CONTRACTING & CONTRACT MANAGEMENT

(Covers contract management and proposed dispute resolution)

KAMPALA UNIVERSITY. 2024.

Prepared and presented

By

COSMAS AGWETA
Phd.PSCM Con’t, CILT,CIPS,IPPU,BPLM.,
TOPIC 1: OVERVIEW OF CONTRACTS: PRE, ACTUAL AND POST CONTRACT
MANAGEMENT

Topic objectives
By the end of this topic, participants/students will be able to:
(i) Explain the essentials of a valid contract
(ii) Identify and explain the elements in a contract management process
(iii) Examine the requirements for effective contract management

The Process of Contract Management:

Contract management is the active monitoring and control of all aspects of the relationship
between the service provider/contractor and the client. The aim of contract management is
to ensure the delivery of a cost effective and reliable service at an agreed price and
standard. It must be consistent with legal requirements and financial propriety. Both
parties should understand, from the outset, their respective obligations and that they fulfill
these efficiently and effectively to provide best value for money.

The process starts from the identification of the requirement for goods and services and
runs through to the completion of the contract. Staff responsible for monitoring and
controlling the contract should be identified at the beginning of the procurement process
i.e. contract manager, and should be involved from the specification stage. This ensures
best practice prior to contract award and reduces the likelihood of problems.

Contract Management Process

The process of contract management has two stages. These can be described as pre and
post-contract award management.

Pre-contract Award Management-This involves preparing a quality contract by

considering the individual tasks required to be undertaken in the sourcing (often
competitive tendering) process and to the point of contract award. The competitive
tendering process (or other, as the case may be) includes the following tasks, which need to
be planned and considered against the requirements:
 Draft and agree on the specification
 Plan contract strategy
 Agree on evaluation criteria
 Research the markets
 Communicate with potential contractors
 Possibly use a pre-qualification document to select providers/bidders
 Request tenders and evaluate tenders
 Tender negotiations
 Recommend tender for award
 Award contract; and
 Debrief unsuccessful providers/bidders

Once the above has been successfully implemented, the process moves on to post contract
award management.
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Post-Contract Award Management

This will be where the active contract management takes place and involves the monitoring
of a contract. Effective contract monitoring requires efficient two-way communications
between both parties. Active contract management will ensure the following:
 That services or goods supplied by the contractor are in accordance with the
requirement of the contract and its terms and conditions
 Provide clear and documented evidence, where necessary, to invoke any non-
compliance procedures
 Measurement of the total performance of the contractor against the requirements of the
contract
 Potential difficulties are identified and alternative courses of action are taken
 That problems are dealt with quickly and corrective action is taken to prevent similar
problems from arising in future
 Ensure that established lines of communication with the service provider/contractor
are made; and
 Ensure costs are monitored and kept in line with contract rates and approved budgets

Contract Monitoring
The exact monitoring requirements and methodology will depend on the nature of the
contract and the goods and services to be provided. There are some standard practices that
can apply throughout. These include:
1. Monitoring the contractor’s performance against the specific targets and levels laid
down in the contract i.e. a set number of items or reports by a given time, or a particular
milestone being reached.
2. Inspection of completed work or random sample checks
3. The contractor providing information and reports on his own performance
4. Regular review meetings held between the client and contractor
5. Recording complaints received from clients of the service, specific systems may need to
be set up where you have a large number of users i.e. on call-off contracts; and
6. Recording client satisfaction with the service, usually recording feedback in the form of
questionnaires from users of the contract, this could happen periodically during the
contract term.
7. A good complaints or client satisfaction procedure must be capable of tracking
individual responses, identifying the source of the complaint/compliment, resolving
the problem or building on the success and responding to the user.

Effective control
Effective control ensures that both parties fulfill their contractual obligations. The contract
manager must record, co-ordinate and communicate what is and has happened with the
contract. This information can then be used for forward planning and any future contracts
likely to be undertaken. A skill that is required for effective control is the ability to identify
problems that require corrective action. The types of problems that might occur are:
 Unsatisfactory performance
 Misunderstanding the requirement

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 Inadequate channels of communication
 Changes to the contract, brought about by unexpected requirements.
Contract control involves actively keeping the contractor’s performance to the required
standard. Participation by both parties is needed if this is to be successful to enable any
problems to be quickly identified and resolved. It is therefore important that a sound
working relationship is established.

If monitoring indicates that a contractor’s performance has deteriorated, action will need to
be taken. The nature of the action will depend upon the level of the under-performance or
complaints. If regular monitoring is effectively carried out problems will be spotted early
and the degree of any disruption from corrective action will be minimized. In most cases a
discussion on the problem, will be all that is required to secure agreement on remedial
action. Negotiations whether informal or formal during the contract are a valuable means
of resolving any problems or outstanding issues.

