time we also has to have some auth authority to do that uh another thing it used to be based on genuine Ascent or consent from the from the both parties so both parties have really to be uh to have uh a real genuine genuine need for this particular party there I mean we're trying to to take away any kind of blackmailing or pressure that one party can put to another it has to be supported by consideration as I said earlier consideration means exchanging something of value and that's important in order to be able to distinguish that from a gift gift is not a contract or it's probably have special laws and special rules and regulations that's very different than from the contract laws overall uh the fifth pillar would be it has to be made of Legal Objective it cannot be done something illegal that all contradicts the country or the area or the jurisdiction uh it has to be something legal so you cannot sell something illegal in in in in in in in a specific country and and the last component would be in a form that's required by law it can be sometimes the law required that certain contract has to be in writing other times it doesn't have to be so it depends on the on the on the law again it depends greatly or vary greatly between one country to another and from one area to another and also uh different contracts have problem also different requirements so again I just want to emphasize that uh every contract has the has it has to be it is an agreement it's a binding agreement and again it has to have the those important pillars otherwise it will not be all fulfill the contractual obligation requirements there are three major different types of contracts we have fixed price uh coast reimbursable and time and material contracts uh some it has some people can call them uh lumpsum contracts Coast plus contracts and unit price contracts the same thing different uh different terminologies for them so we'll start off with the fixed price contract fixed price contract or also called as uh lumsum contracts are probably the most common type of contracts that we mostly see especially in governmental and semi-governmental um organization those are basically you are uh one party has to reimburse or to to compensate the other party for a certain Dollar's amount regardless of what's going on uh if whether the price of the steel go up price of the Silicon chips went down dollars go up it doesn't matter by the end of the day one party has to pay the other party a specific dollars amount um that's can be very different from the coast reimbursable which is a coast plus uh contract in the first one as we said the first in the fixed price usually the contractor burden or take most of the burden of the risk because if something happens to the prices of raw material or any generic uh or elements specific in the contract that makes the that that will shrink his profit uh because again for the other party the owner or the client will have to pay the same amount regardless so having said that the contractor has to pay has has actually the burden of the risk and S and therefore he has to find a way in order to compensate for that risk somehow um The Cost Plus is be is going to be a little bit uh a little bit different from that aspect in this case the owner has will engage with the contractor with this contractual obligation in which the owner will will will compensate the contractor with their cost the pure cost plus whatever percentage or fee that the the contractor that that the contractor will earn ing to the contract or the way the way the contract is written uh in this case probably clearly actually uh we can see the difference in that uh sense that then fixed price the the risk uh will be on on the on the on the contractor while in the in the in the coast plus contracts the most of the risk will be on the client because again whatever happen the the contractor will be will will keep uh presenting invoices in which the client has to compensate the contractors for um so again uh the risk is is connected somehow to different elements and that's that that I would like just to to to present the to to present the impact of the decision on which tab of contract that we have to engage in and the risk associated with that the last tab of contct contract is probably common as well especially in smaller smaller contracts or smaller purchases and that is time and material or what we call it what we also call it unit price contract in which the owner will be compensating the contractor per unit or per hour or per kilo per ton whatever I mean the the the agreement would be so are the three major contracts a lot of what if would we would run into it if we go with the unit price contract it will be somewhere in the middle between the fixed price and the cost plus it has some fixed price elements and has also some Cost Plus elements into the unit price and that's why we can say both parties share the risk having said that it doesn't mean that the unit price would be probably the best way to go all the time uh every every type of contract has pros and cons and there is no perfect or no best type of contract it depends on the situation it depends on theg organization it depends on so many different factors that we need to take into consideration before make such a judgment uh having said that also I just want to make sure that people understand the fact that uh those are umbrellas if you will uh it's uh it's categories uh so we have fixed price contract category and Cost Plus contract category and time and material category and which means that under each category we probably have a different we have three to four to maybe five different types uh we're not going to go into everyone every one of them uh and the difference between each one of them however we need to pay attention that we can see or we we we will see a different we will see different types of of of contracts uh under each of these categories uh let's start again with uh uh contract framework or some people like to like to call it uh contract life cycle if you will uh and it h it has three I I made the four because sometimes they like to put evaluation as a separate uh separate uh phase uh but generally what we mostly what most of the time we see is we have three different phases we have preparation or some people call it pre-award phase or we have award and and we have finally Administration or a lot of people also know it as uh contract uh post award phase so what are we talking about let's let's think about the award is the the time frame where we finally select the final contract and we engage with them in order to finalize all the components of the contract and sign the contract so this is the award phase anything prior to that is will probably be under the preparation phase and think after signature of the contract will be the administration phase so everything we do from scratch all the way until we basically get to the point of selecting contractors the the right contractor or the winner will be under the preparation