DIREDAWA UNIVERSTY INSTITUTE OF
TECHNOLOGY
DEPARTMENT OF CONSTRUCTION TECHNOLOGY AND
MANAGMENT
Course Title: - Construction Procurment and Contract
Managment
(COTM6042)
Project: -
Discuss in detail about Contract Administration and
Claim and Dispute Management System.
Submitted By: Group Three
Submitted to: Dr. EPHREM GIRMA
SEPTEMBER/ 2022
DIREDAWA INSTITUTE OF TECHNOLOGY
COTM MSC/2022
Group-3 Members
1. AHIMED ALIYI
2. EYOEL ALEMU
3. MAHILET NIGUSSE
4. MERON NIGUSSE
5. REDIET TEFERI
6. ROBEL ABEBE
7. SAMSON AKILILU
8. YOSEPH MELESSE
9. SEM
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Procurement and contract management (COTM-6042)Project-1 Group-3
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DIREDAWA INSTITUTE OF TECHNOLOGY
TABLE OF
3.
COTM MSC/2022
CONTENTS
1.
Introduction ....................................................................................................................................................1
2.
Contract Administration .................................................................................................................................2
I.
Design stage Contract Administration ...........................................................................................................2
II.
Contract Administration during the Tendering Stage ....................................................................................3
III.
Contract Administration during Construction Stage ..................................................................................3
IV.
Construction Contract Administration during Completion and Final Account Stage ................................3
2.1.
Contract administrator’s key responsibilities .............................................................................................4
2.2.
Dangers in failing to manage contract ........................................................................................................4
2.3.
Advantages of contract Administration ......................................................................................................5
Claim and Dispute Management System............................................................................................................5
3.1.
Claim ..........................................................................................................................................................5
3.2.
Types of Construction Claims ....................................................................................................................6
i.
Contractual Claim.......................................................................................................................................6
ii.
For breach of contract ................................................................................................................................6
iii.
Extra-contractual Claim .........................................................................................................................7
iv.
Ex-Gratia Claim .....................................................................................................................................7
3.3.
Causes of Claim .........................................................................................................................................7
3.4.
Dispute Resolution Systems .......................................................................................................................8
3.5.
Dispute Resolution Systems .......................................................................................................................9
3.5.1.
Advantages of Dispute Resolution Systems .....................................................................................11
i.
Advantages of Preventive Dispute Resolution System.............................................................................11
ii.
Advantages of Amicable Dispute Resolution System ..............................................................................11
iii.
Advantages of Judgmental Dispute Resolution System .......................................................................11
Reference..................................................................................................................................................................12
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Procurement and contract management (COTM-6042)Project-1 Group-3
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DIREDAWA INSTITUTE OF TECHNOLOGY
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1. Introduction
Construction projects should simultaneously address the geography, site conditions, communities,
physical environments, existing infrastructure, as well as a wide range of stakeholder
requirements. Adding to the complexity is the mix of team specialists and contractors.
Construction projects often result in a one-of-a-kind product rather than massproduced products.
While there is generally no opportunity to produce a prototype, a construction project may
sometimes be performed in phases in order to provide an opportunity to review and refine the
project design and implementation strategy, as well as validate the investment intention. In this
complex environment, participants from various professions, each has its own goals and each
expects to make the most of its own benefits. In the construction industry, since differences in
perceptions among the participants of the projects, conflicts are inevitable. Construction Contract
Administration involves a process of activities that help to manage the design, contract
agreement, and construction process of any development project with proper control. While poor
contract management leads a project to unnecessary disputes and claims, a proper contract
administration would lead any project to end up within the stipulated budget and time frame.
If conflicts are not well managed, they quickly turn into disputes. Disputes are one of the main
factors which prevent thesuccessfully completion of the construction project.
