How can you manage contracts with long lead times effectively?

Clearly outlining project objectives, breaking them into specific deliverables, setting measurable milestones, and establishing a comprehensive timeline is critical. Regularly communicating with stakeholders to ensure alignment and anticipate potential changes in requirements. Additionally, incorporating flexibility clauses in contracts to accommodate unforeseen circumstances during long lead times can help control future cost overruns.

It helps to develop a detailed project schedule that has input from all of the project team leads. Schedules can help the team to stay focused and allows you to define which activities are part of the critical path to project completion.

Due to current supply chain issues and logistics, it seems as if more items are going into the "long lead" item categories. To avoid job interruptions concerning material delay, define first as a long lead item. Engage the contractor to have him supply all necessary documents to your designers to acquire their approval. Submittals, shop drawings, any RFIs should be included and turned over to the appropriate designer for approval. Only after they have signed off can the contractor issue a PO and get the item[s] on the way. Speak w/ your Lender to reimburse the contractor according to their requirements. Once conditions are met, and the materials arrive, the contractor can store until needed.

Managing contracts with long lead times poses unique challenges that demand strategic skillfulness. Begin by conducting a comprehensive analysis of the project requirements and potential obstacles. Develop a detailed timeline that includes milestones, deliverables, and key deadlines. A well-thought-out plan provides a roadmap for success and helps in anticipating potential delays.

Breaking it down into smaller chunks really helps to show that the long lead time will actually be quite tight and their won’t be much float available for when the inevitable delays and challenges happen. Making sure you have clear scope and requirements helps you to put appropriate milestones in place to ensure progress can be seen and measured to stay on track.

Navigating oil and gas contracts is a dance I learned from real-life scenarios. After years in the industry, here's my wisdom: Embrace risk management, lock in prices, and hedge against market swings. Start with a thorough FEED phase. Build strong supplier bonds—partnerships, not just transactions. Keep contracts flexible for adjustments. Diversify suppliers to avoid dependence. Embrace tech and innovation for speed. Always have a Plan B. Stay updated on regulations. Communication is key—keep everyone on the same page. Monitor projects with tools. Train your team and pass on wisdom. Anticipate delays, adapt, and keep the project on its toes. In oil and gas, managing contracts is a blend of strategy, adaptability, and partnerships.

Clarity is key. One of the big pitfalls in scope definition is assumptions. All participants need to listen to each other and themselves to find the hidden assumptions. Anything that can't be fully defined, needs to be captured in a qualification register.

The process for selection of suppliers is critical. Having a sound sourcing process that makes you get the best and reliable supplier is a factor for effective contract management

It is crucial to identify, classify and prepare packages as early as possible (based on method of delivery). Understanding stakeholder's requirements, contractual and technical specifications compliance is of importance to be able to be able to source accordingly. In a challenging market with supply chain pressure, building long lasting relations, creating and keeping a book of suppliers and manufacturers (more effective on a cloud base platform) are extremely beneficial. Also, to engage the supplier (specially in case of specialized scopes) as early as possible to review the details and provide feedback is advantageous (likely will result in schedule and cost savings).

Very well said Louise. Under the key obligations of the PO/CPA/Subcontract, notice periods , remedy options for delay or breach as well as the potential risks all need to be well understood to effectively manage the vendor/supplier/subcontractor with a strong and commercial performance focus. The knock on effect for the Main Contractor can potentially be far greater than the recovery that may be gained from the vendor/supplier/subcontractor.

Even if you rely on your legal team to do some of the trickier negotiations, it's important that the person who will be managing the contract post-award has a good understanding of what the terms mean, why they are there, what recourse there is when something goes wrong, etc. In many ways, the contract is the manual for work post-award. It should be put aside to gather dust.

In my opinion, establishing clear and open lines of communication is crucial. Regularly engage with all stakeholders involved in the contract, including clients, suppliers, and internal teams. Maintain transparency about progress, challenges, and any adjustments to the timeline. Effective communication fosters collaboration and minimizes the risk of misunderstandings.

Understanding the standard forms of contract and programme is fundamental. Having a direct line to someone within the business with realtime understanding and experience of something that’s binding, not by the book, and internally agreeing on how to proceed before tabling points for discussion. That plus having that level of transparency with your client on how to proceed, there may be one or two items to bottom out but you inevitably end up having the same goal. It’s easy to make something way more complicated than it should be, it’s easier to find a solution.

Never agree on a contract without seeing a draft and ability to review, comment and negotiate. This one single effort at the early stages could save you millions and some times billions and all time of disagreements and claims that may arise later. Always make sure you understand the terms and conditions and ask for clarifications. and one simple question: "Is the owner open to negotiate the terms"? Sometimes contracts with long lead items will go through iterations and updates that may result in change required.

Understanding the reason for long lead times is crucial. Whether it is material processing, component assembly or technical design activities, ensuring you have a firm grasp of where the lead time comes from allows you to draft appropriate clauses and ask the right questions to keep things on track.

Breaking it down into smaller chunks really helps to show that the long lead time will actually be quite tight and their won’t be much float available for when the inevitable delays and challenges happen. The supply chain need to understand how they interface with the overall timeline in order to gain their buy-in to help manage challenges proactively. Early engagement from the supply chain also really helps to gain and keep their buy-in to a successful outcome for the whole project. Clear and fair terms and conditions are a must for successful outcomes without too many disputes. It is also crucial to ensure the contract has appropriate mechanisms in it to allow for the parties to sensibly deal with unexpected situations that occur.