It is important for contract managers to have clear and documented evidence if contracts
do not run smoothly. Records of all meeting and telephone conversations should be held
on file. The contractor should be notified in writing of all instances of non-compliance, and
a written timetable for rectification, should be drawn up. It is likely that the contractor will
also be keeping records of the problems incurred with the contract

If the contractor continually fails to perform, this may constitute a breach of contract.
The severity of the failure and the cost to the council will need to be assessed. Legal advice
may be required before any further action is considered.
Below are examples of where default in a contract may arise.
Failure to:

 Perform any part of the services provided in the contract

 Provide financial or management information
 Pay any sub-contractors or suppliers in time
 Employ appropriately qualified, experienced, skilled or trained staff or
 Comply with legislation
Although it is sometimes difficult to predict accurately where problems may arise, good
contract management with regular dialogue between the contractor and client will help to
identify potential problems. This will enable problems to be dealt with swiftly and
effectively and so prevent major disputes.

Contract management and Control of change

Contract requirements are often subject to change throughout the life of the contract.
It is therefore important to ensure that changes, which will have an impact on the contract,
are identified at the specification stage and any variations are included in the specification.
It may not always be possible to predict all variations. Changes to the requirements
normally affect the cost and so will need to be recorded. Variations to a contract made
during its life will not always be as a result of contract monitoring and control. It may be
decided that during the course of the contract, a slight change to the requirement is needed

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due to external factors. E.g. price fluctuations due to inflation change in price of major/key
commodities such as fuel.
Changes to the contract may affect:
 The specification
 The quantity of goods or services
 Delivery times or locations; and
 The nature of the services being provided
Normally it will be the role of the contract manager to ensure that the need for any contract
variation is recorded and the contract is varied in line with the contact /law applicable to
the procurement procedures for variations. The variation must clearly be matched with the
main contract for clear audit trail possibility.

Maintaining Audit Trail

It is essential to keep records of dealings with suppliers whether written or verbal. All
information should be kept in the contracts file held in the procurement section/unit. Such
records will be required for:
 Information if problems arise,
 Reviewing meetings and re-negotiations
 Audit purposes; and
 Planning for any subsequent re-tendering processes

Post contract management: the justification of contract Completion Reports

It is good practice that at the completion of any contract a review is place on record of what
went well/wrong and what lessons can be learned for the purpose of any future contracts.
After completion of any contract, the contract manager is required to complete a Contractor
Evaluation Report. The information on this report will be used to evaluate the contractor(s)
and monitor their effectiveness. In the case of high value contracts where the contract is of
a complex nature i.e. consultancy contracts, there should be a formal post project
assessment covering all key aspects of the procurement. This should include the following:
 The outcome of the project/contract
 The extent to which the expected benefits (deliverables) were achieved; and
 The total cost the contract

Benefits of Contract Management

The worst way to ‘manage’ a contract is simply to leave it take its course, it will inevitably
go wrong and leave an incomplete audit trail. Effective contract management will provide:
 Performance to a required standard
 Compliance with the contract conditions (terms and conditions)
 Give clear documented records
 Value for money by ensuring that best procurement practice is followed
 That all commercial options are considered
 Manage and control change; and
 Anticipate any problems/challenges during the contract

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Activity 1: In groups of 5 (or as conveniently determined), discuss what you consider to be
the real challenges in contract management
Activity 2: Make proposals on what may be done:
(a) by the contractors and
(b) by the entities to overcome the challenges named in 1 above

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TOPIC 2: DESIGN OF CONTRACT DOCUMENT AND CLAUSES AND
MANAGEMENT OF WORKS AND CONSULTANCY CONTRACTS.
Topic objectives
By the end of this topic, participants/students will be able to:
(i) Explain the terminologies in contract documents
(ii) Identify and examine the Salient clauses in contract documents that need to be
incorporated in any contract documents
(iii) Explain and discuss the rationale of any clause(s) in a contract document

Introduction
A contract document spells out the various rights and obligations of parties to the contract.
Classically, there are 3 categories of contracts: Contracts for works, supplies and services.
It should be noted that despite the categories, the general content structure of the contract
documents are similar. They particularly all have:
 General provisions
 Special condition (these will depend on what is being procured!)
As noted above, all written contracts have the following notable clauses:

