One of the key characteristics of capital projects delivery, is that outsourcing parts of or the complete project’s scope of work is a practice that will be always adopted by project owners or employers in their endeavor to transfer projects’ delivery risk to more qualified and experienced third-party entities. Whether it is a traditional Design-Bid-Build, Design-Build (DB), Engineering-Procurement-Construction (EPC), Engineering-Procurement-Installation-Commissioning (EPIC), Build-Operate-Transfer (BOT), Build-Own-Operate-Transfer (BOOT), Build-Own-Operate (BOO), Private Finance Initiative (PFI), Public Private Partnership (PPP) among other capital project delivery methods, contract agreements between the different buyers and sellers involved in delivering the project is a must.
Contract agreements for capital projects can become quite complex and they can include thousands of pages with thousands of defined terms that could have more than one-hundred thousand reference to those defined terms and for which they will become the basis for establishing the thousands of obligations that need to be performed by the different parties of the contract. Managing, monitoring and tracking those obligations in a proactive format can drastically reduce the risk of claims and disputes by ensuring complete compliance and fulfillment of those obligations that will help in protecting the relation between the different parties of the contract.
By definition, an obligation is a requirement, a bond, a promise; something that must be done. Legal terminology stipulates the use of “shall” and “must” to state firm obligations in a contract. The terms “will” and “may” are also used to indicate lesser firm commitments, but are none the less important for each party to monitor and track.
Obligations are usually grouped as deliverable and receivable obligations. For example, if the contract is being managed from the contractor perspective, the deliverable obligations represents the obligations that the contractor should perform based on the contract conditions whereas the receivable obligations, also known as entitlements, are what the contractor is expecting from the employer. On the other hand, if the contract is being managed from the owner perspective, the deliverable obligations represents the obligations that the employer should perform whereas the receivable obligations are what the employer is expecting from the contractor. Those obligations should be managed, monitored and tracked throughout the project lifecycle stages which will also include the maintenance and operation phase that could extend for 20 to 30 years for Build-Operate-Transfer (BOT), Build-Own-Operate-Transfer (BOOT), Build-Own-Operate (BOO), Private Finance Initiative (PFI) and other forms of Public Private Partnership (PPP) projects.
Obligation monitoring and tracking, also known as Obligation Matrix, is the systematic method of breaking down the contract into a pre-defined pattern that fits the needs of the different project stakeholders to provide more clarity and insight into all important and relevant points that are part of a contract. This will enable the different project stakeholders to understand the contract in simpler terms, rather than the requirement to spend a lot of effort to analyze and understand it. Project stakeholders include the contract administrator, project manager, project engineers and others who might have a role in fulfilling the contract’s obligations.
Technology can play an active role in improving the management, monitoring and tracking of contracts’ obligations. This will be achieved by combining the technology of Intelligent Document Format (IDF) like solution offered by Affinitext and Project Management Information System (PMIS) like PMWeb. Affinitext will be used to identify all obligations and entitlements included in the contract documents while PMWeb will be used to manage, monitor and track the fulfillment of those obligations. In addition, and although this will not be covered in this article, the identified obligations can be associated with other project management processes managed in PMWeb including but not limited to Request for Information, Interim Progress Invoices, Potential Change Orders, Change Orders, Risk Management, Work Inspection Requests, Punch Lists, Disruption Events, Claim Notices among many others.
To start with, Affinitext will be used to identify the list of contracts obligations and entitlements for each project in three steps. The first step is “Creating the Task Finder Report” where an established search string is run across the project documents to extract all obligations and entitlements.
The search is a comprehensive set of operative terms like shall, will or must, frequently used by lawyers when drafting complex contracts. The search results are easily previewed within Affinitext or the parameters saved and rerun at a later date. Results are then exported into the Task Finder Report, a macros-enabled CSV which contains a hyperlink back to the source contract and a full extract of each clause.
The second step is “Assigning Tasks in the Task Finder Report”. The Project Team or Contract Manager, work alongside Affinitext to review the Task Finder report. Either independently, or using Affinitext process driven rules, there are drop down options to assist with completing the spreadsheet to assign each obligation to the individual it sits with. In a collaborative contracting relationship, different parties can work through the spreadsheet together, ensuring that all obligations are set-up to be managed fairly.
The third step is “Populating the Task Manager”. On completion, the Task Finder report is imported back into Affinitext by the Affinitext Account Manager. Each task is pinned at the clause to which it relates, triggering notifications and just in time email reminders. All tasks sit in a filterable Task Manager diary to make it easy for teams to look ahead at their responsibilities in the contract. Where all parties are using Affinitext, the verification tool means compliance can be approved directly at the clause. Once evidence is attached and the task is marked as completed, the audit history will sit at a clause level.
Although Affinitext enables monitoring and tracking the status of fulfilling the contracts’ obligations and entitlement, nevertheless, PMWeb can be used to maximize the benefits that will gained from managing those contracts’ obligations and entitlements along with the other project management processes as well as ensure that there will be a single version of the truth when it comes to reporting the overall performance status of a project, program or portfolio of projects.
