CONTRACT MANAGEMENT ISSUES IN THE DEVELOPMENT OF HYDRO

POWER PROJECTS
Er. L.M. Verma

Er. Sunil Choudhary

Er. Chandan Gupta

AGMr (Civil)

Sr. Manager

Engineer (Civil)

Synopsis
The Contract is the cornerstone for the development and maintenance of a good relationship
between the Employer and the Contractor as well as for the acceptance of the Project
deliverables ensuring value for money. In addition to the many tangible benefits effective
contract management provides to a business, it serves a most important role in any
organizations overall litigation readiness. Ineffective contract management leads to nonproductive and untimely handling of problems that arise during execution of the Contract,
which usually leads to tension between the Employer and the Contractor. The management of
a contract essentially starts much earlier before the award of the contract to the Contractor,
even before the drafting of the Tender Documents. More specifically, contract management is
considered to commence at the moment when strategic decisions are made regarding the
contracts type and duration, and the issues that it regulates. If the Contract that was drafted as
part of the Tender Documents does not provide for issues that it should have, includes
ambiguities in the wording that leave room for different interpretations etc., it is very difficult
for the Contracting Authority to build, based on it, a successful working relationship with the
Contractor. At present the contract management deficiencies result in large volume of time
and cost overrun in the majority of the projects in our country.
There are several reasons why organisations fail to manage contracts successfully. Some
possible reasons include poorly drafted contracts, inadequate resources for contract
management, the context, complexities and dependencies of the contract are not well
understood, there is a failure to check Contractors assumptions, authorities or responsibilities
relating to commercial decisions are not clear, a focus on current arrangements rather than
what is possible or the potential for improvement, a failure to monitor and manage retained
risks.
Also, the management of Hydro Power projects is different from other
construction/infrastructure projects in the manner that they are situated in remote areas,
initially only limited information is available on physical aspects of the project, possibility of
large deviations, hilly terrain, floods, landslides and unfavorable weather conditions, long
contract period, and large requirement of inputs (machinery, manpower, and finance).
This paper primarily focuses on key contract management issues in development of Hydro
Power Projects including suggestive measures for effective Contract Management. It attempts
to explain what is Contract Management, the Importance of Contract Management, what is
Effective Contract Management, the factors essential for good contract management, issues
and challenges relating to contract management and suggestions for effective contract
management.