A. General Provisions (Clauses)

a) Definitions: This clause provides the meaning of the key terms that have been used in
the contract.
b) Law governing the contract: This clause provides the applicable law that shall
government the contract in question.
c) Language: The binding and controlling language for all matters relating to the meaning
or interpretation of the contract in question
d) Mode of communication-the effectiveness of the communication, etc
e) Location-where the services shall be performed
f) Authorized representatives to transact on behalf of the client or contractor
g) Taxes and duties: specifies such taxes, duties, fees, and other impositions as may be
levied under the applicable law, the amount of which is deemed to have been included
in the contract price.
h) Country of origin(Rules of origin): If any preferential treatments are applicable

Clauses on: Commencement, completion, modification and termination of contract

1- Effectiveness of the contract (commencement of contract). It articulates the time when
implementation of the assignment will comment upon the effectiveness of the contract
2- Expiration of the contract(unless terminated)
3- Modification–procedure for modification of terms and condition of the
contract(including any modifications of the contract price or scope of services)
3. Force majeure clause
4. Termination clause(when and under what conditions a contract may be terminated)
5. Obligation of the client
6. Obligation of the contractor
7. Contractors personnel(description of personnel, removal and/or replacement of
personnel)

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8. Payment of contractor such as (sum remuneration, contract price, payment of additional
services, terms and conditions of payment, interest on delayed payments)
9. Settlement of disputes(amicable settlement and otherwise)

B: SPECIAL CONDITIONS: These are conditions (special) of the contract by which

the general conditions may be amended or supplemented.
The following are some of the most prevalent under special conditions:
 TOR (Terms of Reference)-this refers to the statement of requirements for
procurement of services (e.g. consultancy services, etc). Under the procurement of
services, the provider is technically referred to as the “service provider”
 SOW (scope of works) - this refers to the statement of requirements for procurement
of works (e.g. road construction, channels, buildings, etc).It entails the scope of the
required works. Under the procurement of works, the provider is technically
referred to as the “contractor”
 Specification (often abbreviated as “Specs”) - this refers to the statement of
requirements for procurement of goods/supplies (e.g. office tools, motor vehicles,
etc). Under the procurement of supplies, the provider is technically referred to as the
“supplier”
 Out puts
 In puts (from both the client and the contractor), etc

Activity 2. Refer to any contract you have ever entered into and state:
a) The party you were(contractor or entity)
b) The description of the work that you undertook/ executed
c) The challenges you encountered with the other party (whichever is applicable to you)

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TOPIC 3: PROBLEMS/CHALLENGES IN CONTRACTING

Topic objectives
By the end of this topic, participants/students will be able to:
(i) Enumerate the common challenges associated contracting
(ii) Discuss feasible proposals of alleviating such challenges for smooth contract
performance

Introduction
Contracting is an integral part of the overall procurement cycle. As a result, all upstream
challenges faced have a direct effect on the quality of the contract entered into between the
provider and the procuring entity. Specifically, the following pose fundamental problems
associated with contracting:
 Understanding of the intentions of the contract
 Law applicable
 Changes in the environmental variables such as inflation
 Breach of contract terms and conditions by parties such as delays in delivery of services,
Poor workmanship by contractors, abscondment of providers
 Lack of expertise to develop clear contract terms and conditions
 Natural calamities
 Payment risks
 Forged documents
 Variance in actual site conditions from expectations(in case of construction contracts)
 Approved shoddy work
 Changes in design during implementation
 Different stake holders with varying interests in the contract
 Meeting expectations from end-users (or consumers)
 Motivating providers to perform and Managing the providers performance

SOME POSSIBLE SOLUTIONS TO THE PROBLEMS

1. Enforcement of performance bonds/adherence to only guarantees from reputable

institutions – Banks.
2. Inclusion Price Variance clause’s in contracts
3. Provide for post qualification
4. Early preparation/planning of procurements
5. Develop “complete” bidding documents
6. Develop clear and relevant evaluation criteria
7. Early identification of risk factors
8. Insurance against insurable risks, etc

Activity 3
a. List the various contracting problems associated with: Works contracts, Supplies contracts and
Services contracts
b. How can the problems named in activity ‘a’ above be minimised?