Typically, if the parties cannot reach a resolution themselves, expensive, time-consuming legal
procedures begin, which severely affects all the participants. Disputes are a reality in every
construction project. Without the means to address them, minor issues can fester and grow, with
crippling consequences for project participants. The rising cost, delay and risk of litigation in
construction disputes has prompted the construction industry to look for new and more efficient
ways to resolve these disputes outside the courts. It has been found that when resolution occurs
sooner rather than later and when this resolution is relatively confrontational, there is a much
better chance that litigation can be avoided. Given the uncertainties involved in a construction project
and the magnitude of funds involved, it is only natural to have disagreement between parties, but these
need to be resolved. While most of such day-to-day differences are resolved in an amicable manner,
without having to resort to a more formal mechanism, the parties at times agree to disagree and seek
redressed through independent intervention. Although, in principle, the discussion falls under the
purview of construction law, effort has been made to discuss some of the aspects related to disputes
and dispute resolution with as little legalese as possible. Technically, a dispute implies assertion of a
claim by one party and repudiation thereof by another. Thus, neither a mere claim without repudiation,
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COTM MSC/2022
nor a pair of claim and counterclaim, can be called a dispute
2. Contract Administration
Contract Administration involves all necessary activities for a construction project performance
from the initial stage to its final stage. These activities include monitoring of the project
performance with the agreed contractual obligations between the parties to the contract. After all,
Contract Administration plays an important role in Construction Project Management. Through
Contract Administration, project risk is monitored and controlled. Also, a good Contract
Administration process is important for successful project delivery.
Typically, a construction project undergoes different stages.

Design Stage

Tender Stage

Construction stage

Handover and Final Account stage
In all these stages of any construction project, Contract Administration plays a major role in
contract monitoring and risk controlling. The contract administration process begins together with
the project design and planning stage. During this stage, it is necessary to determine the
contracting system to follow for the specific project.
I.
Design stage Contract Administration
Contract Administration duties during the design stage include monitoring and controlling both
cost and time under the pre-determined terms with the Employer.
Once the design drawings are available, the next step is to prepare the specifications and contract
documents. Usually, the Contract Administrator for the project will prepare the contract
documents. At this stage, contract documents will be prepared and contractual matters will be
discussed for the proposed project.
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II.
COTM MSC/2022
Contract Administration during the Tendering Stage
Procurement is an important stage for any project and this is the stage where more contract
administration work involves. Once the tender closing date is reached, the next step is tender
evaluation. This is another important task involved in the contract administration process of any
construction project, in this stage, the Consultant or Contract Administrator has the responsibility
of determining evaluation criteria. Tender evaluation criteria can depend on the technical
proposal, time, and price. However, there will be a series of tender clarifications in terms of
tender questionnaires, tender interviews, and clarifications.
III.
Contract Administration during Construction Stage
In this stage, it is necessary to understand the contract document and the obligations to each party.
During the construction stage, more risk is involved in terms of both time and money. At the
same time, it is also necessary to get the work done with the required quality and as mentioned in
the specifications.
Contract Administration during the construction stage involves progress claims, variations to the
contract, claims including Extension of Time, and other legal matters. Usually, the contract
administration team is aware of the binding contract and its clauses. Contract Administrators,
Quantity Surveyors, and Contract Engineers mainly involve in the process in different roles and
responsibilities.
It is important to know the contract document specifically used for the project when you involve
in contract administration or related matters of any project.
IV.
Construction Contract Administration during Completion and Final Account
Stage
Contract Administration during the maintenance, completion and Final account stage is mostly
similar in different forms of contract. In this stage, it is necessary to monitor the defects,
warranties if necessary, and any other liabilities. Once all the obligations are fulfilled, it is
necessary to prepare the Final Account Certificate. Adjustments to the contract document in terms
of variations, liquidated damages or penalties should indicate in Final Account. In this stage, the
release of retention money is included too.
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DIREDAWA INSTITUTE OF TECHNOLOGY
COTM MSC/2022
Although the above-mentioned process is a brief of Contract Administration, it is not such a
simple process. It includes more risks and in some cases, there are disputes to solve. Therefore
Contract Administrators and Quantity Surveyors play a major role in delivering a project within
the stipulated contract obligations. Usually, the Contract Administration process will end up with
the acceptance of the project. This can be done after completion of a project with due
performance or termination of a contract due to poor performance by any of the parties to the
contract, after handing over a completed project, there is a defects liability period as well.
