Introduction to Contracting out PH Engineering Works and Contract Management | Construction

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The objective of the guide is to provide advice on successful implementation of any large construction contracts related to public health engineering works. The following key steps must be adhered to, to ensure a successful outcome to the contract management process: 1) Planning the full contract document, 2) Procurement - Selection of contractors through tender process, 3) Implementation - Advice and supervision during the implementation phase and 4) Completion
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  OXFAM Technical Brief  –  introduction to contracting out works 1 Introduction to contracting out PH engineering works and contract management This Technical Brief provides an introduction to contracting out PHE works and the subsequent management of such contracts for engineers, logisticians and project managers. Introduction The objective of the guide is to provide advice on successful implementation of any large construction contracts related to public health engineering works. The following key steps must be adhered to, to ensure a successful outcome to the contract management process: Planning the full contract document Procurement - Selection of contractors through tender process Implementation - Advice and supervision during the implementation phase Completion  –  Supervising the handover process It is essential that the person managing the contract process, not only follows the key process steps, but also liaises closely with the project technical team, the logistics team, the Oxford logistics team and the Oxford PHE Advisory team. 6.1   6.2   The objective of successful contract management The objective of successful contract management is to ensure the successful implementation of large construction contract for public health engineering works. The contract should be designed so as to contribute to good management practice and by so doing reduce the incidence of disputes and improve the overall administration and management of the contract process. Clear objectives are important in large-scale projects. Without clear objectives responses to changed circumstances may lead to the project going off in undesirable directions. Given the project cycle consists of identification  , planning & design  , implementation & management  , and evaluation  , contract management is part of the implementation-management phase, but in spite of this, issues relating to managing large works contracts need to be fully considered in the planning & design   phase. In other words, Oxfam must carefully consider if, they have the capacity to embark on a complex construction project on the one hand, and if local conditions allow the successful achievement of the project activities on the other hand. Typically Oxfam’s capacity will be affected by staff availability for the entire duration of the project and those staff having the required capacities to manage the construction contract both technically and administratively. Typical local conditions undermining the activities are the absence of experienced construction companies, the complexity of works, the lack of equipment, the required materials being unavailable and logistics constraints. When the conditions are particularly favourable, Oxfam should consider the participation of beneficiaries for labour intensive activities and may manage the works through in-house resources; when conditions are adverse, Oxfam will probably hire external consultants, award international contracts, or even choose alternative solutions to building. Keys steps in successful contract management Let’s consider the key steps of a construction activity: Step 1  –  Planning 1.Prior planning, well-defined procedures, andprotocols may prevent poor project performance.Not only does the project process itself needplanning, but also the individual activities formingpart of the process also need planning. Proceduresand protocols refer to systems in place for dealingwith recurring issues (like the requisitioning of materials). It is not enough to have such systems inplace, but everyone needs to know that they arethere and how to use them.2.Seasonal factors need to be considered in allprojects, as there might only be certain activitiesthat can be undertaken at particular times of theyear.   Good Practice - Management Considerations It is very important that the same person follows up the contract implementation from start to finish. It is always advisable to use a worksite register where all important decision and remarks are kept throughout the contract implementation.  OXFAM Technical Brief  –  introduction to contracting out works 2 3.Verify the proposed technical design has beenelaborated by the project technical team incollaboration with local partners such as public worksdepartments, water departments and other relevantgovernment actors.4.Analyse the  “contract model” required by the Donor , or   in vigour in the country where the worksare going to be implemented. Verify the   proposedcontract is   appropriate; if not, propose other moreappropriate formats such as standard contracts used by World Bank or the European DevelopmentFund, and adapt to the specific context.5.The estimate of quantity of different works should be calculated as precisely as possible as thiswill minimise amendments  to the contract and variation orders . The same applies to rateanalysis . This work should be undertaken in closecollaboration with the project technical team.6.Get a Confidential Cost Estimate  to ensure theprice quoted is within a sensible range.7.While estimating the project completion time , a project implementation schedule  should beprepared and all factors that could delay the project. A risk register  approach may be considered? Thiswork should be undertaken in close collaborationwith the project technical team, as they will beresponsible for the day-to-day supervision of works.8. A decision should be taken on whether to use onlynational contractors, or a mix of national and local contractors, given Oxfam’s community based approach to PH work. Such consultations should beundertaken in collaboration with all the main actors.9.The