7.15. Contract management

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7.15.1. Amendment to Contracts

Process Owner | GM office & Commercial Department

Amendment to contracts emerges due to change in scope, values and other aspects by way of Variation order or otherwise. While the issue of variation order itself becomes an amendment to a contract, at times, there could be a requirement of amending the contractual clauses due to learnings from the execution till date or need of amendment initiated either by the Contractor or GM office or commercial department. It isn't easy to detail the possible reasons at this stage but should there be a requirement of amendment of a Contract following process shall be adopted.

 

Rule 7.20

(Rule 7.20)The process involved in an amendment to Contract is as under

  1. The amendment to contract can be initiated by either the Contractor or the GM office or by the Commercial department.
  2. Every Variation order should be constructed as an amendment to contract sum, and suitable provision to that effect shall be included in the standard contract document.
  3. Sooner the GM office receives a notification for an amendment to contract from the Contractor, or sue-moto initiate an amendment to the Contract, GM office shall notify the Commercial department with the reason for the change and background.
  4. On receipt of such notification, the Commercial department shall initiate a joint discussion with Contractors’ commercial team and GM office and agree on the changes to be incorporated, requiring a series of meetings and negotiations.
  5. Once the negotiations are concluded, the Commercial department shall execute the amendment to contract with the Contractor.
  6. The amended Contract shall be uploaded in the ERP's repository by the Commercial department and copies shared with the QS, GM office & procurement department.
  7. Should the amendment to Contract require a change in the Schedule, the delay report shall be done by the GM office.
  8. Should the amendment to Contract require a change in the BOQ values, the site QS team shall be permitted to initiate the change in BOQ under the ERP.

7.15.2. Cancellation of Contracts

Process Owner | GM office, PMO and Commercial Department

Cancellation of contracts is very rare. However, should there be a situation for cancelling a contract the same needs to be done by following a proper process. Firstly, the decision of cancelling a contract should be treated more like a Change Management where the overall impact on the time and budget has to be correctly evaluated and understood. No decision should be taken merely because of the Contractor's non-performance unless it is essential, and there are no other options left but to terminate the contracts and get another vendor on board.

    Rule 7.21

    (Rule 7.21)The process involved in cancellation to contract is as under

    1. The GM office shall initiate the requirement of change of Contractor (in case of NSC, in discussion with GC) by sending a detailed note to the PMO by including the background for the change, likely impact if the change is not made, the potential impact of change is made, impact on Schedule and Budget etc.
    2. The Director PMO shall evaluate the impact of these changes, discuss with the Commercial Department and the Procurement Department and send a formal recommendation to the Group CEO and Director Operations.
    3. Joint discussion shall be held between Group CEO, Director Operations, Director PMO, Head -Commercial Department, Director -Procurement & Director Finance to decide the strategy, legal impacts, likely claims, settlement of accounts, counterclaims etc.
    4. Once the strategy is decided, the commercial department, jointly with the Procurement department, shall initiate the discussion with the Contractor concerned with GC's help and assess the overall impact and way forward.
    5. Post conclusion of negotiations, the commercial department shall present the finance committee's outcome for final approval.
    6. Once approved by the Finance committee, the recommendation shall be communicated to all the stakeholders by the Commercial department.
    7. Simultaneously, the commercial department shall initiate the execution of cancellation of Contract.
    8. The GM office shall initiate the handover/takeover of works including Joint Measurement Survey of the Works with an agreed cut-off date, to be approved by the GM.
    9. Simultaneous to this, the Procurement department shall initiate getting new Contractor as a replacement.

    7.15.3. Documents Control and Management:

    All originally signed contracts/Amendments/POs/WOs/Claims/Legal documents/ Insurance copies must be preserved in digital form in ERP and physical form by the Legal department under the Commercial Department.

    Original Bank Guarantees need to be under control of Finance & Accounts

    Legal department should endeavour to engage a reputed third party agency such as Writers to professionally store and retrieve the original documents.

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Scope of ERP

The entire process of contract amendment is covered under ERP in given in

Appendix 24.

Appendix 23.

Rules:
Rule 7.20 Amendment to Contract

Rule 7.21 Cancellation to contract

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