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.

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.

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.

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.

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.

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.