2.1.
Contract administrator’s key responsibilities
Contract administrator’s key responsibilities are;
Assisting in the preparation ofsubcontract packages.
Assisting in drafting the scope ofwork and procurement schedules.
Issuing variations.
Processing progress claims.
Overseeing detailed design and shop drawings.
Co-coordinating and attending site meetings and
providing
technical
expertise if
required.
2.2.
Dangers in failing to manage contract
Failure in properly managing your contract will lead to the subsequent adverse outcomes
Chaos in your contracts leads to additional expenditures and increased risk.
Both the buying organization and the supplier want to have the ability to control the
contract, basically power. As the buying organization, if you don’t control performance of
the contract, leaving it with the supplier, the supplier may not have your interest at heart
and that may mean unbalanced decisions that do not serve your organization’s interest
Unchecked misunderstanding between the buying organization and the supplier could
mean failure to meet contractual obligations and responsibilities
With the rise of issues as a result of misunderstandings and disagreements, the relationship
between the supplier and the buyer may be damaged Progress may be slow and as such
in ability to move forward with the contract
The intended benefits and value from the contract may not be realized and what this will
also lead to is missing out on future opportunities to improve on performance and value
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COTM MSC/2022
for money
Changes in contract can be detected late and that will result in to decisions being made at
the wrong time or not being made at all.
2.3.
Advantages of contract Administration
Advantages of effective contract administration are;
It facilitates communication between both party
It makes sure contracts meet official requirements
It protects both entities
Financial optimization.
Productivity / Operational Effectiveness
Risk Reduction; it improved risk management since it is always on the lookout for
uncertainties as it develops and manage the contract
The supplier’s commitment and compliance are not left to chance
Incentives and momentum for ongoing relationship development and performance
It is important for Contract maintenance and change control
It is important for Charges and cost monitoring
There will effectively Ordering, payment, and budget procedures
It is important for Contract performance reporting
3. Claim and Dispute Management System
3.1.
Claim
During the execution of a project, several issues arise that cannot be resolved among project
participants. Such issues typically involve contractor requesting for either time extension or
reimbursement of an additional cost, or sometimes both. Such requests by the contractor are referred to
as ‘claim’. If the owner accedes to the claim of contractor and grants him extension of time or
reimbursement of additional cost, or both, the issue is sorted out. However, if the owner does not agree
to the claim put out by contractor and there are differences in the interpretations, the issue takes the form
of a dispute;
Claims are becoming an inevitable and unavoidable burden in modern projects involving new
technologies, specifications and high expectations from the owner. It is, therefore, imperative for all the
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parties to be fully acquainted with the procedures and systems, including resource to certain preventive
actions as found necessary and required. Construction claims are found in almost every construction
project. They are the seeking of consideration or change by one of the parties involved in the
construction process. They have significant effect to project cost and time.
Claims are unavoidable and necessary to accommodate unforeseen changes in project conditions in a
contractual sense. Essentially, claims in this context are the administrative processes required to handle
construction events that take place where the contract “leaves off”–changed conditions, design changes,
defective specifications, quantity variations, delays, disruptions and accelerations.
While many claims can be resolved harmoniously, the prior presence of conflict between parties may
initiate an unnecessary dispute. Disputes should not be demonized, as resolution mechanisms have their
place in the construction process. This is especially the case when onerous and one-sided amendments to
standard forms, often drafted by lawyers with the objective of improving their client‟ position at the
exception of fairness; or when the only way in which a party can actually protect their position because
the contract conditions promote conflict. Inappropriate risk allocation through disclaimer clauses in
contracts is a significant reason for increasing total construction costs. The most common exculpatory
clauses used in construction are uncertainty of work conditions, delaying events, identification,
liquidated damages, sufficiency in contract documents.
3.2.
Types of Construction Claims
There are a number of ways to classify construction claims. They may be classified by the related
parties, rights claimed, legal basis, and characteristics of claims. By determining their relevant
legal bases, construction claims can be divided into three categories:
i.
