IACCM Forum

Hi Marcel,

In my little experience in energy, oil and gas and real estate, there is a clear differenciation between the roles that lies within the position in the hierarchy.

In energy and real estate: PCM are usually legal advisors asigned with the supervision of a project supervision of the PM. As an intermediate between the Company Shareholders and Stakeholders of the project with the actual team developing the project.

In oil and gas, PCMs fall under the supervision of the PM who answers himself to the Project Director who is the interface with the Shareholders and Stakeholders.

Then again, this wil again depend on the structure of the company: functionnal or projectized and the company's belief in the PM's competences and abilities. I have found that in Oil and gas, very little companies trust the PM and rather have many project engineers and a project director.

If you are interested I could send you some job descriptions.

I think that your case will be a little different than some others. Since your firm does not have regular Contract Managers, both the PM and Counsel will need to divide responsibilities that would fall otherwise to a CM.  Obviously, contract interpretation should belong to legal Counsel, whereas items that are generally considered "business issues" fall to the PM.  (At least in the US, most Counsel will refuse to decide business issues.) By business issues, I am referring not only to scheduling and quality review, hallmarks of the PM function, but also responsibility for compliance with pricing and invoicing terms as well as regulatory compliance and general language quality/clarity.  Then, when a dispute arises, the PM should loop back to Counsel (Legal dept) for consultation.  In this way, your firm can try to achieve more or less the same result.

Do you see the weakness inherent in this approach?  Believe me when I say that it exists in many firms. The Legal dept BELIEVES that it is adequately addressing all appropriate concerns and the the PM office THINKS that it is handling the commercial issues reasonably well.  But who controls negotiation of a new Scope of Work?  Who is responsible for overall monitoring of contract compliance? When a contract addendum comes in from the other party for review, who takes the lead on reviewing it and pushing it to different stakeholders for approval? Who acts as the 'arbiter' when two internal stakeholders disagree? Who escalates the full package to executive management?

Two notable things can happen in this scenario: (1) Some confusion eventually will arise with regard to responsibility for certain matters; and (2) the joint efforts of both Counsel and PM will fail to address business critical issues.

As both a licensed attorney (in the United States) and a reasonably experienced contract manager, I believe that a contract manager can greatly improve the quality of commercial relationships and contracts in general.  If you are seeking a way to introduce the adoption of a contract/commercial manager function, consider performing a "gap analysis" on the firm's processes. Also consider doing a quality review as to both contract terms and contract results. The results of these analyses may be surprising.

I hope that this helps to give you some perspective. 

This dilemma is common to many organizations. It also tends to vary between countries, where traditions in roles can vary quite extensively. You have selected just projects, contract and legal. You might potentially add sales and some of the functions of finance, such as pricing.

The best way to address this is to focus on process rather than organization. I believe the only companies that have really addressed the conflicts you mention have first of all segmented the types of relationships they need to enable (typically based on their relative complexity). They then look at the process steps required to support those relationships. From this, it is possible to define the nature of the skills or knowledge required to undertake the steps - and this will lead to a clearer grasp of who within the organization can provide those skills.

I'll be happy to discuss in more detail if that would help.

As an experienced Contract Manger, I see great differences for the three roles you have addressed PM, CPM and the Legal Counsel.

The Project Manager, having the full control and detailed access to each part of the project, and having the full authority to instruct various stakeholders within the project. He should have some know lade of the Contract Provisions to handle the daily issues with the Employer and Subcontractors.

The Contract Manger, having another area of concern and deep concentration in contractual aspects. He should have a project business background tighter with some contractual issues as variations, legal systems, rights & obligations, and claim management. He is not focusing like the PM on daily issues as mentioned hereinabove but rather, he will be invited to discuses with the PM the more serious problems resulting form dispute in the contract provisions. I believe the CM is the connection between the PM and the Legal Council.

When matters is more complicated and dramatic escalation is made towards taken serious legal actions, in front of State Courts or arbitration, then a more experience is needed regarding the applicable laws and proceedings and also official licensing as attorney, this is could be handled by Legal Council.

Rezk, 

I think that your description assumes a post-signature role for the Contract Manager, does it not? 

Depending on the organization's stage of evolution with regard to contract management, the Contract Managers may also be focusing on bidding and negotiations. I guess we go back to Tim's reminder that this question is really one of function/process - ideally, all functions should be mapped to a responsible party. 

