Oracle Primavera Contract Management is one of Primavera's suite of tools for managing projects. It has been around the industry for over 20 years and has seen many different names; however, the core of the application has stayed the same from the beginning. The design is to manage all aspects of the communication of a project as well as the monetary aspects. As the years have gone by in the construction industry, not much has changed as far as building concepts; we still build things from the ground up. It is tools like PCM that allow us to perform our jobs more efficiently.
This chapter will look into the beginnings of contracts and why we need tools like PCM.
People have been making agreements between entities ever since there was a need for someone else to perform certain tasks. When an organization determines it needs or wants help with a task, it hires another entity. This can be an individual or a large multibillion-dollar company. When another entity is hired, there is a relationship created in the form of a contract where certain aspects of this relationship are understood. These items can be understood with a handshake or formally documented and agreed upon by the signature of both parties. This list of items can include the following:
Scope: "This is what I want done"
Start: "This is when I want you to start"
Duration: "This is how long I expect it to take once you start"
Payment: "This is how much I'm going to pay you when I am happy with your work"
Nonconformance: "This is what will happen if you do not perform as per the above requirements"
Let's look at a simplified example. Meet Joe and David. Imagine a caveman named Joe asking his buddy David to make him a wheel; the first question from David was "What is a wheel?"
But after all the explanation of how the wheel will revolutionize the world like nothing they have ever seen, they agreed upon the items in the list above. Perhaps the payment was to provide firewood to his family for a year.
The concept of contracts has been around since the beginning of time. Of course at the time of Joe and David there weren't all the sophisticated tools available to manage and track these contracts like there are today. If David did not perform the task of making the wheel on time, was there an understanding of the consequences for this nonperformance? If he provided a wheel with four sides, perhaps the delivery of firewood was delayed or it was not delivered at all.
Now let's expand our example. A cavewoman by the name of Kristin approaches Joe to build a self-propelled chair she has invented.
After the explanation of how the self-propelled chair will revolutionize the world like nothing else, they discuss all the different parts required to build this self-propelled chair. They come to an agreement with regard to all the items listed above. So Kristin and Joe have now developed a relationship or contract with the items defined. Of course Joe cannot make all the parts required for the self-propelled chair, so he finds other cave people who can produce the chair, frame, and the wheels that were just invented by David. Joe then sends smoke signals to communicate to David to meet about a relationship to produce the wheels for this self-propelled chair. He also contacts a few of his other buddies and places contracts with them to provide the other materials needed.
All the relationships are in place for all the materials required to build this chair.
We now have three levels of involvement in building this self-propelled chair; there are contractual relationships formed between each of the levels. Each level will be managing the relationship from their perspective, making sure that the other party in the contract is performing as they had agreed. Each level concentrates on their relationships. David does not care about the relationship Joe has with Kristin; that is Joe's relationship. Joe now has many different contracts in place that he needs to monitor to make sure that the requirements of each contract are being met, either between Kristin and himself or his suppliers of parts and himself. He has many different parties that he will have to communicate with and track these communications just in case David claims that he didn't get paid.
As time progressed, the concept of the contractual relationship became more formalized and the legal profession saw another avenue to make money. So instead of just four or five simple requirements, contracts can be several hundred pages long and many times can only be interpreted by lawyers (perhaps by design – but that is another topic). There is no way that a manager trying to perform a task to fulfill his part of the relationship can understand or even know all the requirements. Enter Contract Management tools like PCM.
What has been described here is a simple form of contract. There are many types of contracts, depending on the type of project and the nature of the industry, with various benefits for one or both parties:
Lump sum fixed price contract: This is the simplest form of contract. The advantage is that both parties know the cost before the project commences (barring any unexpected changes).
Unit price contract: The project is broken into various materials or units with an estimated quantity associated with those units. Payment is made on actual units placed into the project. The advantage is that the customer only pays for what was placed into the project.
Many types of cost plus contracts: The contractor (or service provider) is paid for the costs of what he has put into the project plus a fee based on the percentage. The advantage is that the client only pays for what the service supplier has used on the project plus the agreed fee.
Retainer contracts: This is the typical time and material type of contract. The project is broken into several pieces with a statement of work and an estimate. The client then pays for the materials used and time spent on that scope of work.
Incentive contracts: This type of contract is used typically when there is some uncertainty about the costs of the project. If there are overruns or savings on the project, this is shared between the parties. This minimizes the risk for both.