Contractual Claim
Contractual claims are the claims that fall within the specific clauses of the contract such as
ground conditions, valuation, variations, late issue of information, and delay in inspecting
finished work.
ii. For breach of contract
Apart from contractual claims, the contractor may have a claim for damages for breach of contract at
law. In Ethiopian construction industry breach of contract is widely seen from both contractor and
employer side. Contractors’ breach of contract is that they simply try to win the tender without having
sufficient resources to perform the contract and face problem afterwards. On the other hand, employers'
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COTM MSC/2022
breach of the contract is by late issue of drawings, late possession of site, change of their idea etc. This
is an entirely different type of claim. The success which depend upon the contractor providing on the
balance of probabilities, that the employer is in breach of some express or implied term of the contract
and that he has suffered loss as a result. In that case, the contractor can recover damages to compensate
him. Claims of this type must in principle be perused in arbitration or litigation, with all the inherent
uncertainties involved.
iii. Extra-contractual Claim
This type of claims has no specific grounds within contract but results from break of contract that
may be expressed or implied, i.e., the extra work incurred as a result of defective material supplied
by the client.
iv. Ex-Gratia Claim
Ex-gratia claims are the claims that there is no ground existing in the contract or the law, but the
contractor believes that he has the rights on the moral grounds, e.g., additional costs incurred as a
result of rapidly increased prices.
3.3.
Causes of Claim
Many conflicts occur in construction industry between the contracting parties which mostly lead
into the claims. These are some causes of claim.
Due to damages occur to adjacentbuildings during the work,
Due to Change in work scope andVariations,
Loss due to extra overheads on,
Due to Weather conditions,
Delay in Supply of Drawings and Designerrors,
Delay in Supply of materials,
Delay in Payments,
Delay in Completing the work,
Work actually done but not measured andpaid,
Account ofextension of time limit,
Due to Different interpretations of thecontract provisions,
Due to Extension of time (EOT),
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DIREDAWA INSTITUTE OF TECHNOLOGY
COTM MSC/2022
Due to financial failure of the contractor,
Due to Unforeseen ground conditions, Etc…
3.4.
Dispute Resolution Systems
a) Preventive Dispute Resolution Method
In any project, the project team tends to argue on various issues affecting the project resulting in
disputes that may negatively affect the overall success of the particular project. Therefore, it is
important for project managers to develop strategies for preventing any dispute within the project
team to ensure successful completion of projects. on the other hand, if the prevention strategies
fail, it is important for the project management clue to have reliable and effective dispute
resolution programs that will ensure the particular disputes are resolved in the best way possible
to avoid project failures and negative effects that disputes may bring. Therefore, it is important
for project managers to understand disputes and critical issues regarding the concept to ensure
effective prevention and resolution in a project management perspective.
These are three key ways in which project disputes can be prevented.
I.
Effective Communication – Communication is a key factor in ensuring
understanding between people and groups. Disputes arise when parties cannot
understand each other on specific issues due to lack of effective communication
channels. Therefore, project managers need to ensure that the project teams
understand all issues regarding the project to avoid misinterpretation and
misunderstanding.
II.
Inclusive Planning – Planning is the fundamental step in project management.
However, if the planning phase is only done by the project leaders, questions will
Arise on some issues resulting in disputes. Therefore, to prevent such kind of
disputes, project leaders should ensure that the entire project team is included in
the planning phase to ensure participation in decision making regarding project
aspects.
III.
Contract Agreement – To prevent project disputes regarding project
schedule, objectives, and expectations, all project team members would be
notified on project contract agreement to insure knowing what is required of them
will ensurethat no disputes occur due to a misunderstanding of the agreement.
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b) Amicable Dispute Resolution System
Amicable settlement is a process where parties to a dispute or a lawsuit find ways to resolve their
differences in a friendly and non-contentious way. To achieve an amicable settlement, the parties
need to be willing to make concessions for the sake of reaching an agreement.