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TOPIC 4: CONTRACT SUPERVISION: APPOINTING A CONTRACTS
SUPERVISOR

Topic objectives
By the end of this topic, participants/students will be able to:
(i) Explain the meaning and significance of contract supervision as an integral part of
contract management
(ii) Explain how to identify and appoint a contract supervisor
(iii) Explain the responsibilities of a contract supervisor

Introduction
Contract Supervision is systematic process of verifying whether everything in the contract
is being implemented in conformity with the provisions in the contract. Effective pproject
follows the supervision cycle covering the following:
 Supervision of start-up/preparatory activities
 Supervision of implementation activities
 Supervision of Completion activities
Preparatory Activities
 Collection and Study of contract documents e.g. contracts, plans, budgets, work plans.
 Assembling a supervision team
 Developing supervision framework
 Developing supervision instrument and arrange for logistical support
Supervision of implementation activities
 Supervision for time, quality and cost
 Discussion of findings and recommendations
 Remedial actions suggested or taken
 Supervision for cross cutting issues
 Production and dissemination of supervision reports
Contract completion Activities
 Liability
 Commissioning
 Operation and Maintenance arrangements

APPOINTMENT OF CONTRACT SUPERVISOR

Contract management includes activities that follow the establishment of the contract,
including administration throughout the contract period. The project sponsor should be
responsible for a project involving delivery of goods or services should ensure that contract
supervisors:

 are appointed with appropriate responsibility and accountability (with clear TOR);
 are appointed as early as possible (e.g. planning stage) and in any event prior to the
formation of the contract (or execution of contract documents);
 are adequately skilled or trained so that they can perform and exercise the
responsibility;

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 act with due care and diligence and observe all accounting and legal requirements,
including adherence to set procurement Guidelines applicable during the course of the
contract; and
 Can meet the obligations of their position including maintaining supply, ensuring
compliance with specified customer expectations and contract deliverables, and
obtaining remedies when breaches of contract occur.

In addition, the project sponsor should ensure that all contracts have clearly defined
deliverables and performance measures and benchmarks against which the contract
supervisor can measure and report.

A contract supervisor is required for the length of the project. Contract administration
arrangements are to be identified and planned when the specification is prepared
(including who, how, delegations, reporting requirements and relationships, specific task
responsibilities etc). The contract supervisor will be named in the agreement.

In general the contract supervisor is required to ensure that:

 staff in departments or agencies affected by the contract are aware of the contract
arrangements, the contract supervisor's appointment, and the arrangements for a
replacement in the event of his or her absence;
 adequate documentation is maintained to ensure continuity and audit ability;
 staged projects are reviewed at the end of each stage, and if continued, the reviews
determine whether to continue with the current provider or select an alternative
provider using appropriate tender processes; ongoing feedback is sought from users as
to their satisfaction with the goods and services, and user requirements are
continuously reviewed to determine whether they are appropriately specified;
 remedies for breach of contract are enforced; and
 the objectives of the contract, the process, the outcome and achievement of value for
money are regularly and formally reviewed.

High value strategic or complex contracts, should have their own contract management
plans for use by the project or contract supervisor, identifying matters such as key
responsibilities, deliverables, performance measures and targets and dispute resolution
arrangements. Contract Management requires a broad set of skills including:
 defining outputs;
 defining what is required to meet those outputs; and
 then managing the delivery of those requirements.

Contract administration is the last stage of the tendering and contract cycle, and includes
all administrative duties associated with a contract after formation, including contract
review and contract transition. The effectiveness of contract administration will depend on
how thoroughly the earlier steps were completed. Changes can be made far more readily in
the early tendering cycle than after contract management has commenced. Some of the key
early stages which influence the effectiveness of the contract and how it will be managed
include:
 defining the output, that is, writing specifications which identify what the aims and
outputs of a contract will be;
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  assessing risk;
 researching the market place (including conducting pre-tender briefings);
 actively creating competition, so the best possible suppliers tender for contracts;
 evaluating tenders competently to select the best contractor with a strong customer
focus and good prospects of building a sound relationship
 formulating appropriate terms and conditions of contract; and
 identifying appropriate performance measures and benchmarks so that all parties
know in advance what is expected, and how it will be tested.

Broadly there are three levels of contract administration and they generally relate to risk.

1. Operational level
This is for standard contracts for goods and services. Day to day contract administration
may be no more than a monitoring, record keeping and payment authorisation role. A
standard contract which requires excessive administration may be the product of a failure
in the contract preparation stages. An example of an operational contract would be a
stationery contract (supply of).

2. Intermediate level
This is for more complex contracts of services where, for example, part of an organisation
may rely on a supplier for a key service. This involves a more active role by the contract
supervisor in developing the relationship between the department and contractor.

3. Strategic level
This is the third level and is for contracts involving complex partnerships and strategic
alliances. These need more active management of the business relationships between
the supplier and the users i.e. manage outputs and not the process. Sufficient resources
need to be dedicated by all parties to managing these contractor relationships to ensure
a successful outcome and, where feasible, to achieve partnership. A partnership is the
result of mutual commitment to a continuing cooperative relationship, rather than
parties working on a competitive or even adversary basis.

