Project management is certainly the backbone of the maritime sector, but without the support of robust contract management, projects often fail to deliver on their promises.
The synergy between these two disciplines is essential for the success of maritime projects. Effective project management sets the strategic direction and operational execution of a project, while contract management provides the framework for legal compliance and risk mitigation. This combined approach lays a strong foundation for positive outcomes in various industries, including the complex and heavily regulated maritime sector.
In this article, we will explore the critical relationship between project management and contract management. We will discuss why having robust contract management practices is absolutely necessary to ensure project success, especially in the maritime industry where adherence to international regulations and effective stakeholder relationships are crucial.
Importance of Project Management
The mid-20th century marked a critical milestone in the evolution of project management. It was during this period that the discipline was formalized through the development of various methodologies and frameworks. Within the maritime sector, project management has become an integral part of projects. Its importance is widely recognized, and there's hardly any debate on whether it's essential for successful project completion.
Let's first dive deeper in project management. This topic involves the application of knowledge, skills, tools, and techniques to execute projects effectively and efficiently. This comprehensive process includes setting clear objectives, managing various constraints such as scope, schedule, budget, quality, resources, and risk to ensure smooth execution.
Recognizing the critical role of project management in today's business landscape, we are also drawn to another equally important dimension – Contract Management. It's essential to discern its distinction from project management and understand its unique value.
What is Contract Management, and why is it as crucial as Project Management?
Contract management is an integral part of any organization's operations that encompasses several stages of a contract's life cycle. It consists of three main areas. The first, Contract Development, involves crafting and negotiating contracts to ensure their fairness, verifying completeness and considering all associated risks and possible pitfalls. The second, Administration, is focused on monitoring the performance of the contract after contract signing ensuring all parties involved are fulfilling their responsibilities as per the agreement. The third area, Oversight, handles any changes or conflicts that may arise during the term of the contract, ensuring both parties adhere to the agreed terms. This active process requires a comprehensive understanding of legal, financial, operational and practical elements to secure successful contracts.
Summarized Contract Management involves:
Contract Development, including creating and negotiating contracts to make sure they are fair, complete and well balanced
Administration, involving monitoring contract performance and making sure all parties fulfill their responsibilities.
Oversight, covering handling any changes or conflicts that arise during the contract period and making sure both sides follow the agreed terms.
The Role & Skills of a Contract Manager
A Contract Manager brings to the table interdisciplinary skills that are critical for effective contract management. These include expertise in law, necessary for the development of contracts and ensuring regulatory compliance. Their negotiation skills are essential in creating agreements that are fair and protect the organization's interests. Communication skills play a key role in administering contracts and managing any changes or conflicts that may arise, ensuring all parties adhere to agreed terms. In addition to these, relationship management is crucial to maintain positive interactions with all stakeholders involved. Lastly, technical and operational management skills are imperative for identifying risks during contract development, monitoring contract performance and identifying potential risks that could impact the contract's success.
Why is Contract Management important?
Contract management serves three significant purposes:
Risk Identification – This is the most important subject. Understanding all associated risks to determine whether the proposed scope of work, terms, and conditions are acceptable and do not present unacceptable and unbearable risks to the company.
Risk Mitigation - By carefully overseeing all contractual activities, organizations can prevent breaches of agreement, avoid costly disputes, and maintain a positive business reputation.
Legal Compliance - effective contract management acts as an organization's protection against possible legal issues with possible significant financial consequences.
Why Project Management alone is insufficient: the case for effective Contract Management
Project management alone is not enough for maritime project success; relying solely on it can lead to unexpected problems. Projects often face unforeseen risks, and contract management provides clear procedures for identifying, assessing, and responding to these risks, acting as a safety net for project managers. Additionally, staying within budget is crucial, but without proper contract management, cost overruns can occur due to issues like ineffective supplier relationships, contractual disputes or missing crucial information necessary to initiate a claim or to defend towards a claim. Contract management ensures everyone understands their financial obligations and helps prevent these problems.
Ensuring compliance with laws and regulations is critical, but project managers may lack the legal knowledge required for full compliance. Contract managers ensure contracts align with relevant laws and industry standards. In summary, project management alone cannot handle complex project issues in most cases often focused on project realization. Effective contract management addresses potential risks, controls costs, and ensures contractual compliance, overcoming these limitations
But there is an other challenge in the maritime sector.
Why Contract Management performed only by lawyers needs to be changed – search for a contract management liaison
A predominant practice in the maritime industry is to confine contract management duties mainly to lawyers or in house legal counsels. While their legal expertise is undeniably beneficial, this approach has significant shortcomings. One primary drawback is that lawyers often lack the specialized knowledge required for technical and operational management experience being a crucial component of many contracts in the industry. Without this technical understanding, they might overlook or misinterpret essential details or associated risks in contractual agreements.
Secondly, utilizing lawyers for routine contract management can prove prohibitively expensive. Their high professional fees can inflate the overall cost of projects, leading to budget overruns or affecting profitability. And costs are often the argument to involve lawyers even shorter, leading to even more faced risks!
Therefore, diversifying the responsibility of contract management beyond just lawyers and involving experts from different domains could potentially lead to a more comprehensive and effective approach in handling contractual matters in the maritime industry. Having a liaison (like The Synergy Partner) who understands both the legal language and the technical terms used by shipyards and subcontractors is crucial and cost effective.
What’s the next step?
While project management plays a crucial role in orchestrating business operations, it often lacks the specialized skills and knowledge required to handle intricate contracts. And most maritime companies somehow feel this too.
This is where The Synergy Partner, with Maritime Contract Management expertise, steps in.
The Synergy Partner understands the complexities and unique challenges that come with managing maritime projects and associated contracts, completing the project managers' tasks and ensuring every detail of a contract is well understood, estimated, and implemented effectively.
By bringing robust identification of associated risk, risk mitigation strategies, cost control measures, and comprehensive compliance assurance to the table, contract management performed by The Synergy Partner complements and enhances the effectiveness of project management, ensuring that projects not only meet their goals but are also legally compliant.
So why leave anything to chance? Embrace The Synergy Partner's expert Contract Management services today and steer your business towards success.
