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05 MANAGING CONTRACTS

Posted Sat, 2016-06-25 01:00 by Rafael Davila
  • http://www.mediafire.com/download/h32cl7rbl5ti1pl/GPCCAR_08_as_of_2016-01-05.pdf
 GPCCAR 05.5.3.13 Billing / Getting Paid Under the Contract We will explore in greater detail in Module 9 - Managing Project Progress but for now, one of the tested and proven techniques is to STOP paying for work off the milestones or work packages and start to pay for work based on the Activities. Not only will that encourage contractors to actually pay attention to the schedule but by enhancing their cash flows it will result in better performance by your subs and vendors. GPCCAR 05.5.3.7 Breach of Contract Quantum Meruit- refers to “fair and reasonable compensation” for whatever work has been done up to that point in time. This is legal concept underlying Earned Value Management.
  • Everyday in the USA we have hundreds of thousands of construction contracts that do not use EVM and do not require using the CPM schedule as a payment tool. 
  • EVM does not distinguish performance of critical versus non critical activities, it is not needed to determine if there is a breach of contract.  
    • It makes no sense to adopt as a contractual requirement something that is discouraged by the DOD [the father of this creature] on fixed-price-contracts. EVM as a contractual condition is only appropriate in development contracts. In addition the DOD do not requires EVM on non-fixed-price contracts under certain threshold.
  • Compensation is determined by the contractual conditions which among other things include schedule performance as of the essence.
    • There is no need to go into excesive granularity as to make the payment appliction a payment tool. For decades we in the USA have been using separate tools to track schedule and to prepare our billings and the practice is till favored by a very wide margin. This in no way have prevented us to make appropriate determination of what is payable and what is not. 
For a related discussion where the above mentioned issues are adressed in detail please reffer to:
  • http://www.planningplanet.com/forums/guild-project-controls-gpc/591073/090-managing-project-progress 
  • 09.0 - MANAGING PROJECT PROGRESS

I am not against the discussion of the relevant but controversial issues of using the CPM as a Payment Tool as well as the use of EVM.  On the contrary they must be addressed but in a transparent and unbiased fashion.