Appointing a Contract Supervisor

It is required that contract supervisors:
 are selected with a knowledge of the product provided under the contract;
 contribute to the development of the Contract Management Plan;
 monitor the performance of the contractor(s);
 are appointed with appropriate responsibility and accountability;
 are adequately trained so that they can perform and exercise the responsibility; and
 act with due care and diligence and observe all accounting and legal requirements

The contract supervisor should be appointed by the senior supervisor in charge of the
project prior to the execution of the contract. Moreover, where it is practical to do so, the
contract supervisor should be involved at the earliest stages of the procurement, eg at the
planning stage, or the time of writing the specification. Contract administration
arrangements should be identified and planned including who, how, delegations,
reporting requirements and relationships and specific task responsibilities.
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The contract supervisor's duties and powers are governed by the conditions of contract and
the general law. In addition, she or he is required to form opinion and make decisions, and
in doing so is expected to be even more prudent.

Responsibilities of a contract supervisor may include:

 contributing to the development and approval of the contract management plan for the
project;
 periodic review of the contract management process (including the plan);
 liaising with internal supervisors, users and suppliers to identify and resolve issues as
they arise;
 regularly meeting with the contractor and maintenance of associated records;
 regularly meeting with key internal stakeholders e.g. government departments on
contract performance;
 monitoring the contractor's continuing performance against contract obligations;
 providing the contractor with advice and information regarding developments within
the department, where such developments are likely to affect the products provided;
 determining if staged projects should continue, and managing a procurement process
for additional stages;
 providing accurate and timely reporting to the senior management in charge of the
project, highlighting significant performance issues or problems;
 ensuring insurance terms and conditions provide adequate protection for the State and
are maintained throughout the contract period;
 ensuring all products and services provided are certified as meeting the specifications
before the supplier is paid;
 maintaining adequate records (paper and/or electronic) in detail on an appropriate
contract file to provide an audit trail;
 managing contract change procedures;
 resolving disputes as they arise;
 managing transition to new contract and/or provider
 conducting post contract reviews;

 seeking remedies in the event of contract breach, etc

Activity 4
a. List any 5 main qualities of a good contract supervisor

b. How can each of the above qualities be tested in the person seeking for the position
of a contract supervisor

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TOPIC 5: PERFORMANCE MEASUREMENT

Topic objectives
By the end of this topic, participants/students will be able to:
(i) Explain the various contract performance measures
(ii) Explain and discuss the qualities of a good performance measure in the
management of contracts
Introduction
Contract performance measures need to be pegged on the statement of requirements of the
procurement in question lest they become irrelevant. Procuring organizations need to be
able to assess the outputs of the contract and therefore determine whether or not the
contract is a success. Contract performance measures can be established for all categories of
procurements-works, supplies and services.

Some notable areas that could be subject to performance measurement include:

 Delivery to due date or time (time is of essence)
 Adherence to agreed cost
 Adherence to agreed reliability tests
 Adherence to required standards of consistency
 Ability to change in response to changing conditions or requirements
 Ability to innovate and improve in design or production
 Quality of service delivery
It should be noted that for contract development, some or all the aforementioned measures
may be critical. Therefore, those measurements that are most critical should clearly be
embodied in terms of measurable outcomes within the contract.

Qualities of good measures:

Any measure of contract performance should meet the “SMART” standard. That is:
 Specific – the measure should show the desired achievements in order to avoid
differing interpretation e.g. “2 tons of fire wood delivered to the factory premises every
Friday”
 Measurable – should show quantifiable outputs so that we can see the progress being
made(such as “2 tons” of fire wood, as in the illustration above)
 Appropriate – Measure what is important. From the early identification of what will
make the contract successful, comes a series of elements worth measuring. If time is
critical, measures of cost overruns are common, but of limited use. If quality is key in
the output of the contract, then measures of adherence to schedule are secondary.
Measures should change based on changes in the importance of different factors.
 Realistic - Achievable, meaningful, practical and aiming at down-to-earth results.
 Time-bound - It must show when the activity must have been successfully completed
so that we are bound by time element (such as “every Friday”, in the illustration above).
Procedure for contract performance measurement lies on control and monitoring, which
relies on measurement. The barriers to effective contract performance and control are many
such as: poor data through the impact of measuring to the time it takes.