Using PMWeb visual custom form builder, the Contract Obligation Form will be created. The purpose of the Contract Obligation Fulfillment process that will use this form is to ensure formalizing the fulfillment of all due obligations and entitlements, store all documents that are associated with an obligation or entitlement as well as link all project management records to their relevant obligation and entitlement.
To eliminate the redundancy in completing the Contract Obligation Form fields with data that have been already generated by Affinitext, the Task Finder Report MS Excel created in step 2 will be imported into PMWeb database. This will automatically create unique record for each identified obligation or entitlement as well as populate the Contract Obligation Forms with the imported data. This is a one-time import although it can be repeated if required.
Of course, there will be some data input redundancy for some of the fields in Contract Obligation Form when it comes to updating the actions taken to fulfill the obligations and entitlements. Nevertheless. this is done on purpose as it will enforce the relevant project team member to formally closeout his or her obligation or entitlement fulfilment.
The Contract Obligation Form will include the data fields included in the exported Task Finder Report from Affinitext. Those fields will include obligation type (Deliverable or Receivable), the contract party that the obligation rests with, the project team member responsible to ensure that the obligation was fulfilled, date the referenced obligation will start, time bar to complete the obligation if any, date due to complete and date it was actual completed on with the calculated variance or delay between due and actual completion dates. The form will also include a remark or notes field as well as it can include other fields if needed.
For each Contract Obligation Form, all supportive documents will be attached. Those documents can be either stored in PMWeb document management repository in its designated folder or subfolder, or directly uploaded to the record if needed. Those could include for example copy of the Contractors’ All Risks (CAR) Insurance, Workers’ Compensation Insurance, Bid Bonds, Performance Bonds, Advance Payment Bond among many others. PMWeb also allowing adding links to other project records that could be relevant to the contract obligation record such as meeting minutes, correspondence, submittals, etc.
Further, project related MS Outlook emails, including the Affinitext alert emails will be imported and stored in PMWeb to maintain a copy of all sent alert emails to the project managers to fulfill their assigned obligations and entitlements.
Of course, the same concept will also apply to all other records that will be managed in PMWeb including but not limited to Request for Information, Interim Progress Invoices, Potential Change Orders, Change Orders, Risk Records, Work Inspection Requests, Non-Compliance Reports, Interface Agreements, Punch Lists, Disruption Events, Claim Notices, Testing and Commissioning Inspection Checklists, Handover Certificate among many others where the relevant Contract Obligation Form will be linked to the record.
There is also the option of adding an ad-hoc workflow for the Contract Obligation Form to enable documented collaboration to formalize the closure or fulfillment of a contract obligation. The project team member responsible to ensure that the obligation was fulfilled can invite other project team members who might have a role or need to be involved in closing the obligation. The collaboration page allows capturing all notes made by those project team members as well as attach all documents that they want to share.
The Deliverable and Receivable Obligations Status Report will provide a real-time status of all identification obligation fulfillment tasks. The report can be configured to include filters to provide alerts for due tasks as well as report on delayed obligations that need to be fulfilled. The report will also include visuals to summarize the reported obligation tasks by priority, status, obligation type (Deliverable or Receivable), task type, the contract party that the obligation rests with, the project team member responsible for fulfilling the obligation among others. The information captured in the Deliverable and Receivable Obligations Status Report can be also summarized and become part of the project’s overall performance dashboard.
About the Author
Bassam Samman, PMP, PSP, EVP, GPM is a Senior Project Management Consultant with more than 35-year service record providing project management and controls services to over 100 projects with a total value in excess of US $5 Billion. Those projects included Commercial, Residential, Education and Healthcare Buildings and Infrastructure, Entertainment and Shopping Malls, Oil and Gas Plants and Refineries, Telecommunication and Information Technology projects. He is thoroughly experienced in complete project management including project management control systems, computerized project control software, claims analysis/prevention, risk analysis/management (contingency planning), design, supervision, training and business development.
Bassam is a frequent speaker in topics relating to Project Management, Strategic Project Management and Project Management Personal Skills. Over the past 35 years he has lectured at more than 350 events and courses at different locations in the Middle East, North Africa, Europe and South America. He has written more than 250 articles on project management and project management information systems that were featured in international and regional magazines and newspapers. He is a co-founder of the Project Management Institute- Arabian Gulf Chapter (PMI-AGC) and has served on its board of directors for more than 6 years. He is a certified Project Management Professional (PMP) from the Project Management Institute (PMI), a certified Planning and Scheduling Professional (PSP) and Earned Value Professional (EVP) from the American Association of Cost Engineers (AACE) and Green Project Management (GPM).
Bassam holds a Masters in Engineering Administration (Construction Management) with Faculty Commendation, George Washington University, Washington, D.C., USA, Bachelor in Civil Engineering – Kuwait University, Kuwait and has attended many executive management programs at Harvard Business School, Boston, USA and London Business School, London, UK.