Sayeh Tower, Vali—e-Asr St., Tehran

Contract Management

What is contract management?

Contract management, as its name implies, is the way in which an employer designates a company or an individual to manage the execution of a project. Therefore, determining the methods of project implementation and determining the organizational chart and recruitment of personnel is the responsibility of the contractor. This article provides useful information about a management contract. In this method, the contractor or person receives a percentage of the cost of project management. These costs usually include the cost of preparing the contract and the cost of execution, but before that the agreement of the parties must be considered, this contract is to the benefit of the parties because the employer does not pay any overhead (overhead or profit) to the contractor and only pays for the necessary items in the contract, project management, manpower and machinery, so the cost of the contract is saved.

Advantages of project or contract management method

If contract management is used in the middle of the design phase or earlier, by integrating into the design team and coordinating with it, it will be able to apply construction-related experiences and skills in the designs to reduce time and cost and Better implementation of the plan and increase the possibility of value engineering analysis in the design and construction stages. Since the executive supervision of construction contractors is the responsibility of the MC, so there is no need for the supervision services of consulting engineers. The presence of MC leads to coordination between construction contractors and resolves their problems in terms of non-interference. Providing support services to construction contractors leads to speeding up operations as well as covering their weaknesses. Because the MC is not directly involved in the design and implementation, it can exclusively manage, plan and control costs, regardless of the direct implementation issues. MC, as a member of the employer’s team, has no profit motives and its goal is to satisfy the employer and protect its interests. In this method, intense competition is created between construction contractors, because the work is divided into smaller packages, and the contractors try to obtain more work packages by doing it correctly and in a time.

Percentage of contract management

In this contract, the contractor receives some construction costs as a percentage of the employer. Which is usually used to prepare raw materials for the project. How to pay and receive fees is determined entirely by the contract. The employer’s profit in this contract is due to non-payment of any overhead costs. And pays only the costs related to the supply of materials, manpower and equipment to the contractor. Also, the contractor’s profit in this contract is due to not paying any cost for the construction of the project and not accepting any obligation.
Finally, according to his specialization and profession, he receives some profit as a percentage of the total costs from the employer. In this way, the percentage of contract management will be determined.

Influential persons in contract management

Employer: The employer is a natural or legal person. Who may be the owner of the land himself or as the deputy owner, the employer of the project. He is the person who bears all the costs related to the construction of the project. Usually in large contracts, the employer is obliged to insure the parties to the contract. He transmits all the information to the contractor through the consultant.
Contractor: One of the main parties to the management contract is the contractor. The contractor is a natural or legal person, who is responsible for managing the construction project. The contractor can accept the contract by observing two principles. In the first case, the responsibility of providing all equipment, materials and manpower is with the contractor, which is determined by the employer at the total cost. In the second case, all materials are provided by the employer. And the contractor is responsible for providing equipment and hiring manpower. In this case, no cost will be delivered to the contractor for the preparation of materials. And only the cost of providing equipment and manpower will be delivered to the contractor.
Consultant: Another person present in the contract management of construction contract is a consultant. The consultant has a duty to arrange a suitable contract after consulting with the employer. And then check whether the project is proceeding in accordance with the wishes of the employer or not? In general, having a consultant can minimize the risk of contract errors and losses. On the other hand, the presence of a consultant prevents any unauthorized delays in the contract and project process.

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