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Contracts performance process
 Establish contract performance targets (that are SMART-enough). These are resident in
the signed contract document
 Collect information on provider performance on the contract(as per contract terms and
conditions) agreed upon
 Compare provider’s performance with the performance targets-as set out in the signed
contract document to determine any variations
 Communicate the findings to the provider
 Take action , if material is enough or not.
Why measure contract performance:
The saying “if you can’t measure you can’t manage” literally means measurement aids
procurement contract management. Accordingly, procurement management needs to
measure contract performance for various reasons, notably the following:
1. To encourage more effective contract management
2. Measuring and publicizing the results can increase motivation
3. enables the identification of what went right, what went wrong and lessons to be
learned for future contracts
4. To aid monitoring and evaluation of contract performance
5. To provide information for supplier development initiatives, etc

What should be noted in contract performance measurement?

 Measure what is important.
 Information collected should have supporting data, where necessary
 Use simple measures and rations, together with control limits and exception reporting.
Clear away the noise of too much data. Remember, an imperfect system is better than
flying in blindness!

Activity 5: In groups, discuss the challenges associated with contract performance measurement

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TOPIC 6: CERTIFICATION OF WORK/COMPLETION

Topic objectives
By the end of this topic, participants/students will be able to:
(i) Explain the various levels of certification
(ii) Examine the contents of a contract certification document for their relevancy to both
the entity and the “provider”

Introduction
Certification of work done by the provider is an integral part of contract management.
Because certification is attestation/guarantee that the work meets the requirements as per
contract, this assignment is a preserve of the contract supervisor and is technical.
Depending on the contract provisions, certification/evaluation may take place at various
points in time of contract performance, such as:

Interim Valuation
Interim valuation is the process of establishing the best-estimated quantity and value of the
amount of project implemented at any given time prior to completion. Interim payment is
normally based on interim valuation report. Supervisor is to ensure that competent and
knowledgeable persons carry out interim valuation and make detailed interim valuation
report showing how the quantity and value is arrived at. The supervisor should note that
interim valuation is provisional estimates at the time of valuation as project
implementation is to continue. Unless the project implementation has stalled, Interim
Valuation is really provisional and it is the best estimate at the time of valuation. For
construction works it covers the estimate value of the actual work so far done and materials
on site. The supervisor should ensure that substantial amount of project is implemented
before interim valuation to avoid time wasting and encourage progress.

Interim Valuation Certification

The interim valuation reports should be certified by the supervisor as true and good
representation of interim quantity and value of project implementation at the time of
valuation.

Payment
The supervisor using and attaching the copy of certified interim/final valuation report
promptly initiate payment. The supervisor not only initiates payment but also ensure that
it is prompt. This is done through the production of Payment Certificate. See Sample below
for Sample of Payment Certificate for works project. In supervision of payment, the issues
of Taxation especially VAT is to be considered. Sometime it is part of the Payment
Certificate and some time it is contained in Separately “VAT ONLY” Payment Certificate.
In payment of goods delivered in project implementation it is important to consider and
attach the following:
[a] LPO
[b] Delivery note
[c] Goods received note and
[d] Payment invoice, all appropriately certified by the required officer

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 INTERIM PAYMENT CERTIFICATE
Certificate Serial No.
Date of Valuation:
Issue date:
Issued by:
Address:

Employer:…………………..
Address:

Project Implementer:
Address: .

Project Title:

Project Location: .

INTERIM CERTIFICATE No:

Under the conditions of the above mentioned Contract, in the sum of UgShs ………..(VAT
Inclusive).

I/ We certify that interim payment as shown is due from the Employer to the Contractor

[a] Contract sum VAT Exclusive USh ….

[b] Gross Value of Contractor’s Work on Site (VAT Exclusive) USh…..

[c] Contractor’s Material on Site (VAT Exclusive) USh

[d] Less Retention …. of [b] &[c] USh

[e] Less previous payment certified (certificate No. 3) USh

[f] Less Advance Payment USh

[g] Payment Due on Certificate (Excluding VAT) USh

(In Words) Uganda Shillings ……………only in favour of (implementer)

To be signed by or for the issuer named above: Signed :

Official Stamp:
Supervisor Certification:

Variations
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Variation is deviation from the agreed project implementation quantity and value. The
supervisor should ensure that the process of arriving at a variation order is followed prior
to the variation to avoid either non-completion of the project implementation elements and
unnecessary escalation of the cost of the project implementation. Identification, justification
and recommendation report for the variation, seeking approval by authorized decision
maker and in writing and implementation of the variation. The recommendation and
approval should cover the cost of the variation, the time to be taken to implement the
variation.

