Contract Risk Management

Course length: 5 days

Course description

Increasingly complex contracts and procurement structures often make it difficult to fully appreciate risk allocation and its implications. Prevention is better than cure. Late delivery, defects and cost overruns, damage to reputations, client relationships and the bottom line, can all be reduced or avoided through risk management. Unforeseen changes often occur to the design and scope which can cause further calls to increase investment. 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 individual risk, and for the consequences should the risk occur. This course is intended to provide a good grounding in the essentials of contracts risk management arising out of renewable energy resource contracts in an international and Kenyan context

 Objectives

• Critical understandings 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

 Who should Attend

• 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

 What you will learn

• Expanding the expertise of personnel involved in contract development and management will allow project and general management teams to be more effective
• The total cost of ownership will be understood and reduced by properly identifying and managing the risks
• Clear allocation of risk will reduce the possibility of disputes, and any that do arise should be settled more quickly, with less cost, delay and disruption
• Reducing project failure, costly changes, and cost overruns resulting from a poor understanding
• Critical understandings 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 Outline

DAY 1

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

 DAY 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

DAY 3 

• Risk Related Terms & Conditions
• External Events
• Force Majeure
• Strikes and Other Labour 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

 DAY 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