This is a short list but it shows that there are many types of contracts in which you can engage with another party. PCM can handle any of these types of contracts with a bit of adjustment to some procedures.
Other types of organizations that utilize a tool like this would be organizations that manage a budget bucket of money. This is not a true contract per se; however, it carries all the aspects of a relationship and therefore PCM can be used with these organizations, such as public entities or internal research groups.
The contractual relationship is the center of the universe as far as PCM is concerned. There are many aspects to managing contracts in the real world. There is, of course, the monetary aspect of the contract relationship and many other aspects or requirements related to a contractual relationship. Many of these are in the form of deliverables - what the contractor will provide to the client These deliverables require communication between the parties of a contract. Being able to understand all these deliverables and requirements, and when they need to be delivered, can be a daunting task. All these deliverables and requirements are tracked in PCM. All the modules within PCM are linked to a contract relationship and therefore allow monitoring of this information at the contract level.
Here is a list of the out-of-the-box modules provided in PCM. They are broken down by a folder structure, as follows (the module tree is configurable so your tree may be different):
There are a total of 33 modules available today and five of those modules allow for unlimited document types or acronyms: Notices, Noncompliance, Requests, Proposals, and Changes. Within each of these modules, an unlimited number of that document type(s) are allowed. These modules are available at the project level. When a project is created, it automatically has all these modules associated with that project.
Regardless of the type of business you have (IT, Infrastructure, DOD, Contracting, and so on) or the various types of communication you currently use, PCM can accommodate them. It does not matter what level of the project hierarchy you occupy, the one represented by Joe, David, or Kristin; since all levels manage the contractual relationship, all levels can use PCM for their organization from their perspective. PCM allows using your specific acronyms and document types. The text within the system can also be configured to match your terminology. Many systems force your company in their box and make you change your terminology to match theirs.
Every document in every module can be associated with a specific contractual relationship entered in the system. This allows for all contract-related communication to be assembled and reported.
Many organizations think that implementing a tool like PCM is like throwing Microsoft Word on your desktop and telling you to use it. We all know that 90 percent of us only use about 10 percent of MS Word. Tools such as this are a discipline product; if you have the discipline to correctly use it, it can do great things. PCM is a way of life type product; your organization will come to depend on it to manage each set of contracts. PCM requires some forethought and planning before it can be used in an organization. There are many questions that need to be answered to properly set up this powerful tool. Often, those questions do not have ready or immediate answers; implementing a tool like PCM will force organizations to provide those answers. This is not a bad concept; don't be afraid. This exercise will help your organization mature and become better informed about project information and contract management. There is so much information that needs to be tracked and managed, that there must be procedures in place to make sure that nothing slips through the cracks. PCM will also shine a light on items that currently are in the dark, either intentionally or not. It is a tool that forces accountability within the project team. This is why many users are afraid to implement a tool such as this. PCM will expose those areas that are typically lacking in your organization. Every organization is different as to what those areas are and the effects of exposing them.
Change in an organization can be extremely hard. This is not something you didn't already know. Most managers and/or their subordinates do not like change. They have become very comfortable with the status quo. They have their very special spreadsheet that they can manipulate to show upper management. Many say, "Since the current system works, why do we have to change?" We need to define the word "works" in that question. All may be fine with the project manager and everything works for him, but for upper management, all is not fine. They have been wondering why, even though the project manager tells them all is great until the end of the project comes, the profit margin is not what they had expected and been told for the duration of the project. Many times upper management say, "If we had only known about those issues before the end of the project." PCM allows the upper management to have a view into the projects if required. It offers real-time information for reporting. They can run these reports any time from their control center. From the perspective of the enterprise, graphically they can see how aspects of the project are going. The following screenshot shows the Control Center screen of PCM:
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The health of a project can be visible from the Control Center of PCM. By reviewing the graphs available and the alerts that affect your position, you can concentrate your time where it is needed and make proper decisions for the project.
Oracle Primavera Contract Management application is the tool that other applications are measured against. In terms of projects, it invented the class of Contract Management software and has remained an innovative leader in that category. The latest version (version 14) provides an easy to use, robust database architecture that allows management of all levels throughout an organization to understand all aspects of their project in real time. They then can use this information to make informed and timely decisions.
With the many types of contracts available and the multiple projects being managed at the same time, a computerized tool to help in the management of this information is critical to efficient project management.
In the next chapter you will be exposed to the vast amounts of information available to a project and how to start organizing it for your benefit.