Amicable Resolution System includes Negotiation, Mediation, Conciliation and use of Mini Trials
to administer the claim in a less formal, simple procedure, more flexible, less adversarial and
strictly confidential mode so as to avoid the time and cost implication of claim processing. When
parties reach an amicable settlement, they’ll either do it on the basis of their own desire to resolve
their dispute or will use the services of a mediator or a lawyer to support them in the process.
c) Judgmental Dispute Resolution System
Judgmental Dispute Resolution System including Adjuration or use of Dispute review board,
Arbitration and Litigation where the formal adjuratory or common law system is applicable to
bring the closure of claim processing. This sub process where dispute was handled in any form of
its resolution systems is termed as Dispute Resolutions. Once the contractual parties agree on the
final outcome of the claim process then they have reached into a stage where the claim is
approved.
3.5.
Dispute Resolution Systems
Dispute Resolution systems can be classified as:
Arbitration
Under this form of Dispute Resolution mechanism, both the parties involved in the dispute, choose
the person to hear and determine their dispute through a consensus. The objective of arbitration is
to arrive at a fair resolution through an unbiased tribunal speedily and in a cost-effective manner.
Conciliation
Under the process of conciliation, the intention is to facilitate the settlement between the parties.
The parties, however, are not obliged or are not bound by the conciliation, in a sense that
negotiations can be carried out until the parties arrive at a mutually pleasing settlement. The
process is handled by an impartial individual termed as the conciliator.
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Mediation
A mediator is involved in assisting the parties in dispute to reach an agreement. The parties in
dispute themselves set the conditions of the settlement to be reached. The third-party does not
impose any decisions on the parties but merely acts as a facilitator involved in improving the
dialogue between the parties.
Negotiations
It is the most common method of dispute resolution. A non-binding procedure in which
discussions between the parties are initiated without the intervention of any third party with the
object of arriving at a negotiated settlement to the dispute. Negotiation occurs in business, nonprofit organizations, government branches, legal proceedings, among nations and in personal
situations.
Mini-trial
A mini-trial is really not a trial at all. Rather, it is a settlement process in which the parties present
highly summarized versions of their respective cases to a panel of officials who represent each
party and who have authority to settle the dispute.
Adjudication
Adjudication is an effective way of resolving disputes in construction contracts. It is a decisionmaking process involving a neutral third party, called an adjudicator, with the authority to make
a binding decision on the parties.
Litigation
Litigation is where a dispute is decided by a court of law with jurisdiction or power over the
dispute and to which it has been referred in accordance with its procedures. This process is very
different from arbitration, because the source of a courts power to decide a dispute is not the
agreement of the parties.
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3.5.1.
i.
COTM MSC/2022
Advantages of Dispute Resolution Systems
Advantages of Preventive Dispute Resolution System
It minimizes time consumption
It is important for the party’s relation
It is cost effective because there will no dispute
etc.
ii. Advantages of Amicable Dispute Resolution System
It will not have the stress of dealing with the Court system and the anxiety of a litigated case.
It has less uncertainty of getting a desired outcome than putting in the hands of a judge.
It will save money in less costly legal proceedings than money for unnecessary court
proceedings.
It will not have time pressure to negotiate the settlement terms
etc.
iii. Advantages of Judgmental Dispute Resolution System
If the dispute is resolved Judgmental Dispute Resolution System it is the final all the parties
must be agreed
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Reference
1. Handout & PPT By EPHRAIM GIRMA (PHD) .
2. Amila Gamage(blogger)
3. Chaitanya Khekale1, Nityanand Futane2 International Journal of Science and Research (IJSR)
ISSN (Online): 2319-7064
4. FIDIC-2010
5. Wikipedia
6. Bekele, A. (2005). Alternative dispute resolution methods in construction industry.
7. Google
8. Zhang Yang, “The Study on Law Disputes in Construction Project Contract Relationship,”
International Conference on Medical Physics and Biomedical Engineering Physics,
Proceedings 33 (2012), pp.1999-200
Procurement and contract management (COTM-6042)
Project-1 Group-3
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DIREDAWA INSTITUTE OF TECHNOLOGY
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Construction Organization and labor Management COTM6012