When entering into any type of agreement, the only way to make things "official" is to have a contract in place. This applies to everything, from real estate transactions to personal affairs like marriage.
And, of course, construction projects are no exception. Without a well-crafted contract, you risk running into obstacles like misunderstandings and disputes, which can ultimately derail your projects.
In this guide, we'll go over the fundamentals of construction contract management, how it works, and how to use contracts to ensure successful project execution.
Table of contents:
Construction contract management is the process of overseeing and administering the agreements made between parties in a construction project. It involves negotiating the agreement and monitoring its execution to ensure all parties fulfill their obligations and payments are made according to the contract's terms.
There are eight common types of construction contracts. They include:
Effectively overseeing construction contracts ensures that projects stay on track and all parties fulfill their responsibilities. Let’s review some of the key benefits of contract management in construction.
A contract with clear terms and well-documented expectations will minimize misunderstandings or conflicts. Construction disputes over scope, payments, or timelines are less likely when the contract clearly outlines the rights and obligations of each party. This leads to faster conflict resolution and prevents delays that could disrupt project progress.
For instance, if one party misses a deadline, the contract can specify penalties and ensure issues are addressed in a timely manner.
When contracts are properly managed, projects are more likely to stay on schedule and within budget. As such, construction managers must closely monitor performance against contract terms so that teams can get back on track quickly if issues arise.
Let's say a project runs into a material shortage that could delay work. With a well-managed contract, contingencies for such delays can be triggered to mitigate the impact on the overall construction project schedule.
A well-managed contract helps you identify and mitigate construction risks throughout the project lifecycle. You can negotiate the correct terms and see to it that liabilities and contingencies are defined and accounted for. Done right, construction contract management can also help teams prepare for unexpected challenges, such as labor constraints or design changes, minimizing their impact on the project.
Part of construction contract management means implementing a structured framework for tasks, timelines, and communication. This leads to clear expectations and robust processes, so everyone understands their roles and completes tasks without confusion.
For example, having a clear change order process reduces downtime when adjustments need to be made.
So, what exactly does construction contract management entail? Here are the steps involved in the process.
When you're working at the jobsite, you first need to lay the groundwork before building the actual structure. The same thing is true with contract management, but instead of laying a physical foundation, you're establishing a solid framework of agreements and expectations.
At the contract planning stage, project stakeholders determine the scope of work, objectives, budget, and timeline. This is where you identify potential risks and ensure all parties understand their responsibilities throughout the project lifecycle. Having a solid plan helps avoid ambiguity and sets expectations so you have a strong foundation for the contract.
At this stage, the terms of the agreement are discussed and finalized. This involves agreeing on payment schedules, deliverables, contingencies, and legal obligations. Back-and-forth discussions should be expected, as parties must ensure the contract is mutually beneficial and protects the interests of everyone involved.
Contract execution is the core of the process, so to speak. It's where the work outlined in the contract officially starts. It involves ensuring that all terms, deadlines, and deliverables are met. At this stage, construction project managers, contractors, and clients must stay aligned, report on milestones, and handle any issues that come up.
As with any project, monitoring how you're doing is a must. That's why teams should conduct performance reviews regularly to see if the work is progressing as it should. Any deviations from the contract—such as delays, cost overruns, or quality issues—must be brought up sooner rather than later. Effective oversight during this stage can help prevent problems from escalating into major setbacks.
Contract closeout is the final stage of the process, where the project is completed and the contract obligations are fulfilled. Closeout involves confirming that all work has been done according to the agreed terms and all final payments are completed.
As you can see, construction contract management has several moving parts. Tracking everything and keeping stakeholders aligned can be challenging, especially if using manual methods like spreadsheets or multiple tools that don’t communicate.
Leveraging tools like Autodesk Docs for construction document management helps to organize all project documents, automate tedious tasks, and keep relevant stakeholders on the same (digital) page.
Let's take a closer look at the benefits you can unlock by digitizing your contract management workflows.
Construction contract management software automates repetitive tasks like document creation, approval workflows, and payment tracking. This reduces the likelihood of human error and frees up time for teams to focus on higher-value activities.
One of the biggest benefits of using contract management software is having a centralized location for all project-related construction documents. Instead of sifting through emails or spreadsheets, teams can easily access the latest versions of contracts, amendments, and other documentation. That way, you and your team can spend less time hunting down information and more time acting on it.
With a centralized digital platform, stakeholders can collaborate in real-time, and people are less likely to get their lines crossed. Whether sharing feedback on contract revisions or updating deliverables, construction contract management software ensures everyone is aligned and working from the same information.
The benefits discussed above—fewer errors, centralized data, and better collaboration—help teams effectively identify and address risks. It ensures that potential issues are flagged early so stakeholders can be more proactive in addressing issues.
Advanced construction contract management tools provide valuable insights through reporting and analytics features. These insights allow teams to track performance against contract terms and identify areas for improvement, ultimately leading to more efficient and successful project outcomes.
Construction contract management is critical to delivering projects successfully. From planning and negotiating agreements to actually executing them, it's important to keep every detail organized and every stakeholder on the same page.
Fortunately, tools like Autodesk Docs can make your life easier by providing a single source of truth for all your paperwork, teams, and workflows.
Check out Autodesk Docs and discover how it can help you streamline your construction contract processes.
