S-063 - Contract Tactics for Development and Projects

Introduction

The overall contract strategy for a project will have been defined during the concept identification stage. The result is a list of potential contracts. As part of concept selection, the contract tactics should be defined, in two parts. First, how will we place these contracts into the market? How many bidders are there? Will they be interested? Are they prequalified? Will they need to subcontract? Secondly, how will we reimburse them? Lump sum, bill of quantities, reimbursable, cost plus? What about incentives or penalties? Getting the right tactics for each contract is essential to minimise difficulties later. And the client company Tender Board will certainly want to review and approve the contract tactics for the project.

Timing

Making Contract Tactics requires a reasonably firm scope and list of potential contracts. It also presumes knowledge of the local market. Therefore the contract tactics should be defined during the latter part of concept selection. The first significant contract to be placed will probably be for Front End Engineering.
Methodology

Take the list of potential contracts and ensure each has an estimate of its value. For each contract, evaluate the client view: what is the spend as fraction of project total, and what is the risk of contractor defaults.
Tabulate the answers.
For the first contract, list the likely bidders and evaluate the contractor’s view: what fraction of his turnover is it, and how attractive is the work. Use market intelligence to answer this.
Repeat for each contract, and tabulate the answers.
Combine the client/contractor views to determine the kind of relationship that such a contract would bring.
Based on this. propose tactics for each contract: how to bid, how to award, how the pay.

[As part of tactics, a determination of ‘Local Content’ can be made, and is often required by client company Tender Board.] Finally, make a contract engineering activity plan to show when each invitation to tender must be ready, to meet the required award dates in the project timescale.
Deliverables
  • A client view of each contract
  • Contractor views of each contract
  • Analysis of all client/contractor relationships
  • Tender tactics for each contract
  • Payment structure for each contract
  • A Contract Engineering work plan
Duration

A 2 day workshop with the client development team will deliver the result stated.

Information

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