contract document, which mainly contains conditions of contract , bank guarantee , bills of quantity  (BOQ), specifications  and drawings should be prepared, in close collaboration with theproject technical team, considering local prevailingnorms and other legal requirements. Clauses willinclude  financial, administrative and technical issues. Wherever possible, quality testing, eitherunder the responsibility of the Contractor or Oxfam,should be scheduled or considered in the overallcosting.10.While preparing the conditions of contract, the localprevailing rules and regulations (including tax relatedissues) should be considered; both logistics andfinance should be consulted before finalising it. Itmay be necessary to consult a lawyer (locally orinternationally) to ensure the documentation islegally sound.11.A decision will need to be taken on the workingcurrency, (local currency, USD, Euro or GBP), to beused in the contract documents. This decision will betaken in accordance to local practice.12.Types of financial and performance guarantees should be specified as a function of the prevailingnorms in the   country where the PH works are to beimplemented.13.The contract shall be drafted with the aim of identifying roles and responsibilities of all parties ineach circumstance (ex.: what happens when theContractor does not perform? When should Oxfampay? What responsibility has Oxfam towards the landOwner? Who can legally represent the parties? Whoendorses the technical compliance of works?).14.The eventual owner, public works departments,water departments and other relevant governmentactors, should be closely consulted and involved inpreparing the contract documents. Step 2  –  Procurement - Selection of a Contractor through a tender process: 1. Treating all Tenderers equally is a keycomponent of the tendering process. For example, itis of paramount importance distributing the samepieces of information to all Tenderers at the sametime. Communications in writing must be preferredover verbal informal approaches.2.The work should be tendered out with ContractManager advising on the tender process to befollowed. Donors , such as the EU, may have theirown tender guidelines, if so, copies of the guidelinesmust be obtained.3.The first contact with construction companies isthrough an invitation (restricted tender) or a publicadvertisement (open tender) for Tenderers  to takepart respectively in a pre-qualification exercise or an open tender process .4.The tender dossier shall explain the project in detail.If necessary, pre-bid meetings can be organised,ensuring that all interested Tenderers receive exactlythe same information.5.The bid should contemplate mechanisms for thepurchase of major construction materials if any (e.g.large water pipes, generators, submersible pumps,etc.), especially if international procurement isrequired. The offer shall clearly state whether theGovernment, or Oxfam, or Third Parties need tocooperate in the procurement process (e. g.: forimport taxes).6.A panel shall conduct the selection process using arange of pre-established criteria. Good Practice  –   Quality Testing e.g.   for the construction of a tank: concrete resi    stance test (at 7, 14 and 28 days) means taking spec    ial sample of concrete each time a batch of conc    rete is prepared. e.g.   a pipe pressure test, between 2 valves, may be und    ertak  en   each time a section of pipeline is comp    leted e.g.   water quality testing may be undertaken when a borehole is drilled.    OXFAM Technical Brief  –  introduction to contracting out works 3 7.The Contractor shall be carefully selected on thebasis of the sealed bid it has submitted or any otheraccountable fact. Relevant considerations that do notarise from the bid can be acknowledged by the Panelin the Tender Evaluation Report (e. g.: pastexperience with Oxfam, or with other organizations,not mentioned by the Tenderer). Considerations notmentioned in the tender Evaluation Report cannotinfluence the selection. The selection must be basedon objective, substantiated facts.8.The eventual owner, public works departments,water departments, other government actors, and/orother key stakeholders should be involved in theselection process.9.When the selection process has been completed,agreements will be made with the Contractorregarding the best mechanisms for the purchase of major construction materials (e.g. large water pipes,generators, submersible pumps, etc.) especially if international procurement is required and suchmaterials are not available locally or nationally. Theeventual owner should be fully involved in theprocurement process, as this may avoid importtaxes. Step 3a - Implementation, during construction phase   1.In the field, if there is a variation from original plans,a variation order should be prepared explaining thereasons for this. This then needs to be approved bythe Contract Manager in collaboration with theproject Technical Team and other key actors. Fieldsupport visits to verify the facts on the ground maybe necessary.2.All conditions of the contract must be fully agreed,analysed and carefully   complied with by both theEmployer and the Contractor.3.Close coordination among the Contractor, Oxfam GBand the eventual Owner is very important and allattempts should be made to ensure that a goodworking relation exists among all these. The ContractManager may also need to liaise with key Donors onthe contract management process. However it isimportant to clearly define the communicationchannels between actors that are non-signatory tothe contract. In principle external information, orrequest, or complaint should go through the ContractManager before reaching the Contractor.4.The person managing the works is stronglyrecommended use of a worksite register, withnumbered and maybe multi-layered pages. Theregister should be kept by, where remarks,warnings, decisions taken and other information maybe recorded while conducting joint monitoring visits(Manager + Technician + Contractor). Evencontestations may be registered. Those permitted towrite notes in the register should be clearlyidentified, in writing, in the register.5.It the event that the Contractor fails to comply withthe conditions of contract, the Contract Managermust advise on the necessary