Contract Risk Management & Compliance

Introduction:

One of the major functions of contracting is to ensure that risks to owners and contractors are identified and managed in a way that both parties are satisfied with the project outcome. While a contract cannot, of itself, make risk “go away”, it can, and should, identify the risks, determine who is responsible for managing each risk, and for the consequences should the risk occur

Targeted Groups:

Contracts, Tendering, Purchasing, Procurement, and Project Personnel
Contract Administration, Engineering, Operational and Maintenance Personnel
Risk, Claims, Financial, and Audit Personnel
Project Management Professionals
And all others who are involved in the planning, evaluation, preparation and management of tenders, specifications, awards, and contracts that cover the acquisition of materials, equipment, and services and who are in organizations whose leadership want high levels of competency in those involved in these activities

Course Objectives:

At the end of this course the participants will be able to:

Provide an understanding of how risk arises·
Compare different methods of identifying and assessing risk·
Review the impacts of different approaches to risk allocation·
Explore different Contract types to transfer risks·
Consider the contractual techniques to ensure effective risk allocation·
Review risk management techniques during the life of a contract·

Targeted Competencies:

Critical understanding of the risk mitigation process
Knowledge to move contracts from the tactical to a more important strategic focus
Ability to identify risks that can arise
Skills in allocating contract and procurement risk
Examples of Contract Terms and Conditions which allocate risk

Course Content:

Unit 1: Types and Management of Risk:

The Need for Contractual Relationships
Defining Risk
Categories of R for Both Sides of a Contract
Risk Assessment Process
Managing Risk
Qualifying Suppliers
Defining Internal Control
Proportionality of Control

Unit 2: Minimizing and Transferring Risk:

Transferring risk through Contract Types
Firm Fixed Price or Lump Sum Contracts
Cost reimbursable Contracts
Incentive Contracts
Award-Fee Pricing Arrangements
Indemnities
Cross Indemnities
Insurance

Unit 3: Risk-Related Terms & Conditions:

External events
Force majeure
Strikes and other labor disputes
Risk and Title
Use of ICC Incoterms
Assignment and Novation
Other clauses that need to flow down to sub-contractors
Risks associated with Sub-Contractors

Unit 4: Dealing with Financial Risks:

Controlling Risk Associated with Payments
Currency Risk
Economic Risk
Fraud and Corruption
Limiting or excluding liability
Distinctions between liability in contract, and the general law
“Gross negligence”
A review of some sample clauses from standard contracts, and other real documents