Managing contract change using an Internet-based system for NEC / ECC projects
Introduction
This microsite, provided by Management Process Systems (MPS), features edited extracts from the Interim Research Report - Collaboration Support Realises Business Process Benefits for NEC/ECC projects - The Internet Contract Change Management (CCM) System by Professor Ming Sun and Tejas Oza, Bristol, University of the West of England. For further information, contact: Professor Ming Sun, Director, Construction and Property Research Centre , Faculty of the Built Environment, University of the West of England. Tel: 0117 32 83006 E-mail: ming.sun@uwe.ac.uk. Please visit www.mpsprocess.com for a full copy of the report.
The Contract Change Management (CCM) system is an Internet based service, provided by Management Process Systems (MPS) Ltd, which supports the contract change process defined in NEC/ECC.There is anecdotal evidence that CCM helps projects reduce risks and save costs. UWE are carrying out a two-year research project which will lead to an innovative cost/value measurement methodology for CCM.
Why do changes occur during construction projects?
Construction projects are subject to influence from many factors, including external pressures, inter-organisational pressures and project level pressures. Some of these forces are within the control of the project team, while others are beyond their direct control. Under certain circumstances, one or a combination of these factors will trigger a change in the project. These factors commonly include:
- Climate conditions. Climate conditions are very difficult to predict and plan for in advance.
- Site and ground conditions. Some sites may have limitations on the normal operation of vehicles, people and equipment due to narrow space constraints or noise restrictions. Inadequate ground condition survey and unknown geological conditions often result in necessary amendment to design and remedial actions to building work. In extreme cases, a finished structure has to be demolished and rebuilt.
- Client-initiated variations. .Typical client-initiated changes include delays in client review and approvals; late changes in design specifications; interference in the project execution; and poor contractual relationship.
- Contractors' faults.. Poor site management and supervision by the contractors can cause delays. Increased use of subcontractors increases the difficulty of coordination and quality control. Delays or defective work by one subcontractor can have a serious knock-on effect on others. In addition, poor workmanship is also widely recognised as a common cause of unwarranted change and rework.
- Design changes, errors and omissions. .Design errors and omissions are usually caused by human error. In addition, design changes can be caused by many other factors, such as misunderstanding of client's requirements, poor coordination, requirement change, discovery of abnormal site conditions, etc.
- Communication failures. .Construction projects need good collaboration between all parties involved. The identification of roles, responsibilities and authorities is critical in ensuring effective and efficient information flows. Document management and control are fundamental for the creation of compliance records. Poor communication often results in information errors or incomplete information and delays in decision-making.
- Project team and personnel changes. .Changes in personnel, especially to key staff, have significant negative effects on project progress.
- External factors.. There are a host of other factors that are normally beyond the control of the project team, but nevertheless have potentially huge impact on project costs and schedule. Examples include inflation of cost for labour and materials; shortage of labour and materials; changes in regulation and legislation; new technology; currency exchange rates; third parties. The onset of risk is a major source of change.
What are the consequences of change?
Although some projects may benefit from positive changes, most changes interrupt the flow of work, leading to uncertainty of outcome for the businesses involved:
- Cost and time overruns. .The most frequent effects of project changes are increases in project costs and delays in completion. In extreme cases they can cause a diminution in project business benefits due to a reduction in functional deliverables.
- Rework. .Rework incurs cost increase on wasted labour and material on the abandoned work and remedial measures, which can be as high as 12.4% of total project costs.
- Loss of productivity.. It is generally accepted that projects with a high level of change experience productivity degrading for up to 30%.
- Disputes and claims. .Project changes often cause alterations to the contractual terms and conditions in both time and cost. Different views of the causes of change can lead to claims and counter claims. Ambiguities in contracts increase the risk of disputes. Poor document control adds to the general delay and costs in obtaining resolution.
- Negative impact on staff morale. .Working overtime and/or managerial pressure are usually required to get the project back on track. One consequence is damage to staff morale and staff fatigue, which results in low productivity and poor quality of work.
How can changes be managed effectively?
The success of a construction project, to a large extent, is determined by the ability of the project team to manage the inevitable changes during the project. The following are some general change management principles:
- Avoid unnecessary changes
- Identify change as early as possible
- Assess the risks associated with proposed change
- Keep good timely communication amongst the whole project team
- Maintain an audit trail of decisions
- Comply with contractual requirements
- Ensure data are consistent and easily available to the project team
- Ensure status of change agreements are visible to senior management
- Deal with time-related consequential costs (preliminaries) at same time as net costs
- Obtain early understanding of commercial impacts
- Deal with changes quickly
- Obtain agreement while changes are 'fresh' in people's minds
- Do not allow changes to coagulate into 'claims'
- Avoid leaving agreement to the end of the project
- Avoid 'global claims'
- Ensure change management processes are quality assured
- Have checks in place to avoid silo mentality
- Maintain good relations across project team (soft skills); collaborate rather than confront
- Understand the project business case
- Select the right form of contract
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