steps to be taken tofacilitate the contra ctor’s work. The Contract Manager may be required to offer support to theproject technical team or to plan field support visitsin this eventuality.6.The Contract Manager must coordinate technical,financial and legal aspects of the activities. He shallbe in continuous contact with the Technical Experts Good Practice - The Offer (the Bid) Typically, an offer from a Contractor must include details of the following: - declaration of acceptance of tender conditions - power of attorney - site visit certificate - general information about the company - organisation chart - technical qualification certificates - similar construction experience - personnel to be employed on the contract - CV of key personnel - work plan - consortium’s ways of working and roles (if applicable) - priced bill of quantities and financial bid - bank details - list of equipment to be made available on the contract Tips for maintaining a good working relationship with the Contractor. -   One clear line of communication (  don’t give order to workers, go through the line defined at beginning of works) -   No surprise or changing decision at last minute (prior notice with time to adapt) -    Always remember that the contractor has to make money and don’t like to feel he’s loosing    -   It c  an be “give and take on” what’s important to Oxfam and the contractor. -   Consider the impact of decisions and changes on cost, time and quality of the works, as well as the interest of each party (humanitarian project needs, reutation etc.   Good Practice  –   Selection criteria -   Previous similar experience -   Type and number of equipment (compressors, vehicles, etc. need to be verified) and human resources. Those at full disposal of the project should be distinguished from those to be shared with other activities of the Contractor -   References (name and contacts should be given). -   Up to date to any taxes and social obligation within local laws and Oxfam code of conduct -   Duration and beginning date of works     OXFAM Technical Brief  –  introduction to contracting out works 4 in order to ensure that the implementation of the works adheres to the technical aspects agreed in the contract. Step 3b - Reacting to problems of poor performance In the eventuality of poor works progress, due to bad performance by the Contractor, or due to force majeure, a number of measures should have been foreseen in the contract, such as: suspending the works, offsetting Contractors claims against those of Oxfam GB, holding payments, rejecting the final technical report and demanding a new report, enforcing financial penalties, enforcing recovery of amounts due, awarding the execution of the undone works to third parties at Contractor’s cost,  seizing the financial guarantees, terminating the contract. Step 4 - Completion 1.Payments are usually scheduled at the completion of an agreed percentage of works done, or at majormilestones of the construction. Certificates of completion shall be signed before these paymentsare done. That applies to both partial achievements(i.e.: certificate of provisional acceptance ) andend of works (i. e.: certificate of finalcompletion ).2.Before issuing a final completion certificate, theContract Manager shall check all works together withthe project Technical Team, the Contractor and theeventual Owner. Only after the inspection processshould the final completion certificate  be issued. Any testing scheduled in the contract should beconducted in presence of the above mentionedparties. They shall sign the test result report(s) andattach them to the completion certificate.3.When the works are completed, some contractualobligations still remain pending for a certain periodof time (e.g.: retentions, warranties, final statementof account, etc.). The Contract Manager shall ensure that those are correctly processed. 4.The eventual Owner of the works can be given theresponsibility to deal with the Contractor on issuessuch as retention money  and any repair andmaintenance works necessary during the warrantyperiod . The Contract Manager should advise theOwner on ways of implementing this strategy.5.The Contract Manager should advise on the handover  process and issuing the final completioncertificate.6.The handover is tripartite: the Contractor handoversthe facilities to Oxfam; Oxfam handovers thefacilities to the Owner. It is very important to ensurethe responsibilities of Oxfam and the Owner withreference to the settlement of last payments,guarantees and retentions. Maximum efforts must be paid to meet Owner’s satisfaction on the worksquality (through all contract stages and this starts before the contract / definition of works’ quality) and achievement of the expected project goals.7.It is highly advisable to ask the Owner to state itsfull satisfaction of the works done in the handoverdocuments. The roles and responsibilities of Oxfam Staff Typically, the following Oxfam staff will be involved in one way or another in the contracting out process and any of them could be the Contract Manager: Country Programme Manager  Main role   Main responsibility  Legally responsible for OGB in the country. Legally and financially responsible, as well as responsible for overseeing all OGB staff. Project Manager  Main role   Main responsibility  Overseeing the project staff and project management Budgetary responsibility Public Health Engineer  Main role   Main responsibility  Technical supervision Technical designs and specifications. Technical reports of works achievements Logistics Manger/Officer  Main role   Main responsibility  Technical supervision Tender management Finance Manager/Officer  Main role   Main responsibility  Financial supervision Payments Good Practice  –   Scheduling Payments   It is useful to have sufficient money remaining to be paid at the end of all works that are dependant on final quality testing. This remaining % should be enough to fund, partially or totally, any corrective works that have to be done on what the Contractor has achieved. Not only considering the end of works, but each time payments are scheduled; when possible some quality testing and report should be attached, in particular with pipe networks  .
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