Even if you delegate some of the more complex tasks to your legal team, the person managing the contract once it's been granted must understand what the terms indicate, why they're there, what recourse there is if something goes wrong, and so on. In many ways, the contract functions as a manual for post-award work. It should be let to accumulate dust.

Very simple answer: fix all your progress payments to deliverables (clearly defined with no ambiguity). this is very helpful to manage the long lead time. Keep downpayments to the minimum, not more than 10-15 % of the total cost

Priorities time slots. Then build.programme.around key milestones with guaranteed delivery dates. Ensure resources available for off loading at guaranteed dates and places. Particularly resolve Union intransigence and human intimidation problems.

Implement a system for regular performance reviews to assess progress against the established milestones. These reviews not only help in identifying areas that may need attention but also provide an opportunity to celebrate achievements and milestones, boosting team morale.

Make sure you clarify to both owner and supplier on how to deal with changes after placing an order and who is responsible and accountable for what! For example, if the scope change results in changes to already manufactured product, what unit price, Fee and overhead the manufacturer is going to use? How the owner is going to approve and what's the process for change order approval and payment? Make sure you have interim milestones on your order and check accordingly with supplier and inform the owner through recurrent procurement management meetings. Those processes are the best to be communicated with owner through Procurement Management plan as part of PMP at the start of the project.

Having the two terms “Efficiency” & “Effectiveness” continuously in mind, when , planning, analyzing and making decisions would have big positive impact on performance. This also, needs to be equipped with the right tools, including checklists, trackers, and right technology. It needs to be simple , though efficient & effective.

I agree but we need to have for large projects baseline Schedule, Cost and resource load load schedule with identifying critical activities and use of critical path method (CPM) teamwork and goal oriented approaches, plan for long lead items and right people at the right position

May be this is an area which I am passionate about as part of a governance team. Most activities are repetitive and building trust during negotiations and the first year of the contract is important. As the trust leap expands, you would expect the Suppliers to be more transparent and proactive in identifying issues related to operational tasks or contract. 1. Digitise partner interactions by establishing a standard communication portal. 2. Enable operational SLAs for Partners and internally within your organisation so that you help the Partner to achieve what they anticipate to get from the contract. 3. Clearly define escalation contacts and escalation triggers( when to escalate) in advance. 4. Provide feedback to management.

Attention to detail firstly and understanding what a deviation to contract actually means! So many specifications actually leave elements undefined and open to interpretation and usually get implemented and then challenged after the event. This causes impact to the project delivery but more so is costly. Having an understanding of the explicit definition and scope should be reinforced with a robust procedure of raising concerns of anything that is unknown or inconsistent with the expected deliverable. Early warning notices, technical queries and change management should a key acceptance with the client from day one with agreed response timescale’s. It’s impossible to claim any recovery costs after the event !

Identify potential risks early in the process and develop mitigation strategies. Anticipating challenges allows for proactive problem-solving and helps prevent issues from escalating. Consider developing contingency plans to address unforeseen circumstances, ensuring the project stays on track even in the face of unexpected challenges. Incorporate flexibility into contract terms to accommodate potential changes in scope or unforeseen delays. Clearly outline mechanisms for change orders and extensions, providing a legal framework for adapting to evolving project requirements without jeopardizing the contractual relationship.

Change orders need to be communicated, addressed and approved in a timely manner. Make sure to include all details, including the needs for and how it benefits the owner for smooth review and approval. Make sure to include that in your schedule and adjust milestones and deadlines to track the impacts (time and cost). In a marine project, if you fail to meet a week of fish window, you might have to wait until next year, imagine the cost and schedule impact! (It happens!)

document control, tracking the process through periodic meetings and communicating impact to stakeholders will minimize big shocks! (no body like that!) It also helps claims approval/rejection (depends which side you are on), more collaborative working environment and better results. Since you arrived to the end of your contract, make sure to create lesson learned document and present it to the team to make sure you build a success culture for your team! All the best

One of the biggest problems I've encountered is that we struggle to really use the lessons learned. We need to actually change processes and procedures, rather than just capturing things in an Excel file or slide pack. Things are constantly changing these days and it is crucial to make sure that while we learn from the past, we are looking forward and our strategies are fit for the future.

Absolutely!!! 100% agree with this. Internal issues with procurement and justification can be a real challenge. Internal challenges and trusting in each other is key for this element to work seamlessly. Technical rationale vs procurement principles are often misaligned causing unnecessary efforts from project teams. Flexibility and understanding of the need here is so important. Thanks for sharing.

Always have a back up & consistently manage the schedule. Regularly include on-site inspections tied to performance benchmarks.

To be able to react to unexpected news (e.g., shipment delay, product shortages, price changes, etc.), be proactive in establishing communication framework in the planning stage. Find out from your vendor(s) who they need to deal with down the chain, and ensure the same communication framework being followed up the chain with key individual(s) when delays happen. This way, you can notify your stakeholder as soon as the news came from your main vendor to forge up a backup/temporary solution. Clients don't like delays or price escalation, but it's better to break the news earlier than later.

I always negotiate seting a time-line so that I can avoid risk of missing my customer delivery schedule so that we will not be charged penalties. Also add a payed lead time into the schedule in the agreement with our customer adding a week or two at inseption in finalizing the contract agreement. Hopefully it becomes as solution.

In my experience the long-lead items must be identified (some cases anticipated), suppliers listed then verify delivery dates are able to meet turnaround window.