Generally, however, I do agree with your statement that the Contract Manager can serve as a "connection" between the PM and Legal.  The benefits that flow from this appproach are sometimes lost on the Legal department, but in other cases the Legal department grows to depend on Contracts for assistance in enforcing important standards.

Excellent point!

Regards,

Edward

Dear all, a Contract Manager may have dual responsibility. For the 'sell' side, the CM would have to deal witht he Clients including closing out contracts, pushing for VO claims and settling prime disputes. For the 'buy' side, the CM would take the responsibility to identify, evaluate and award bidders. A Contract Administrator on the other hand deals with the post-award portion of the 'buy' side especially for construction and complex projects. The Contract Admin is a project-specific role and may report to the CM as there may be more than one current project ongoing. I totally agree with Rezk in his notes. Also I would like to emphasise that the Project Manager has overall responsibility, with the CM and the others as supporting characters.

Interesting discussions.... Here is my two pence worth re-joinder.

In my opinion the PCM has to be associated from 'Cradle to Grave' of a Project. Typically while the Project Manager would lead the pack in terms of deciding on the concept, the basic design, the likely project  timeline, budget, etc, the PCM would have a significant role to play in choosing the Contracting Strategy, in deciding the pre-qualification criteria,  in compiling correct terms and conditions of the Contract- the GCC and the SCC (with help from Legal and Project Manager), in issue of tenders, in follow-up with Bidders, in ensuring minimum level of competition (in competitive bidding environment), in commercial evaluation of Bids, in price negotiation, in recommendation of award, in finalization of Contract, and in all post Contract activities including handling of variations, implementation/enforcement of contractual terms and conditions (with help from Legal as the case may be), in conflict resolutions (again with inputs from Legal as appropriate), in monitoring of spend, and finally in Contract Close-Out. It is a fairly complex role that needs to be played out with sensitivity and care.

Sushil Prasad

Cairn Energy India Limited

Dear all,

I think a very fruitful discussion was kicked off and I thank you all, who up to now participated in the discussion for their opinions. Let me be more precise on how it is in our company. The role and responsibility of the PCM is kind of well defined but for a long time there was no real roll out of such function. Therefore both PM and Contracts ( which you would read to be Legal ) were kind of jumping in with the well described issues that Edward II is mentioning plus a lot more.

The problem is that most of our PMs have a more technical than a commerical background and the lawyers that I recruited for my team would probably not fit into the "typical stereotype" one could have thinking about lawyers. They are legal generalists that love to dig into business matters and get only excited when it comes to business context. If you leave them alone with a nice legal expert statement they will do but after a few months they would resign if you ask them to only do this. Then again, the Contracts team has to be the main source for legal analysis and legal support on almost all issues that the company has to deal with.

When in 2009 my direct reports and myself identified this weakness we took over the functional home of what we call the Project Contract Management Function. (PCM) Altough we try to give this function a home and try to take care of knowledge management, tools etc the PCMs are reporting solid line to the PMs. Depending on the individual PM the way these PCMs are used is very different. Most of them just become assistant PM and basically ( let´s not forget the technical background of most of our PMs ) do not put too much focus on the commercial aspects, which leads to Contracts ( Your legal function ) is taking over partly PCM responsibilites without being able to fullfill the rest of neither the PCM scope nor the Legal aspects in a sufficient manner. Other PMs, more conscious of the role of PCM are requesting from us ( the functional home ) clear guidlines on what to do in each state of project life ( from cradle to grave ).

I hope this sheds a little light into my original question and gives you the background why we are struggling a little to find the right split of responsibilities.

Again thanks for a continious good discussion.

Regards

Marcel

Dear all,

I think a very fruitful discussion was kicked off and I thank you all, who up to now participated in the discussion for their opinions. Let me be more precise on how it is in our company. The role and responsibility of the PCM is kind of well defined but for a long time there was no real roll out of such function. Therefore both PM and Contracts ( which you would read to be Legal ) were kind of jumping in with the well described issues that Edward II is mentioning plus a lot more.

The problem is that most of our PMs have a more technical than a commerical background and the lawyers that I recruited for my team would probably not fit into the "typical stereotype" one could have thinking about lawyers. They are legal generalists that love to dig into business matters and get only excited when it comes to business context. If you leave them alone with a nice legal expert statement they will do but after a few months they would resign if you ask them to only do this. Then again, the Contracts team has to be the main source for legal analysis and legal support on almost all issues that the company has to deal with.