phase and everything goes from the moment we award the contract all the way until the contract is closed and delivered will be under the administration phase so we'll start off with the contract preparation contract preparation we are going to go through seven main steps what do we do in this is we are going to uh we we start usually off the contract preparation by identifying needs contracts are not born out of vacuum uh contracts are usually come as a response to a need certain needs would would force or would make that possible so overall organization has to have a certain need and that certain need need to be fulfilled somehow either in-house or by Outsource uh after that after we identify the need and the and the the proper the proper use of that need we go to the uh we need to develop what they call it business case and market research we we need first to find out how can especially if we if we need to fill that need from out from outside how are we go we need to find out what are you know who can be able to do it for us uh that's we be part of your market research what organization will be able to provide you that particular service or that particular product or Goods uh we also need to build a business case uh a business case that describe different aspects such as uh where to get this from if we are end up going to what would be the total approximate budget uh what would be the cost versus the benefit what would be the availability of such a product or service in this market so we need to develop the feasibility or the you know justification for that particular coming project after that we need to develop number three would be the developing acquisition plan acquisition plan we need first to make a decision are we going uh in-house or we are going Outsource if we are going in-house the process here stops it uh we'll go through a different process probably through manufacturing or or engineering or something like that but from our perspective in contract and procurement the proc will stop if we're going Outsourcing by doing a contract that's one thing that we need to make a decision about in this particular step so we have a need it need to be fulfilled that's step number two and step number three which would be we need to go out we need to Outsource that one uh if we decide to go out to go that route which is outsourcing or Contracting we we need to evaluate our resources both internally and externally erally uh we need to answer certain questions such as uh do we have the capability of creating score of work do we have uh the capability of uh of going of administering a administering contracts do we have the resources for that do we have the knowledge and the experience do we have financing do we have uh do we have uh credit you know a lot of number of question that we need to be addressed at this point uh by evaluating this resources after that we go through developing a a whole a whole contract plan contract pl we need to answer very important question at this point such as what type of contract am I going to go with fixed price contract am I going to go with a Cost Plus contract and what what or am I going to go with a unit price contract and even if I want to go with a fixed price contract I need to answer a questions such as what type of fixed fixed price contract I need to go with so those need to be addressed another thing that probably also determin the strategy going forward am I going to go with a one contractor or am I going to go with several contractors so I need to break down the scope of work into several components and I need to give each one of them each each each each part of the scope of work to a different contractor uh these decisions need had to be addressed at this point uh and that will help me to go to step number six which is writing scope of work uh scope of work is what they call it a lot of time the heart of the contract and that is simply What description a full description of uh of the pro of the of the of the project itself um and finally after that we need to determine are we going to go or giving this bid or or this this uh this contract or the way we going to solicit contractors going to be through pre-qualification am I going to go with the open B am I going to go with the short listing what is the strategy I need to go and do it overall in order to get uh potential contractors uh before we go forward I would like to present that poll in front of you and that poll basically says the following what do you think number one reason for challenges we face in managing contracts in the Middle East what do you guys think okay are we're about done I guess so okay we going to end voting at this moment last chance go ahead okay fine uh end voting and that is show results basically what you guys say is uh almost there are people saying between per poor performance measurement system or I think people are referring to poor kpis the other one would be poor or unclear scope of work they are tie 30% each and then you have unqualified contractor a little bit less and soul and singer sourcing will be probably the least um the result is kind of expected uh but uh generally speaking when I ask this questions probably in the training rooms or overall more generically uh I might have a little bit more lead towards the Third one which is poor or unclear scope work a lot of people are suffering from this point and that's why a lot of people think that you know the the better we do in in preparing ourself or investing our time in doing scope of work the less problems we face in the future overall so again it is kind of expected uh people have different reasons why you think we having problems overall and challenges in the Middle East for contracts but one of the main or leading reasons would be the SC scope for overall uh scope of for what is scope for is a document that we usually uh as I said earlier is the heart of the of any contract it is a document that explain in in in details what are the goods and the services in sufficient detail that need to be uh we require it or need to be uh we need to acquire it through contractors uh the better the more complete the clearer the scope of work the less problems and headaches we are going to face towards the contract Administration uh part so again uh a lot of people think about it this way uh the the more I invest in time and effort and and and and preparing good scope of work the better overall we see results in terms of contracts we can see in J generally speaking uh what do we see in the contract uh of work actually think about it this way scope of work answer your basic English language questions or any I any language question which is what why where when who and how so basically you will see in scope of work is it's a description a full description which which is a description of the work required which is addresses the answer the question what but also you need to put to to include if possible the objective why we're doing this contract or why we're doing this