Bad contract management: lessons learned from a real project in Somalia
A contract is a formal agreement between a customer and a contractor that establishes working relationship based on terms and conditions in the contract. A good contract management during project means a happy customer and zero claims and disputes
PMI PMBOK 6 describes various types of contracts used in project management. Fixed price and cost-reimbursable are more common in waterfall approach. Due to Covid-19 economic impact, most projects in Somalia use fixed price, where the customer releases fixed agreed-upon funds on quarterly basis. The contract type is indicated in the bid document advertised by the customer as shown below
Based on data I collected from real projects in Somalia, one captured my attention where a bad contract management by a contractor led to disputes and refund. The particular contract contained the following clause
1. Any staff payment exceeding an amount of $1000 should be conducted through a bank and not in mobile money. Failure to comply will result in an ineligible expense and a refund to the customer
The contractor’s project manager didn’t read that clause carefully and approved staff expenses amounting to $3000 using mobile money. The external auditor reported this expense as ineligible according to the contract. Now the contractor realized their mistake and paid the refund
The next step was to update the lessons learned register in the OPA file and come up with an action plan
| No. | Challenges Faced | Improvements Made | Action taken | Owner | Status |
| 1 | Contract claim | continuous check by internal auditing | Train project team about contract management and internal auditing | Project manager | Closed |
To recap, ALWAYS read the contract first before starting the project, train all project team to understand and comply with the contract, and strengthen organizational internal controls including continuous internal auditing. Finally it is the responsibility of the project manager to check EVM reports, financial statement, and supporting documentations throughout the project execution and monitoring
To learn more about project management and practical project management, get a copy of our latest book from the link below
Jama, A. .A. (2022). Practical project management: With Microsoft project illustration. Somalia: Pure Training Centre. https://www.amazon.com/dp/B09QGVRKY3
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