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Contract Strategy for Development and Projects

Introduction

The majority of any project budget is spent through contracts. The project scope needs to be packaged into optimal contract work scopes. From a single EPC contract, to a series of small contracts, no standard grouping is suitable for all projects; each project will have its own unique contract strategy.
The contract strategy will also indicate the likely value of each contract, leading to a view on how the contract might be placed into the market. Detailed assessment of the tender method and payment mechanism is part of Contract Tactics; refer to the Contract Tactics service.
The strategy is presented in a diagram commonly called the ‘Navajo Blanket’ from its appearance, showing the grouping of activities per contract.

Timing

Contract Strategy answers the questions ‘How should we package the work?’, ‘ Who can build this for us?’ and ‘How should we manage the contracts’, and is required as part of the feasibility assessment of a project. Therefore the contract strategy should be defined during the latter part of feasibility assessment.

Methodology

  • Create a Work Breakdown Structure for the project as a matrix of asset breakdown versus development activity.
  • Set aside core activities to be retained in house.
  • Group irreducible activities that would never be split.
  • Identify where client has an existing contract that could be used.
  • Use themes to create several alternative strategies for the remaining scope.
  • Make SWOT assessment of the alternatives and select preferred strategy.
  • Make list of contracts and estimate of value of each contract.

Deliverables

  • A Work Breakdown Structure matrix
  • Core, Irreducible and Existing contracts set aside.
  • Alternative strategies and a SWOT analysis
  • A list of proposed contracts with value.

Duration

A 2 day workshop with the client development team will deliver the result stated.

Information

For more information about this service please contact us through the Client Enquiry Communication form on this site, or send us an email at info@eee.nl.

Reference:

EEE-S-062

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