Claims
A claim is a demand for something that is due because of rights, entitlement, responsibility,
liability and obligations. The challenge for supervisor of project implementation is to sort
out what is a right claim and a wrong claim as an item and as an amount. Therefore in
handling claims, the supervisor has to consider the basis for the claim and the procedures
for the claim to carry out efficient and effect claim disposal. The common source of claim is:
 Prolongation of project implementation
 Disruption
 off-site overheads and profit
 Financing charges and preparation costs, among others

Retention Sum
Certain amount as percentage of interim payment certified is retained to ensure that the
project implementer remain liable to make good any remedial requirement during the
warranty/liability period. The percentage is normally about 5 or 6%. The supervisor is to
ensure that the retention sum is always deducted from interim payment and only paid
after final certification of project implementation at the end of the warranty/liability
period. Or in the cases where warranty is offered without deduction of retention sum, the
warranty requirement is brought to the attention of the users of the project output and the
warranty document kept properly for reference.

Final Valuation, Certification and Payment

At the end of defect liability period or project implementation, final valuation of the total
quantity and value of the project implementation is established by a competent person and
Final Valuation Report produced. The Final Valuation Report is then certified to be correct
representation or necessary adjustment is instituted. Based on the certified Final Valuation
report, supervisor of project implementation initiates and ensure the final payment is done
promptly.

Final Accounts and Project Cost

The final Accounts and Project Costs is produced from the various certification and other
costs incurred in the project implementation. This is a tool for final financial accountability
to the stakeholders. It establishes the actual costs of implementing the project pointing out
any relevant information and recommendations for improvement in future project
implementation.

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Activity 6 Discuss the associated problems in certification/evaluation of work

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TOPIC 7: RESOLUTION OF DISPUTES/CONFLICTS (Alternative Dispute
Resolution Process / Models)

Topic objectives
By the end of this topic, participants/students will be able to:
(i) Define and explain the components of disputes in contracts
(ii) Discuss the common sources of disputes in contracts
(iii) Discuss the various dispute resolution strategies

Introduction
Contract supervisors need to appreciate that disputes are likely to occur as the
implementation of the contract progresses. Supervision of contract implementation may
involve dealing with disputes at the time they occur. If disputes are not resolved in time,
they are likely to have cost and delayed implications to the procurement/project and may
lead to consequences which are not desirable to smooth contract implementation.

Defining disputes:
A working definition of a dispute has emphasis on the following;
 a dispute involves a disagreement between two or more persons
 Each party has got an interest which happens to be incompatible with others.
 Each party will try to protect / articulate its own interest.

Common sources of disputes in contract management

 Contract variations/amendments
 Payment methods/arrangements
 poor communication
 Differing desired outcomes within a contract
 Projects overrunning time or cost/budget
 poor health and safety records
 sloppy administrative work, among others
 Suitability (e.g. software), hardware warranties, especially in IT projects.
Disputes may be minor, major or intractable. Conflict is the heart of a dispute, but does not
have to be destructive. It possible to identify 2 types of conflict, that is: constructive and
destructive conflict.
1) Constructive conflicts tend to portray the following characteristics:
 Tend to be cantered on interests rather than needs
 Tend to be open and dealt with openly
 Are capable of helping a relationship develop
 Focus on flexible methods for solving disputes
 Help both parties reach their objectives
2) Destructive conflicts often:
 Often cantered on people’s needs rather than interests or issues of fact
 Focus on personalities, not action or behaviours
 Involve face-saving and preservation of power
 Attach relationships
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  Concentrate on quick fix, short term solutions
 Tend to repeat themselves

Negative results of disputes;

On a critical analysis of the causes of disputes, untamed disputes could lead to
 Time wasting, if they last long
 May become violent if they go out of hand
 May destroy team work
 May cause distrust among team members
 Lack of co-operation may deepen
 One may develop a feeling of low esteem and defeat
 Low moral and stress may be developed

Claims as a Source of Dispute

The main cause of dispute is claims that have not been disposed off to the satisfaction of
the claimant(s). Based on the concept of “prevention is better than cure,” prevention of
dispute is in handling effectively and efficiently claims and then communicating the results
satisfactorily. Claim is demand for something that is considered due based on rights and
entitlement. In contract implementation, the right/entitlement arises out of either contracts
or out of common law that is implied terms. The claim could be by the project implementer
or contractor who feels a claim is due.
The contract implementer/contractors claims are normally associated with:
(a)Extra payment from the buyer
(b)Prolongation of contract implementation time frame without liquidated damages costs;
while the claim by the buyer is normally associated with less payment to the project
implementer/contractor, demand for make good on delivery of contract implementation,
liquidated damages, etc

Purpose of Entertaining Claim in contract Implementation

The aim of entertaining claim in contract implementation is to avoid disputes while
allowing contract implementation to continue on a slightly different basis, and to ensure
that the contract implementer/contractor is paid an amount that would reasonably have
been included at the time of tender/documentation had the changed quantity/requirement
been envisaged. It is also to preserve the buyer to deduct liquidated damages for late
completion.
In absence of contract, claim is based on the remedies available based on common law
principle that “the plaintiff is entitled to be placed so far as money can do it, in the same
position as would have been had implementation progressed as envisage.” This is
providing for reimbursement of damages or breach of relationship in contract
implementation without recourse to disputes and possible legal action. Therefore, there
must be rule/guidelines laid down, to be followed.