project and that's basically address the question of why um how long the timing uh how much the budget uh the performance standard uh reporting requirements resources need to be provided Staffing requirements all these aspects need to be addressed as well if you have a if you have a better written probably SC for so SC for as we said is one of the leading lead one of the most important document of the project of the project overall and it's one of probably the most difficult one because again you need to to to create something that both parties has to commit into it uh for the duration of the contract evaluation will be the second phase and a lot of time again uh people uh sometimes uh I I actually put it differently this time a lot of time I merge it with the preparation uh overall what do we do in evaluation we go through four steps especially if we come if we're talking about bidding process we start off with the preliminary evaluation in which we are making sure that uh you know there is no major deviation uh something that will you know we don't want to waste our time and effort and money in trying to uh evaluate something that we know that we not going to be a candidate any anyway so we do preliminary evaluation to make sure that we are checking the eligibility the you know the the the agreements uh the overall agreements the signatures all those you know important things if uh if we pass if the if the bidder uh passes the preliminary evaluation it goes through what we call it Technical and Commercial evaluation we need to evaluate each bed technically and commercially sometimes together and other times we do them separately so it depends again on the organization policy of your organization we need to evalu we need to try to use evaluation criteria uh so we need to know beforehand before we start opening beds that what are we evaluating and what are the criteria ingly uh we do that again before we receive an opening bets by the time we do this evaluation and applying those evaluation criteria we can determine whether which one of the potential better will be the winner and that particular potential Winer will be recommended to be awarded this particular contract so we need to do the last thing that uh committee or the tendering committee need to do is is is to write the recommendation report for that particular biller uh after that we enter the third phase which is we need to ask uh it say probably a shorter phase in which that we need need to sign uh we need to complete the signature and acceptance for the terms or conditions of the contract um we need to address certain things such as do we need to negotiate at this point um yes or no and why uh pre-award a me meeting should we should we do pre-award meeting or we should pass uh how are we going to address the questions for example uh documentation has how need how how do we need to to document every every aspect of the preparation phase um are we go the contract award how are we going to inform the bidder and how to we need to finalize the the contract uh we need to start issuing commencement order uh approval for materials equipment uh we probably have to communicate the our HC procedures and finally we need to also make sure that all parties are approve approve for our monitoring procedures so again in this one basically can be summarized as selection of the contractor and also awarding and uh basically signing the contract and at that point we enter the last phase of this contract in which that uh we are we we signed the contract we are moving forward so we need to make sure that with the contractor is meeting our contractual uh his contractual re requirement or he's complying basically we need to make sure that the contractor comply with everything the terms and conditions and the provisions of the contract uh we need to make sure that we are able to administer and manage day-to-day operations making sure our eyes are open and uh and making sure the contractual are complying again uh we need if we find any problems or any deviation we need to start providing notices on time before we lose our right also we need to we are the one the administrators would be the one who knows how to get the authorization ation from who and who and approvals and again from who uh in this phase there are a lot of tools and techniques that can help us administering the contract and uh we you know they they need to be because again it's not very it's not very easy job to do that you need to make sure that everything within the contract will be applied contract Administration again include things like mobilization communication uh schedule and cost management variation orders and change management claims extensions dispute resolutions uh disputes overall conflicts uh variation orders all those are part of every time day every time everyday's life of contract administrative contract management TP a couple of things I just want to address before the end of this webinar uh the first thing is it's extremely important to take time time to read and understand and analyze your contract fortunately I've been meeting some um I've been you know encountering some people uh who never read a contract so I'm not sure how they how are you able to administer a contract if you did not read it very well uh you need to read it and have a basic understanding you don't have to be an attorney by any mean but you have to have to have a basic understanding for the contract uh you need to establish some kind of monitoring protocol how how how am I going to monitor the performance of the contractor uh we need to know we need to document I mean one of the most important messages for anyone in contract business is document document maybe and document some more documentation for everything is extremely important and you need to manage issues and variation deviation as you go do not let it accumulate towards the end otherwise it will kill the project overall uh best practices a standard uh standardize your processes so what the way you manage certain contract does not change every time we change a product or a service or a company uh communication is extremely important part of contract management uh make sure and it's very important part of any contract administrator or manager because we manage and communicate every time every day um big chunk of our time is actually spend in communication Lessons Learned is another important takeaway uh lesson learned is uh do not you know so we do not repeat our our our mistakes uh document the goods and the bad uh and finally create some kind of online repository for contracts that commonly used uh terms finally uh this is actually show the courses we provide as Merc and it's how they are related to what I just talked about again uh we have a course for preparation phase or we have another course for administration phase we have another separate training course for tendering uh and bidding evaluation uh if you want if your business including includes some negotiation about contract so we have