6.4.7 Handling problems

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Regardless of how good the relationship and communication between Contracting Authority and Contractor is, it is quite likely that problems will arise during the execution of the contract. This is why it is imperative, on the one hand to include provisions in the contract regarding the resolution of any problems that may arise (e.g., when the performance of the Contractor is inferior to the goals set), and on the other to institute and agree from the beginning procedures for the drafting and submission of reports as well as transfer/ reference of the problems to be resolved at higher level.

The problem that appears most frequently during the execution of contracts involves the performance of the Contractor. However, apart from this problem, a considerable number of other problems referring to issues like invoicing, payments, communications, contract administration procedures etc., may appear throughout the execution of the contract scope and their possible causes are as follows:

The time dedicated to the management of the Contractor's performance is limited and inadequate;
The Project support by the Senior Management of the Contracting Authority is insufficient;
The Contracting Authority or the Contractor failed to anticipate early significant risks or the need to implement changes;
The Contractor's organisational structure changes or significant changes are made in the Project management team on the part of the Contractor;
The planning for the execution of the contract and its scope is of limited extent and inadequate;
The contract requirements change as a result of changes in the operational environment of the Contracting Authority or due to modifications in the needs of the end users;
The appearance of conflicting goals and interests between Contracting Authority and Contractor;
The original hypotheses and assumptions made on the part of the Contractor during the planning of the Project implementation are proven inaccurate or mistaken in practice;
The occurrence of unforeseen events;
The Contractor fails to fulfill his contractual obligations;
The personalities of the key executives involved in the execution of the contract have so many differences that lead to conflict;

When a problem arises, irrespective of the nature and issue that this involves, it is important and critical:

Checklist 6-2: Actions after the appearance of a problem

To be recorded in order to be taken into account in the evaluation of the overall performance as well as when reviewing the achievement of best value for money.
The Contractor to be notified about it through the proper communication channel and at the proper level each time (see par. 6.4.5).
The problem resolution procedures provisioned in the contract to be followed.
The problem to be referred to/ transferred for resolution to the immediately higher level when its resolution at the initially involved level is not possible or becomes impossible.

 

The problems appearing and their effects can be reduced through:

 

Table  6-6:  Actions to reduce the possibility of problems appearance and their consequences

Organised, systematic and effective monitoring/ management of the Contractor's performance (see par. 6.5.1. Monitoring the Contractor's performance)
Implementation of regular meetings - reviews with reference to the progress in the execution of the physical scope and potential problems/ risks identified either by the Contracting Authority or by the Contractor
Planning and application of the procedures for the management of issues (see Chapter 7, paragraphs 7.4.5 & 7.5.5), changes (see Chapter 7, paragraphs 7.4.6 & 7.5.6 and Chapter 6, par. 6.5.1) and risks (see Chapter 7, paragraphs 7.4.7 & 7.5.7)
Timely identification/ recognition of the problems and application of corrective actions
Definition of roles and responsibilities with clarity in order to avoid any misunderstandings and taking initiatives on the part of the executives participating in the Project execution but not having the relevant responsibility
Seeking and receiving assistance and consultation support from other executives of the Contracting Authority on special issues (e.g., legal, technical, etc)
Establishment of escalation procedures for the problems that cannot be resolved in one organisational level to the immediately higher one.

 

Escalation procedures

The problems that appear during the execution of a contract must be resolved promptly before they turn into more significant issues. This is why the Project Manager of the Contracting Authority (or the Engineer in the case of public works) must meet regularly with his counter part from the Contractor's administration in order to discuss the problems that appear as soon as they arise.

However, in cases where the resolution of a problem or disagreement is not possible at the organisational level where it appeared, the involvement of the immediately higher level becomes necessary2 [ The stratification/ hierarchy of the levels for the transfer of problems to be resolved is the same as the one that applies for the definition of communications between Contracting Authority and Contractor ]. The procedures for the transfer of a problem to be resolved to the immediately higher organisational level must be planned and finalised by the Contracting Authority during the commencement of execution of the contract. Despite that, an effort must be put forward so that the problems are resolved at the lowest possible organisational level (best, at the level they appear).

 

Example 6-2: Escalation of problems

Let us consider the Authority of example 6-1, which has contracted an economic operator for the supply of information technology services.

If we assume that the organisation and communication levels are those presented in the figure of the Example 6-1 of paragraph 6.4.5, then the transfer of any problems to be resolved in the context of execution of the contract to a higher level would be as follows:

If the problem appeared at the operational level, that is the level of the End User (Contracting Authority) and Project team (Contractor's technical staff), which could not be resolved or it was beyond the competency of those involved at that level, then the members of the operational level of both parties should collect all of the relevant information (problem identification and notice documents, information related with the analysis of the problem, effect reports, practice from meetings of discussion - resolution of the problem) and forward them to the next organisational level that being the Project Manager (Contracting Authority) and the Project Manager (Contractor). Thus, the problem would be transferred to the immediately higher level and it would be now under the responsibility of those in charge from both sides at the management level to reach the resolution of the problem.
In a case where a solution would be impossible to find at the management level as well or following a review it was proven that it is outside the jurisdiction of the management level, the management of the problem would have to be transferred to the Senior Management of the Contracting Authority and the Contractor's Administration.

The flow chart below shows the problem escalation procedure between the organisational levels of the Contracting Authority and the Contractor.

 

 


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