Type of Claim in contract management

 Entitlement under Contract: This is entitlement provided by contractual provision in
contract implementation. E.g. variations, adverse contract implementation conditions
obtaining; etc help to keep contract implementation smooth and avoid frustration.

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 From the buyer’s side, it is important to distinguish contractual claims brought about
by the negligence or omission of staffs or agents from those brought about by other
events.
 Quantum meruit claims: Examples where quantum meruit claims in the contract
implementation context are:
1. Where work/services/supplies are requested for but no price is agreed.
2. Where a price fixing clause in a contract fails to operate
3. Where variations go beyond the scope of the contract
4. Where the contract is void
In assessing and disposing quantum meruit claim, a “reasonable sum” is arrived at by
considering both the value of the work/services/supplies done and the cost to the
contractor in doing it.
 Claim under Tort: Claim under tort is by the project implementation “outsiders” who
are not involved in contractual obligation whatsoever. This category would involve
subsequent owners of output of contract implementations; tenants, general public
within the buyer, or visitors, even passer-by. If such a person suffer injury, damage or
loss because of defective or dangerous contract implementation deliveries, it follows
that any claim should be under tort which means the tort of negligence

Procedures and Assessment of Claim

 The claimant has to submit the claim to the other. Either the buyer puts the claim in
writing to the contractor/consultants/project implementer or vice versa.
 On receiving the claim, it has to be studied carefully, assessed and disposed. The
assessment include ascertaining:
- is the right procedure followed,
- is the claim provided for in the project implementation system or not.
- Is there entitlement or right to it
- Is there qualifying events
- Is the amount of the claim reasonable or not
 On ascertaining the above, a reply for the claim is done. It is at this stage that if the
other party claiming is not satisfied then the claim could turn into a dispute. Therefore
a dispute resolution strategy and steps needs to be mastered by the supervisor of the
contract/project to support the position of the buyer.

Emergence of Dispute
Dispute is a potential reality when the disposal claim fails to satisfy the claimant. The
dissatisfaction by the claimant could arise out of:
 Poor communication of the disposal of the claim to the claimant
 Different interpretation of the alleged qualifying events
 Proper procedures where not followed either in the claim or through disposing of
the claim
 The assessment of the effect of the qualifying events is varying between the parties.
Method of dispute resolution
There are a number of informal types of dispute resolution, without recourse to law
 Mediation: A mutually agreed upon person may listen to both side and try to promote
an understanding as is fit. It is initially non-binding. If settlement is reached, as with
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 any agreement it can become a legally binding contract with the consent of the parties
involved.
 Conciliation: similar to a mediation, but a conciliator can propose and recommend
solutions rather than just facilitating negotiations.
 Expert determination: A private process involving an independent expert who provides
a decision. Again, this can be binding with the consent of parties.
 Adjudication/arbitration: An expert is instructed to rule, with a binding outcome. In
arbitration, a mutually agreed arbitrator is appointed. Each party then submit their
position to the arbitrator either in writing, or verbally or preferably both. From the facts
and argument submitting arbitrator takes position that is enforceable in law. Therefore
the appointed arbitrator has to be competent and knowledgeable enough to dispose of
the dispute. Any dispute of the result of arbitration can only be resolved through
court/litigation process.
 Litigation. This is a method where the dispute is resolved through the court
proceedings. It is tedious, takes long and may involve a lot of costs. It should be
avoided as much as it is possible.
 Meetings: After the disposing of the claim has resulted into dispute, meeting could be
called for discussion and building consensus. It is hoped that if the goodwill and good
faith do exist, this should iron out the deference that resulted into dispute.
 Writing a report/clarification: Writing a clarification may help clear misunderstanding
if the source of the dispute is poor communication of disposal consideration. Or it helps
bring some sense of comfort on the claimant.

Activity 8
a. Discuss the challenges of using either “litigation” or “arbitration” as strategies to
resolve a dispute.

b. What dispute resolution strategy do you recommend, motivate your responses with practical
examples

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