another course just for negotiation problems disputes and conflicts and headaches are also discussed in the fifth course which is managing contractual claims project management uh there's a very tie relation very very strong tie between project management and contract management so we have a course that basically tie those two together the relationship between them how they affect each other and how what we do we need in order to be able to do both contract and project management properly and finally the the last the most or the the most uh recent courses that I just added to our our portfolio in contract is the last one which is going to be introduced actually for the first time in December end of December towards the I think the third or the fourth week of December which is drafting contracts and writing SC for I think there is a major need in the Middle East especially about that particular course because there is um no not really u a lot of alternative or training for that particular type of course that will come to the end to the end of the webinar or my actually part of the webinar for now uh what I'm going to do is now we're going to start receiving any questions uh okay we GNA we're GNA probably give a few minutes in case of there's any questions if there is no questions we going to stay like we going to say for probably a couple of minutes if there are no questions at all uh we going to probably conclude this webinar thank you everyone for listening and we're waiting give you just just a couple of minutes okay I got a uh I I got actually a question from Mr May or Miss I'm not sure uh Maya pan uh how can we avoid claims there is no way to avoid claims uh there is a way to reduce maybe claims but to avoid them all together is kind of impossible especially for large siiz projects maybe for smaller projects you probably can get away with that but for large siiz projects is virtually impossible how can we reduce the claims is probably can be addressed several ways as I said earlier if we have a good written scope of work that's probably number one weapon for you um if you just the the clear scope of work is a way to reduce the number of claims overall uh the way we do contract Administration is another why another way is what we're trying what are trying to say if you are if if we have good contract administrators they probably be able to address all the problems before we start to be you know getting bigger and we start having claims again claims usually we we seen it as un when we do not have a response for a certain you know uh request or you know a problem that we face over or an issue that we have so that's why uh that's why we can see uh the the the impact of that again if you have a good good uh scope of work uh very clear scope of work if you have a very good team in your kind Administration uh you probably be able to reduce the number of claims that we Face overall and that's how we see our world another question I got is from Mr or Mr or Miss ala how much how much importance is giving to Safety in this region uh it it's very important I mean now in every major organization that I encountered they have their own hsse policy uh there's a lot of emphasis on it uh there's a lot of emphasis on it and uh you know I'm not in safety specifically but you can definitely from our perspective as contracts we generally speaking we see uh Provisions in the contracts that call for safety and we can see it also in the terms and conditions uh which is very similar to the one that we see also in North America from my experience basically the provisions the terms the terms and conditions that we see here in the Middle East very similar to the one that we see also in North America uh technically more than that I really do not know about safety it's probably different than contracts if you're talking about that but I'm just answering it from contract from from contract perspectives I hope that answer your question if not just let me know as well thank you thank you also Mr or Mandan uh I hope I answered your question you wrote yes I did so thank you very much uh there any more questions here somebody's typing something so probably give it another couple of minutes okay got a message from Mr Ramy Mr Ramy said uh how does the change in the way of contract administrator affect the project how does the change in the way of contra Administration I'm not sure if I if I really capture what you really mean what do you mean by exactly how does change in the way of contract Administration uh I'm not really sure about that part but contract Administration definitely affect the project greatly uh as we said earlier the change of in the procedure okay the same it it does affect it uh it does affect it greatly um the project by the end of the day have deliverables products or services uh regardless of what you do you should end up having those product and services however how to get there can be can change and can be different signific significantly and can make your life probably easier can make your life or or the other contractor's life much more complicated uh the contract Administration is again a way that we need to make sure that uh the contractor is complying so whatever tour you you're using uh you need to make sure ensure there's a compliance of the contractor again some people believe that to to hold maybe a tight leash on that and some people do not so it depends on your organization however there will be an effect on the project the more the the more difficult you make it for the contractor the more probably also going to going to expect some kind of more Pro problems and issues you can face from the contractors so what I'm trying to say it probably would not affect the fin the product overall or the service overall but it will affect your relationship with the contractor and it will affect your the way we going to get there so I think that's my you know my take I don't know if that answered your question or I am off so please let me know if uh I don't know if there's any more questions as well we have another 20 minutes thank you Mr Ramy I I hope I did answer that question uh I don't know we'll wait for a few minutes [Music] now okay uh thank you ala for joining us ala is leaving us now thank you very much any more questions guys let me try there somebody probably typing just wait for a minute and then we're going to conclude if we don't to Ty anything okay guys I think at this point we are going to conclude for more questions or anything you'd like me to address please do not hesitate to contact us through .mk.com and I think you will be you can see if uh you need to you know if you have any question will be addressed to me it will be forwarded to me and I'll be more than happy to thank you guys very much it was true pleasure I hope that was use you know fruitful and I hope I answered all your questions I hope you guys have a wonderful evening and I'll uh still hopefully we'll see you in next webinar okay have a great day guys bye-bye [Music] now m.com