When in 2009 my direct reports and myself identified this weakness we took over the functional home of what we call the Project Contract Management Function. (PCM) Altough we try to give this function a home and try to take care of knowledge management, tools etc the PCMs are reporting solid line to the PMs. Depending on the individual PM the way these PCMs are used is very different. Most of them just become assistant PM and basically ( let´s not forget the technical background of most of our PMs ) do not put too much focus on the commercial aspects, which leads to Contracts ( Your legal function ) is taking over partly PCM responsibilites without being able to fullfill the rest of neither the PCM scope nor the Legal aspects in a sufficient manner. Other PMs, more conscious of the role of PCM are requesting from us ( the functional home ) clear guidlines on what to do in each state of project life ( from cradle to grave ).

I hope this sheds a little light into my original question and gives you the background why we are struggling a little to find the right split of responsibilities.

Again thanks for a continious good discussion.

Regards

Marcel

Hi Marcel,

The job description of a PCM does have some rounded edges and some of the responsibilities indeed seem over lapping with those of the Legal counsels and some with those of the PM. What we have tried to do in the Company that I work for is to prepare standard contracting templates (primarily developed by Legal and needing their concurrence were the PCM to suggest modification to some standard clauses). The Legal dept also reviews responses to some of the more complex Contractual correspondences involving claims or notices having financial implications. However they are not involved in the day to day running of the Contract and the PCM remains the SPOC (Single Point Of Contact) for all contractual matters with the outside environment. The PM (invariably a person from a technical background) on the other hand primarily oversees implementation of the Scope of Work within budget and schedule and interacts with the Contractor mainly on the technical and schedule issues.

I do not think that there can be a case of one size fits all. Depending upon the stage of a Company's evolution and also very importantly depending on the resources available within a Company, the roles could be tweaked and defined differently.

Regards,

Sushil Prasad

Cairn Energy

"The problem is that most of our PMs have a more technical than a commerical background and the lawyers that I recruited for my team would probably not fit into the "typical stereotype" one could have thinking about lawyers. They are legal generalists that love to dig into business matters and get only excited when it comes to business context. If you leave them alone with a nice legal expert statement they will do but after a few months they would resign if you ask them to only do this."

This is precisely the structural problem that seems to exist in most companies. The PMs were hired due to competence in technical matters. The lawyers have a legal qualification and experience negotiating contracts.  But who bridges the gap to take overall responsibility for the commercial issues?

Restricting a lawyer to reviewing only "legal clauses" does cause problems. It is very difficult to understand the impact of the language without understanding more about the contract. So we lawyers prefer to have access to the entire contract.  

Inevitably, we find some "gaps" in the contract outside of the "legal clause".  In fact, we wonder how the heck other people didn't catch it!  It's SO obvious, right?  We raise the gaps for evaluation...but to whom?  If there is no Contract Manager (NOT in a counsel role...a true Contract Manager), we could go to the PM.  However, the PM is more concerned with technical and operational issues. We could go to the sales guy, but he is really just concerned that the "Contract Intervention Department" is going to delay his deal or, worse, kill it.  Lacking a clear path forward, we just mark up the language as we see fit in our best judgment.  The sales guy may get upset, saying, "Why do you ALWAYS have mark up these contracts so much? No one else had a problem with it!"  

Over time, the net result of this model is that the technical side does not learn how to evaluate contract language. The company agrees to commitments that do not make much sense.  The Legal department throws up its hands.  

The key to fixing all of this is the creation of a true contract management function.  Someone needs to take responsibility for developing internal consensus before the contract is signed.  It is my belief that a contract manager who reports neither to PM or to Legal, nor to Sales, would be in the best position to resolve. 

Gentlemen

Thanks for a lively sharing on this subject. 

I have seen this in the Middle East Fertilizer EPC Projects, the PM is single point of responsiibility-purely technical with a decent understanding of Contracts- but obligated to consult a designated Legal Agency (acting as CM, this agency is usually bought in from contract drafting stage) in specific events. The PM on the  other hand is also supported with "Contract conversant"  technical personnel to handle petty issue.  This is a fairly successful model