Project Owner Contract Administration And Problems In Building Project

Every project is expected to be finished on time, within the budget and has good quality. The project cost is very important to the owner; therefore, it must be controlled well. However, project cost may increase as projected due to many aspects such as labor cost increase, material increase, and change in design etc.

Before commencing the project construction phase, there are a lot of permits and documents that has to be processed and these have taken longer time which will lead to project delay. However, there are also some reasons which often cause delays such as weather, design changes, materials’ unavailability, lack of communication or delay of payment.

When the owner has knowledge in reviewing the contract and with good contract administration, it will have positive effect to the contractors and also to the project.

Owner and contractor agree about the scope of works, time for working and some other rights and obligations through the contract. However, there are still certain conditions that cannot be controlled during the project completion. Normally, the contract consists of date of start and duration for construction, but cannot predict what might happen during the project. In addition, usually there are no payment form and procedure which creates confusion to the contractor when there is a rework. Moreover, project always has variation and if it is not resolved on time, project schedule and cost will be impacted.

Mr. Tran Trong Khiem made a case study aimed to:

1. Investigate contract administration of project regarding with schedule, cost, payment, variation.

2. Analyze problems in each process or contract administration.

3. Propose recommendation for improvement of contract administration.

1. 

Conclusion
 
Recommendation
 
In order to manage the contract more effectively and to reduce the problems, the following recommendations have to be considered:
- Set the milestones so that project team, supervisor, contractor have specific target. Give reward or punishment if contractor or supervisor can or cannot reach the milestone. Project team must make project schedule but not as detailed as of contractor’s. This schedule represents main stages of project together with milestone.

- Before starting the construction, the owner, supervisor and owner must agree on calculation and measuring method, and payment condition.

- Define time for checking payment request not only with owner but also with supervisor. Project team of the owner must have clear responsibility and time for solving documents; so that time for payment requests or variation order can be reduce.

- When signing a contract, owner and contractor must agree about the formula to calculate advanced payment.

- Make a plan for payment including time for State Treasury.

- Before starting the project, owner, supervisor, and contractor must have communication plan and time for each participant to solve problems or variation, and payment approval.

-  Contractor must assign staff to check the design while doing the construction. Read carefully the bidding documents and contract.

- Owner, supervisor, contractor, and designer must agree about the time for each one to check variation.

- Check carefully the material price, labor cost, and compare those with government rules.

- Evaluate project schedule which was extended.

- Owner must control the budget especially when there is adjustment in material price or labor cost.

- Set many milestones for the project, and that must be agreed by the owner, contractor, and supervisor.

- Contractor must have a person who prepare and check weekly schedule, compared it with master schedule, and give proposal if project is late.

There are some problems encountered in the project. First, project team did not manage the time well and had no plan to have milestones for the whole project. In addition, the team was not well-prepared before finishing the project, therefore project time was extended.

After analyzing the problems in payment, design variation, cost variation and schedule, there are some strong points in contract administration. Even there were some problems in the final stage of the project; the project’s first phase was still finished during start of the new school year. The Owner negotiated with the contractor to finish the project despite of difficulty in payment, material price increase and many other projects in Ho Chi Minh City were stopped at that time.

His thesis abstract is copied and pasted below.

Abstract

Construction is risky and owner usually signs contracts with other participants of the project to make clear rights and liabilities of each side in the contract. Especially in the construction phase, time may take many years and owner has to pay so much money for contractor. Moreover, because the time is long, there will be many problems and cause bad effect to the project, such as disaster, labor cost, material cost, etc.

Contract administration is very important, especially with the owner. With contract administration process, owner can control the project well and finish the project in good quality, with time and budget as desired. This report focuses on payment, variation, schedule management process of owner. Through case study of a high school in District 11, Ho Chi Minh City, problems in some management processes which affect to the project will be investigated and analyzed. Some recommendation will propose to improve contract management process.